Opening Bell: U.S. Futures Get Their Mojo Back Ahead Of Key Earnings; Oil Jumps

Key Events

European shares and futures on the S&P 500, Dow and NASDAQ 100 climbed this morning, shrugging off Asian losses ahead of a week filled with high-profile corporate results.

The STOXX 600 managed to crawl above neutral levels after a lower open. Italian stocks pushed the benchmark lower, selling off on heightened political risk as Deputy Prime Minister Matteo Salvini was pressured to clarify whether he intends to break the government coalition and prompt snap elections. The country's FTSE MIB pared some losses by late European morning, after notching up its worst session in months on Friday. Overall, today's lack of direction on the pan-European index follows Friday’s high wave candle, which saw substantial price action, only to close flat.

Earlier, Asian traders were directly influenced by Friday’s back pedaling, by stock investors, on the outlook for a rate cut after FOMC member James Bullard and Eric Rosengren prompted them to scale back expectations for a 50-basis point reduction. The MSCI Asia-Pacific index excluding Japan fell 0.4%. Japan’s Nikkei dropped 0.23%, while China’s Shanghai Composite (-1.27%) was the heaviest faller of the session as it hit its lowest level since June 4, despite the launch of China's own version of NASDAQ, which saw its 25 listed components soaring 140% on average.

Global Financial Affairs

U.S. stocks slipped on Friday, ending the week lower after more than a third of companies releasing their earnings results blamed the U.S.-China trade war for lower profits and provided soft guidance. Adding to headwinds were lower prospects of more marked policy easing by the Fed, and mounting worries over a military intervention in the Middle East, after Iran seized a British oil tanker in the Strait of Hormuz.

Investors raced to increase Treasury holdings as they repriced a slower path to lower interest rates. Technically, the 4-hour chart on 10-year Treasury yields is forming a H&S continuation pattern, confirming its downtrend.

Similarly, investors balanced the previously overly dovish outlook by buying up the dollar for a second day—though the greenback is well off its daily highs, after nearing the top of its short-term falling channel.

Despite the sudden USD strength, a pennant-shaped continuation pattern retained integrity, increasing the scenario for a gold rally.

Meanwhile, oil gapped up on Middle East tensions and a Libyan oil field shutdown. However, from a technical perspective, bulls have their work cut out for them. They’d need to carry prices above $61 to extend the short-term trend up and be willing to commit to $67 a barrel to extend the medium term higher.

Up Ahead

• Earnings season rolls on with companies including: Amazon.com (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), Unilever (LON:ULVR), Caterpillar (NYSE:CAT), Coca-Cola (NYSE:KO), McDonald’s (NYSE:MCD) and Boeing (NYSE:BA).
• Snap (NYSE:SNAP), which reports after market close on Tuesday, will be called to corroborate a 190% surge in its stock price since December with improved metrics on user engagement and sales.
• U.K. Prime Minister Theresa May’s successor will be announced on Tuesday, with Boris Johnson expected to become the new Conservative leader.
• The European Central Bank will unveil its monetary policy decision and holds a press conference on Thursday. Economists widely expect officials to signal their readiness to cut interest rates and potentially broaden stimulus. Some see the chance of an immediate rate cut.

Market Moves

Stocks

• The Shanghai Composite Index declined 1.3%, the lowest in more than five weeks on the largest drop in two weeks.
• The MSCI Emerging Market Index declined 0.4%.

Currencies

• The Dollar Index advanced 0.02% slipping from a 0.09% advance.
• The euro slid less than 0.05% to $1.1217.
• The British pound slipped 0.2% to $1.2481.
• The onshore yuan climbed less than 0.05% to 6.879 per dollar.
• The Japanese yen fell 0.2% to 107.89 per dollar.

Bonds

• The yield on 10-year Treasurys fell one basis point to 2.05%.
• The yield on 2-year Treasurys gained one basis point to 1.83%.
• Germany’s 10-year yield was unchanged at -0.32%, the lowest in almost two weeks.
• Britain’s 10-year yield declined less than one basis point to 0.73%, the lowest in almost two weeks.
• Japan’s 10-year yield fell less than one basis point to -0.135%, reaching the lowest in almost two weeks on its sixth straight decline.

Commodities

• West Texas Intermediate crude advanced 1.2% to $56.29 a barrel, the largest gain in more than a week.
• Iron ore dropped 2.7% to $113.57 per metric ton, the lowest in more than a week on the biggest decrease in more than two weeks.
• Gold climbed 0.1% to $1,427.10 an ounce.