Opening Bell: Oil Lifts U.S. Futures; 2-Year UST Yield Hits Decade-High

Key Events

Shares in Europe resumed their rebound this morning, in tandem with US futures for the S&P 500, NASDAQ 100 and Dow, after stocks in Asia earlier today extended their worst selloff in 16 years. This comes as investors focus on monetary policy while also keeping a wary eye on the ongoing US-China trade war. Treasuries steadied though the dollar selloff continued.

The pan-European Stoxx 600 opened 0.15 percent higher and is currently prolonging its advance, led by energy shares and miners which followed crude oil futures higher, offsetting news out of China that the country is seeking to retaliate with additional tariffs against the US.

Global Financial Affairs

This morning In Asia, the MSCI Asia Pacific Index dropped for a tenth straight session, extending total losses to roughly 5 percent, compressing its value by almost $700 billion this year. This is the benchmark's longest selloff since 2002, this time triggered by trade tensions, the ongoing emerging markets meltdown and a stronger dollar sucking investments out of the region.

Japan’s Nikkei 225 lost 0.24 percent of value; China’s Shanghai Composite declined 0.33 percent; Hong Kong’s Hang Seng slumped 0.29 percent; Australia’s S&P/ASX 200 edged down 0.06 percent. South Korea’s KOSPI remained virtually flat, eking out a 0.1 percent loss.

During yesterday's US session, stocks advanced. Technology shares and Energy stocks followed crude oil higher. The S&P 500 climbed for a second day, up 0.37 percent, led by Communication Services (+1.00 percent) and Energy (+0.95 percent). Consumer Staples (-0.37 percent) and Utilities (-0.26 percent), defensive sectors both, underperformed.

The Dow Jones Industrial Average advanced 0.44 percent, recovering from Monday’s losses, as traders managed to shrug off the US-Sino diplomatic dispute. The NASDAQ outperformed, scoring a 0.61 percent gain for a second day. Alphabet (NASDAQ:GOOGL) pushed the tech-heavy NASDAQ 100 Index up the most in about two weeks. It gained 0.81 percent. The Russell 2000 squeezed out a 0.05 percent gain.

The 2-year Treasury yield extended its climb to a decade high.

Central banks are back in the spotlight this week, with policy meetings on tap for the European Central Bank and Bank of England as well as for Turkish and Russian central banks. As well, market participants are increasingly preparing for the Fed to raise rates two more times in 2018, the next likely hike scheduled for the end of September.

In forex markets this morning, the euro and pound recovered initially, as both Britain and the EU continued attempts to foster an amicable split—pushing the dollar into a decline. However, as of time of writing both the single currency and cable are falling, on breaking news of a potential leadership challenge to the UK Prime Minister Theresa May.

Technically, the pound yesterday reached its downtrend line since early May, only to close below it, suggesting a resistance. Moreover, it formed a high wave candle, denoting a lack of direction.

Though threats from ongoing trade tensions and Brexit negotiations continue to linger, investors are currently honed in on the potential for extreme weather to disrupt economic activity as Category 4 Hurricane Florence continues to power over the Atlantic, as it heads toward the US's east coast.

Oil prices held on to yesterday's more than 3.4 percent surge, propelled by Hurricane Florence, lower US crude inventories and the looming Iran sanctions. Technically, the price may be bottoming. Any movement above $71.10 could complete an H&S bottom.

Upcoming Events

• Policy decisions from the Bank of England and the European Central Bank are due on Thursday.
• Apple (NASDAQ:AAPL) unveils its latest iPhones on Wednesday.
• Australia employment data for August will be released late Wednesday US/early Thursday in Canberra.
• China releases August industrial production, retail sales data on Friday.
• US retail sales, industrial production and Michigan Consumer Sentiment information are due on Friday.

Market Moves

All information is correct as of time of writing

Stocks

• The Stoxx Europe 600 Index advanced 0.24 percent.
• Futures on the S&P 500 Index increased 0.04 percent.
• The MSCI Asia Pacific Index fell 0.11 percent, hitting the lowest in about 14 months with its 10th consecutive decline.
• The MSCI All-Country World Equity Index dipped 0.12 percent.
• The MSCI Emerging Markets Index sank 0.78 percent, to the lowest point in about 16 months.

Currencies

• The Dollar Index fell less than 0.1 percent.
• The euro fell 0.11 percent to $1.1595.
• The British pound declined 0.05 percent to $1.302, the most significant drop in more than a week.
• The Japanese yen increased 0.1 percent to 111.53 per dollar.

Bonds

• The yield on 2-year Treasuries decreased less than one basis point to 2.74 percent.
• The yield on 10-year Treasuries dipped one basis point to 2.97 percent.
• Germany’s 10-year yield declined one basis point to 0.42 percent.
• The spread of Italy’s 10-year bonds over Germany’s rose three basis points to 2.5475 percentage points.

Commodities

• The Bloomberg Commodity Index climbed 0.2 percent, the highest in more than a week.
• West Texas Intermediate crude rose 0.8 percent to $69.77 a barrel, the highest in more than a week.
• Gold fell 0.02 percent to $1,201.90 an ounce.
• LME copper increased 0.2 percent to $5,871.50 per metric ton.