Opening Bell: USD Rebounds; Global Stocks Extend U.S. Rally; Oil Slips

Key Events

Global equities extended last week's rally this morning, as European stocks and futures on the S&P 500, Dow and NASDAQ 100 tracked significant gains in regional indices during Monday's Asian session. However, volume was light in Europe as British markets were closed for the Summer Bank Holiday, making the climb less reliable.

The pan-European STOXX Europe 600 gained 0.24 percent, with every sector in positive territory. Earlier, in Asia, intervention by the People's Bank of China to strengthen the yuan boosted equity prices across regional benchmarks.

Hong Kong’s Hang Seng outperformed, leaping 2.17 percent. China’s Shanghai Composite edged 1.89 percent higher, Japan’s Nikkei 225 gained 0.88 percent. Australia’s S&P/ASX 200 climbed 0.35 percent, while South Korea’s KOSPI underperformed, but still managed to inch 0.27 percent higher.

Global Financial Affairs

It seems that the new equity records hit on Friday by the S&P 500, the NASDAQ Composite and the Russell 2000—helped by consistent US economic growth data and the most positive earnings season in years—have turned traders bullish despite the stalled trade talks between the US and China. The Dow Jones Industrial Average though, whose listed mega-cap companies rely on overseas markets for growth, gained ground but remained a bit over 3 percent away from a new record.

Technically, the SPX's record is too near the resistance of the late January record to dismiss opposition. An possible ambush by sellers may be seen in Tuesday's excellent shooting star.

Last week, yields on US 10-year Treasurys slipped below a neckline of a massive complex H&S since April, as well as below the 200 DMA. Yields typically fall when demand for the safety provided by government bonds escalates, in a negative correlation to equities, which instead gain ground when investors switch to risk-on trade. Investors should keep an eye on this, as well as on the flattening US yield curve.

The dollar bounced back from Friday's slide, even after traders had fully priced in a rate increase next month. Odds of a fourth rate increase in 2018 have decreased; markets are predicting a 60+ percent chance of another hike in December, down from near 70 percent last week before the Jackson Hole symposium. Technically, the greenback found support at the bottom of a rising channel since June.

The Mexican peso advanced for a second day driven by reports that a potential NAFTA deal was imminent.

WTI crude is sliding, as the ongoing stalemate in US-China trade negotiations weighs on the outlook for global growth, though lingering worries over possible supply glitches stemming from reinstated Iranian sanctions have spared prices from plunging deeper.

Up Ahead

• As earnings season winds down, reports are due from Best Buy (NYSE:BBY) on Tuesday before the open and Salesforce.com (NYSE:CRM) on Wednesday, after the close.

• Economists expect Wednesday's US GDP figures will show the economy grew at a slightly slower pace in the second quarter.

• China’s official Manufactoring PMI is due Friday.

• The Bank of Korea sets policy on Friday. Weak jobs growth has cooled speculation of an interest rate hike.

Market Moves

All information provided is accurate as of time of writing

Stocks

• Futures on the S&P 500 gained 0.2 percent, the highest level in seven months.

• The STOXX 600 climbed 0.3 percent to the highest level in more than a week.

• Germany’s DAX ticked 0.6 percent higher to the highest level in two weeks.

• The MSCI Asia Pacific Index climbed 1.2 percent to the highest level in two weeks on the most significant climb in more than six weeks.

• The MSCI Emerging Market Index jumped 1 percent to the highest level in almost two weeks.

Currencies

• The Dollar Index rebounded from a 0.11 percent drop to a 0.7 percent advance to 95.22.

• The euro slipped 0.1 percent to $1.1609.

• The British pound fell less than 0.05 percent to $1.284.

• The Japanese yen strengthened 0.1 percent to 111.08 per dollar.

Bonds

• The yield on 10-year Treasuries gained less than one basis point to 2.81 percent.

• Germany's 10-year yield declined two basis points to 0.33 percent, the most significant fall in more than a week.

• Britain’s 10-year yield rose one basis point to 1.272 percent, the highest level in two weeks.

• The spread of Italy’s 10-year bonds over Germany’s dropped one basis point to 2.7962 percentage points.

Commodities

• West Texas Intermediate crude fell 0.3 percent to $68.53 a barrel, the most substantial fall in more than a week.

• Gold slid less than 0.05 percent to $1,205.34 an ounce.