Opening Bell: Futures, Stocks Jump On Positive Earnings Hopes; Dollar Slumps

Key Events

US futures for the S&P 500, Dow Jones, NASDAQ and Russell 2000 all jumped on Monday, as did global stocks. With Q2 earnings season approaching, investors are clearly hoping corporate results will help confirm the better-than-expected economic data, in order, perhaps to 'lock down' the argument for a V-shaped recovery.

The dollar's slide continued as did gold's move higher. Oil hovers around the $40 level, though it's fallen just a bit below at time of writing.

Global Financial Affairs

Contracts on all four of the major US stock indices opened higher today, on optimism that companies managed to acclimate to a world with COVID-19 and still remain profitable, following the strongest quarter for US stocks in decades, as well as economic data that, for the most part, has repeatedly surprised expectations, including a string of records.

We, however, haven't been convinced by all this record-breaking data considering they followed the steepest recession since the 1930s, all of which was triggered by a global pandemic. And that's not in the rear-view mirror yet. 

On Sunday, the World Health Organization reported a record daily increase in global COVID-19 cases. And in the US, Florida hit a new daily record as well with over 15,000 new cases reported yesterday. 

Still, for now, equities and futures continue moving higher. The Stoxx Europe 600 Index rose at the open, fueled by banking shares and travel companies.

Asia was green across the digital board. Japan’s Nikkei 225 led the gains, (+2.2%), as Paper and Pulp, Railway and Bus and Real Estate stocks all climbed higher. China’s Shanghai Composite, (+1.8%), rose ahead of the release of the country’s economic growth data for the second quarter, a key indicator for trade, manufacturing and investments.

US stocks climbed on Friday, despite escalating coronavirus cases and US-China diplomatic fallout, after Gilead Sciences (NASDAQ:GILD) claimed progress toward a potential treatment for the virus, helping the NASDAQ notch its 25^th record this year.

Despite today's upside gap for US futures and most major global indices, yields, including for the 10-year benchmark note, pared Friday’s gains, perhaps finding resistance by the downtrend line—backed up by the 50 and 100 DMAs—since the June 5 high. From that point, rates have fallen below their uptrend line since April 21.

The dollar dropped for the second day, after it completed a rising flag, bearish following the preceding plunge, putting the currency on course for another leg down within the downtrend.

The flag’s implied target places the dollar below the 94.65 low of March 9, suggesting a long-term reversal.

Gold bounced off its uptrend line since June 5, signaling a resumption along its uptrend line.

However, weakening indicators improve chances for a pullback before taking on greater heights. 

Oil has been wavering around the $40 mark ahead of Wednesday's OPEC+ meeting in which the cartel will consider easing its unprecedented production cuts, despite the rising cases of coronavirus weighing on recently reopened economies.

Up Ahead

• Earnings season begins officially on Tuesday, when the big US banks report: JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) kick off the action.
• Wednesday brings the Bank of Japan’s policy decision and a briefing by its governor, Haruhiko Kuroda.
• The EIA's weekly crude oil inventory report is due Wednesday.
• China releases second quarter GDP on Thursday, as well as key economic indicators for June.
• The European Central Bank meets on Thursday as well, to set monetary policy. President Christine Lagarde will hold a virtual press conference afterward.

Market Moves

Stocks

• Futures on the S&P 500 Index climbed 0.4%.
• The Stoxx Europe 600 Index increased 0.7%.
• The MSCI Asia Pacific Index rose 1.3%.
• The MSCI Emerging Markets Index gained 0.9%.

Currencies

• The Dollar Index fell 0.1%.
• The euro jumped 0.2% to $1.1327.
• The British pound gained 0.1% to $1.264.
• The onshore yuan was unchanged at 7.0 per dollar.
• The Japanese yen was little changed at 106.96 per dollar.

Bonds

• The yield on 10-year Treasuries sank one basis point to 0.63%.
• The yield on two-year Treasuries decreased less than one basis point to 0.15%.
• Germany’s 10-year yield climbed one basis point to -0.46%.
• Britain’s 10-year yield rose one basis point to 0.166%.
• Japan’s 10-year yield gained one basis point to 0.033%.

Commodities

• West Texas Intermediate crude declined 1.1% to $40.11 a barrel.
• Brent crude dipped 1% to $42.80 a barrel.
• Gold strengthened 0.5% to $1,807.75 an ounce.