Opening Bell: Equities, Safe Havens Send Conflicting Risk Signals; USD Gains

Key Events

In marked contrast to yesterday's trading, this morning U.S. futures, including for the S&P 500, Dow and NASDAQ, along with European stocks all surged to new highs. Shares in Asia, including those listed on Chinese indices, rebounded from an extended sell-off after reports emerged that China was taking steps to reign in the spread of yesterday's major market headwind, the pneumonia-like coronavirus.

Nevertheless, investors appear to remain unsure of the longer-term risks. Safe havens including yields, the U.S. dollar and the Swiss franc are also rising, signaling discord among market participants.

Global Financial Affairs

Traders enjoyed a buying dip yesterday as U.S equity futures slumped after markets were rattled by the coronavirus. But risk appetite for equities returned today, suggesting additional new mileposts ahead for the S&P 500 and NASDAQ Composite, with the Dow closing in on its own new record.

Utilities shares and media firms helped push the Stoxx Europe 600 Index higher on Wednesday, so that it carved out its own new record, following gains seen in Asian stocks .

South Korea’s KOSPI surged, (+1.23%), on what investors considered a bargain-buying opportunity after yesteday's slump. Though China’s Shanghai Composite lagged the regional gains, (+0.27%), the index still had an impressive recovery. The gauge closed up 1.81% from its intraday low, Asia’s biggest intraday gainer among the regional primary indices.

SSEC Daily

Technically, the violated gap of Jan. 2 proves a resistance (red line) that's also acting as a neckline of a small H&S top. Finally, the price was unable to climb back above its violated uptrend line since the Dec. 2 bottom.

UST 10-Y Daily

Despite what seems to be the return of vociferous risk appetite, yields, including for the U.S. 10-year Treasury, only climbed slightly. Technically, rates remained below the 100 DMA, after finding resistance by the 200 DMA, while staying near the bottom of a rising channel since the Sept. 3 bottom that has been struggling against the downtrend since the November 2018 high.

DXY Daily

The dollar reached the highest since Dec. 20. Technically, traders are waiting for a resolution of the conflict between the short-term uptrend since the Dec. 31 bottom and the downtrend since the Oct. 1 high. The 200 DMA seems to be the “red line” for bears and bulls, as they do battle at the top of the falling channel.

USD/JPY Daily

The yen weakened, though as of this writing it's well off the session lows. Nevertheless, the USD/JPY remains near its weakest levels since May with the currency pair trading within a rising channel.

The most traditional safe haven, gold, is currently flat.

Oil was down for a second day amid a global glut, offsetting concerns of supply disruption from Libya. Some analysts are targeting additional losses for the commodity, on coronavirus concerns.

Oil Daily

Technically, oil extended a selloff below its uptrend line since early October. After falling below the 50 DMA for the first time since November, WTI still found support above both the 100 and 200 DMA, whose break would signal a continued decline.

Up Ahead

• Companies including Procter & Gamble (NYSE:PG), Johnson & Johnson (NYSE:JNJ), Texas Instruments (NASDAQ:TXN) and Intel (NASDAQ:INTC) all report earnings results this week.
• Interest rate decisions are due in upcoming days from central banks in Canada, Indonesia and the euro region.
• The World Economic Forum, the annual gathering of global leaders in politics, business and culture, continues in Davos, Switzerland.

Market Moves

Stocks

• The Stoxx Europe 600 Index climbed 0.2%.
• Switzerland’s SMI Index gained 0.5%.
• Futures on the S&P 500 increased 0.4%.
• NASDAQ 100 Futures jumped 0.7%.
• The MSCI Asia Pacific Index increased 0.6% to 173.57.

Currencies

Bonds

• The yield on 10-year Treasuries advanced one basis point to 1.78%.
• Germany’s 10-year yield gained less than one basis point to -0.25%.
• Britain’s 10-year yield climbed less than one basis point to 0.633%.
• Japan’s 10-year yield dipped less than one basis point to 0.002%.

Commodities