U.S. Opening Bell: Reflation Trade Sees Stocks Climb; Dollar, Yields Slide

Key Events/h2

Dow, S&P, NASDAQ and Russell 2000 futures contracts as well as European equities advanced on Tuesday, after US markets carved out new all-time highs in trading on Monday. 

Oil continues to slide as OPEC+'s monthly meeting looms.

Global Financial Affairs/h2

The S&P 500 and tech-heavy NASDAQ 100 posted consecutive records in yesterday’s Wall Street trading session. In Europe today, stocks are set for the seventh month in a row of gains as investors are optimistic that central bank policy will offset risks from the resurgence of the coronavirus.

Miners, automobile makers and technology stocks boosted the STOXX 600 Index, which is noteworthy, considering these sectors represent both sides of the reflation trade—value and growth stocks—mirroring the US market.

The UK's FTSE 100 edged lower, even after Monday's bank holiday. Local traders didn’t appear to feel the need to catch up with US markets or pan-European benchmarks.

Asian markets opened lower on Tuesday and missed the momentum afforded by the preceding US session’s all-time highs, as regulatory concerns exacerbated worries of a slowing economy in the region as the Delta variant of COVID continues to spread. However, dip buyers came in and pushed indexes higher. The South Korean KOSPI rose for the third day, jumping 1.75%—its biggest advance in 5 months—as the technology sector attracted foreign investors. 

China’s Shanghai Composite managed to squeeze out a 0.5% gain, despite factory activity slowing amid social restrictions, compounding the higher costs for raw materials.

US 10-year Treasury yields extended a drop, which began after Powell’s anticlimactic Jackson Hole speech as demand remains strong.

Yields distanced themselves further from the neckline of a H&S bottom, falling below 1.3%. Recently, the moving averages triggered a Death Cross.

The dollar tracked yields lower.

The greenback slipped below the 50 DMA, threatening to complete a small H&S top, taking it further away from the neckline of a massive H&S bottom since November.

Gold has moved in an opposite direction to the dollar since the Federal Reserve's symposium.

The yellow metal was struggling with the combined resistances of the 100 and 200 DMAs, reinforcing the July resistance, after breaking free of a falling channel.

Bitcoin has also been tracking the dollar in the last couple of sessions.

The cryptocurrency rose after moving sideways out of the rising channel, but it may be forming a falling flag, bullish after the preceding two-day rally. The pattern is supported by the 200 DMA.

Oil fell ahead of this week's OPEC+ meeting, during which the cartel and its allies are slated to confirm an agreed-upon increase in production. The price has been under pressure and is poised to finish the month 6% lower. 

The price found resistance as it neared the top of its falling channel, reinforced by the 50 DMA. If the price continued to fall below 68.00, it will have completed an Evening Star.

Up Ahead/h2

• The eurozone publishes its manufacturing PMI on Wednesday.
• Also on Wednesday, China reports Caixin manufacturing PMI.
• US Initial jobless claims are released on Thursday. 

Market Moves/h2

Stocks/h3

• The FTSE 100 fell 0.5%.
• Futures on the S&P 500 Index increased 0.3%.
• The STOXX 600 Index climbed 0.2%.
• The MSCI Asia Pacific Index rose 1%.
• The MSCI Emerging Market Index rose 1.2%.

Currencies/h3

• The British pound gained 0.2% to $1.3782.
• The Dollar Index sank 0.2%.
• The euro jumped 0.2% to $1.1825.
• The onshore yuan strengthened 0.1% to 6.46 per dollar.
• The Japanese yen strengthened 0.1% to 109.80 per dollar.

Bonds/h3

• Britain’s 10-year yield gained six basis points to 0.641%.
• The yield on 10-year Treasuries fell one basis point to 1.27%.
• The yield on two-year Treasuries dipped less than one basis point to 0.20%.
• Germany’s 10-year yield decreased less than one basis point to -0.44%.
• Japan’s 10-year yield gained less than one basis point to 0.024%.

Commodities/h3

• West Texas Intermediate crude declined 0.4% to $68.90 a barrel.
• Brent crude was little changed at $73.42 a barrel.
• Gold strengthened 0.3% to $1,815.77 an ounce.