U.S. Opening Bell: Oil Falls Below $70; U.S. Yields Inch Higher; Futures Mixed

 | Jul 16, 2018 12:27

  • European stocks, US futures point to rebound from earlier session

  • Asian stocks slump after China’s GDP slows down as forecast and industrial output misses expectations

  • Yen nears lowest level since January after posting its worst week in 10 months

    • h2 Key Events/h2

    Equities in Europe opened slightly higher, while futures on the S&P 500, Dow and NASDAQ 100 were mixed ahead of key earnings reports and after disappointing economic data in China weighed on all major Asian indices.

    The lackluster equity performance this morning in Asia begs the question of whether investors were concerned with China's ability to withstand the ramifications of a trade war with the US, or rather whether they were spooked by the weak GDP and industrial output figures released earlier from the world's second-largest economy.

    Which perhaps raises the even larger questions of whether the US can continue fueling economic expansion on its own. For now, China’s Shanghai Composite is in a bear market, and both fundamental and technical signs are pointing to further losses. The Chinese yuan is now at a low for the year. Conversely, US stocks are eyeing all-time highs and the dollar is just one percent below its one-year high.

    For the time being, we believe this market dynamic will make US assets even more attractive to global investors, especially if the US economy confirms its steady growth pace and corporate earnings meet expectations.

    h2 Global Financial Affairs/h2

    The pan-European STOXX 600 was pushed higher by media company stocks this morning, offsetting losses in the automotive sector, most likely sparked by ongoing trade uncertainty.

    The FTSE fell more than 1 percent mid-session on Monday as the pound pushed higher against most currency majors. Mining stocks were hit by weaker China data and falling copper prices, while oil majors were also hit by lower oil prices.

    During Asian trading, equities slumped on lower volumes, as Japanese markets were closed for holidays. Local trading wiped out gains from the previous North American session that had propelled US majors towards technical milestones while pushing them closer to all-time highs.the yen's safe haven status will soon be a thing of the past.

    The pound was higher ahead of a debate in parliament on the government's White Paper on the UK's future relationship with the European Union. Prime Minister Theresa May will try to push through the bill which will lead to a 'softer' Brexit, despite factions within the Conservative party remaining bitterly opposed to May's desired Brexit.

    Technically, the dollar broke a falling trendline since June 2015.

    Meanwhile, the yield on 10-year US Treasurys is inching higher, an encouraging sign for equities, as investor demand shifts away from secure assets.