Opening Bell: U.S. Antitrust Probe Into Big Tech Hits Futures; Pound Jumps

Key Events

European stocks and U.S. futures hit a brick wall this morning after the U.S. government opened a broad antitrust probe into big tech companies, abruptly ending two days of earnings-led rally.

S&P 500 contracts—which suggested the underlying index could open below the 3,000-key level in the U.S. session, as they form a H&S top—followed NASDAQ futures lower after reports the Justice Department will begin a sweeping investigation that threatens to hit the world's biggest internet companies, including Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOGL) and Amazon.com Inc (NASDAQ:AMZN), whose stocks slid over half a percentage point at the open to then stage a rebound ahead of two key days of reports for the three tech heavyweights.

The STOXX 600 was also flashing red, as miners' shares, which tracked Iron ore prices lower, offset an earnings-powered technology rally. Automobile producers and financials also dropped after Daimler (DE:DAIGn) said it expected stagnant demand this year, and Deutsche Bank (DE:DBKGn) stock extended a selloff after the German investment bank announced bigger Q2 restructuring costs than expected.

In the earlier Asian session, regional equities crept higher after Bloomberg reported that U.S. trade representative Robert Lighthizer will head to China next week to resume negotiations and White House economic adviser Larry Kudlow said he believes Beijing will start buying U.S. agricultural goods soon.

Morgan Stanley analysts also helped stocks higher saying they expect regional central banks to continue cutting interest rates into next year. While this outlook should boost equity markets, its actual impact is likely to be limited, with local rates already standing at low levels and local governments running high debt levels.

As the immediate beneficiary of trade hopes, China’s Shanghai Composite (+0.8%) outperformed. At the opposite side of the spectrum, South Korea’s KOSPI (-0.91%) ranked as the day's laggard after the country fired warning shots at a Russian military aircraft that entered its airspace.

Global Financial Affairs

In Tuesday’s U.S. session, equities rallied for the second day, driving the S&P 500 above the key 3,000 level once again and pushing the NASDAQ Composite within spitting distance of a new record, as strong corporate earnings results dispelled concerns the U.S.-China trade war is severely impacting growth.

Yields on 10-year Treasurys very nearly erased Tuesday’s gains as risk off gripped the market. Technically, rates have been consolidating within a H&S bottom pattern after falling 39% in the eight months since November. This downtrend projects the market’s attempt to price in an uncertain interest rates path and economic cycle, against a complex geopolitical background.

The Dollar Index dropped after edging higher, while the euro retested the lowest levels in more than two years after completing a H&S continuation pattern, signaling a resumption of the downtrend, amid speculation the ECB will give signs of easing rates at its monetary policy meeting tomorrow.

The pound found its footing after falling on Boris Jonson’s nomination to be next British Prime Minister. The currency is now rising, as traders shorted it on the rumors—during Johnson's race to succeed Theresa May as Conservative leader and shape the next phase of Brexit negotiations—and bought back on the news.

In commodities, crude oil is paring a fourth-day advance and retesting the 200 DMA after just crossing over it. The 50 DMA rested on top of the 200 DMA, as it set up to either bounce off its support or cut through it, triggering a Death Cross and potentially completing a down-sloping H&S top, as demand is too weak to form a symmetrical right shoulder and as continued global demand concerns offset Mideast headwinds.

Up Ahead

• Facebook and Tesla (NASDAQ:TSLA) report earnings after the close today, alongside PayPal Holdings Inc (NASDAQ:PYPL) and Citrix (NASDAQ:CTXS).
• Other companies reporting corporate results this week include: Amazon.com, Alphabet, Unilever (LON:ULVR) and McDonald’s (NYSE:MCD).
• The European Central Bank will unveil its monetary policy decision 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 MSCI All-Country World Index advanced less than 0.05%.
• The U.K.’s FTSE 100 slid 0.2%.

Currencies

• The Dollar Index increased less than 0.05%.
• The euro fell less than 0.05% to $1.1147, the weakest in almost eight weeks.
• The British pound was unchanged at $1.244.
• The Japanese yen increased 0.2% to 108.05 per dollar.

Bonds

• The yield on 10-year Treasurys slipped two basis points to 2.07%.
• Germany’s 10-year yield fell one basis point to -0.36%, reaching the lowest in more than two weeks on its sixth straight decline.
• Britain’s 10-year yield declined less than one basis point to 0.69%.
• Japan’s 10-year yield dropped one basis point to -0.149%.

Commodities

• West Texas Intermediate crude climbed 0.5% to $57.07 a barrel, the highest in more than a week.
• Gold advanced 0.3% to $1,422.65 an ounce.
• The Bloomberg Commodity Index gained 0.3%, the highest in more than a week.