Opening Bell: U.S. Futures Tumble As China Hints At Hong Kong Intervention

Opening Bell: U.S. Futures Tumble As China Hints At Hong Kong Intervention

Investing.com  | Aug 12, 2019 12:25

  • Hong Kong-China risk throws U.S. futures, European shares into the red
  • Opportunistic traders buy into low Asian stock valuations, pushing region higher
    • Risk-off shift boosts gold despite rising dollar; Treasurys and Yen reach new highs

    Key Events

    Futures on the S&P 500, Dow and NASDAQ 100 took a steep turn lower after an upbeat opening this morning, as warnings from China of a potential military response to mounting civil protests in Hong Kong hit investor sentiment.

    Before the downward reversal, at the European open, contracts on the SPX were trading at the height of the session, retesting Friday’s highs, while the STOXX 600 was extending an advance, bouncing off the June lows guarded by the 200 DMA and climbing back above the 200 WMA, after a two-week selloff that almost completed a double top.

    In the earlier Asian session, Japan and other markets were closed for a holiday. China’s Shanghai Composite jumped 1.45%, with consumer and financial shares taking the lead after the country eased lending rules to offset trade war headwinds. The move drove the region into a rebound, as U.S.-China acrimonious trade headlines took a breather, allowing opportunists to take advantage of valuations that have dropped sharply in the past month: average forward twelve-month price-to-earnings ratios (PE) hovered around 11.1 times as of the end of last week, versus 12.7 times a month ago.

    Shanghai Composite Daily Chart

    From a technical perspective, however, it appears that the market is not fully prepared to buy into valuations that risk taking another turn lower. The mainland Chinese index formed a rising flag as it crossed below the 200 DMA, after registering a lower trough, extending the downturn.

    Hong Kong’s Hang Seng (-0.44%) was the only major regional benchmark to close in the red as civil unrest and security countermeasures in the city continued to escalate.

    Global Financial Affairs

    UST 10-Year Daily Chart

    Meanwhile, the yields on 10-year Treasurys dropped to the bottom of a pennant-shaped consolidation since Tuesday. After last week’s plunge from above the key 2.00 rate to the lowest level since Oct. 2016, the current range is a set up for a continuation pattern, completed upon a downside breakout below 1.7%. Such a scenario would further weigh on stocks, with the twofold pressure of falling yields and a deepening yield inversion.

    In commodities, gold gained ground, holding up against a strengthening dollar.

    Oil pared Friday’s gains but traded above the neckline of a down-sloping H&S pattern.

    The Japanese yen strengthened despite the rising greenback—pushing the USD/JPY pair to the lowest level since March 2018.

    Up Ahead

    Market Moves

    Stocks

    Currencies

    • The Dollar Index increased 0.23%.
    • The euro slid 0.1% to $1.1192.
    • The Japanese yen strengthened 0.2% to 105.46 per dollar.

    Bonds

    • The yield on 10-year Treasurys dropped two basis points to 1.72%.
    • Britain’s 10-year yield increased two basis points to 0.504%.
    • The spread of Italy’s 10-year bonds over Germany’s fell seven basis points to 2.313 percentage points.
    • Germany’s 10-year yield slid less than one basis point to -0.58%.

    Commodities

    • Gold fell 0.3% to $1,492.34 an ounce, heading for the biggest drop in more than a week.
    • West Texas Intermediate crude slipped 0.2% to $54.37 a barrel.
    • LME aluminum gained 1%.
    • Iron ore fell 1.6% to $87.65 per metric ton.

    Investing.com

    Related Articles

    Latest comments

    Add a Comment
    Please wait a minute before you try to comment again.
    Discussion
    Write a reply...
    Please wait a minute before you try to comment again.

    Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
    Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
    Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
    It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
    Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

    English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 中文 香港 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
    Sign out
    Are you sure you want to sign out?
    NoYes
    CancelYes
    Saving Changes

    +