Opening Bell: Fed Minutes Boost U.S. Futures, Global Stocks But Dollar Retreats

Key Events

Minutes from the previous Federal Reserve meeting, released Wednesday, reaffirmed the bank's accommodative policy and boosted contracts on the Dow, S&P, NASDAQ and Russell 2000 as well as European shares in trading on Thursday.

Yields slid while gold is higher on a weaker dollar.

Global Financial Affairs

S&P futures built on yesterday's Wall Street advance, suggesting the underlying benchmark will match Wednesday’s new closing high when the US session opens, perhaps even providing another record setting day when trading begins.

Miners and automakers—which perform well in a growth environment—led the STOXX 600 index higher in European trading this morning. However, the FTSE 100 index tempered its performance, as the pound sterling rebounded from a two-day loss. The island-nation is heavily dependent on exports, and a weaker pound increases sales to other countries.

The pound had also been under pressure from concerns about side effects from AstraZeneca's (LON:AZN) COVID-19 vaccine and a slowdown in the vaccination program in the UK. The Philippines have just suspended use of the vaccine for people under the age of 60 after data showed that the inoculation can cause rare blood clots and Britain’s Joint Committee on Vaccination and Immunisation said that the vaccine should not be given to under 30s due to a very rare side effect of blood clots in the brain. So, the pound remains a shorts squeeze.

GBP Daily

The pound’s rebound found resistance by the bottom of a second, consecutive bearish pattern, after having fallen below its uptrend line since the bottom of March last year, as the currency trades along a downtrend.

Most of Asia was in the green, with Hong Kong’s Hang Seng outperforming with a 1.5% gain. Japan’s Nikkei 225 was the only regional index in the red, even if slightly, on concerns of tightening restrictions in an effort to combat the once-again rising coronavirus infection rate there.

In Wednesday’s trading, US stocks were mixed after the Fed did not use any language to suggest a change in stance, instead reiterating its ultra-loose policy saying it will remain in place until “outcomes” are achieved. While the S&P 500 Index edged higher and the Dow Jones closed slightly higher, the NASDAQ ended the day marginally in the red, while the Russell 2000 plunged 1.7% as traders scaled back the reflation trade.

To that effect, the materials sector plunged 1.7%, exactly the same percentage as small US corporates listed on the Russell 2000.

Yields on the 10-year Treasury note are falling again today, after Wednesday’s rebound.

10-year Treasuries Daily

From a technical perspective, rates are retesting yesterday’s bullish hammer (bearish for Treasuries, as yields maintain a negative correlation), especially so at the bottom of its rising channel. Will these technical phenomena overcome the bleak view from indicators that rates are heading lower?

The dollar maintained its positive correlation with yields which has been in place for the last two days, falling after yesterday’s rebound.

Dollar Index Daily

The greenback is struggling to maintain its position within a falling flag, bullish after the preceding 2.25% jump within just 10 sessions, especially given that it’s precisely on top of the previous rising channel. While the MACD already provided a bearish cross, the RSI is on the fence.

Gold rose on dollar weakness, retesting the previous bearish flag.

Gold Daily

A rise above that would constitute a bottom. The yellow metal remains under pressure due to expectations that rates will go higher.

Bitcoin rebounded above $57,000, after Bloomberg predicted the cryptocurrency will shoot to $400K this year

Bitcoin Daily

The token trades along a falling channel, whose bullish posture is reinforced by its occurring on the bottom of a rising channel, suggesting a new record ahead.

Oil fell, snapping a two-day rally.

Oil Daily

However, it found resistance by the bottom of a bearish flag.

Up Ahead

• US headline and core PPI will be released on Friday.
• Canada will announce the change in employment on Friday.
• China’s consumer and producer prices data are due Friday.

Market Moves

Stocks

• Futures on the S&P 500 Index gained 0.4%.
• The STOXX Europe 600 Index advanced 0.4%.
• The MSCI Asia Pacific Index climbed 0.2%.
• The MSCI Emerging MarketsIndex increased 0.3%.

Currencies

• The Dollar Index declined 0.2%.
• The euro increased 0.2% to $1.1887.
• The British pound jumped 0.3% to $1.3776.
• The onshore yuan weakened 0.1% to 6.547 per dollar.
• The Japanese yen strengthened 0.3% to 109.54 per dollar.

Bonds

• The yield on 10-year Treasuries sank two basis points to 1.66%.
• The yield on 2-year Treasuries declined less than one basis point to 0.15%.
• Germany’s 10-year yield was unchanged at -0.32%.
• Britain’s 10-year yield advanced one basis point to 0.785%.
• Japan’s 10-year yield dipped less than one basis point to 0.098%.

Commodities

• West Texas Intermediate crude declined 0.7% to $59.34 a barrel.
• Brent crude dipped 0.6% to $62.77 a barrel.
• Gold strengthened 0.4% to $1,744.24 an ounce.