- U.S. futures, global shares climb on outlook for Fed, ECB, PBoC accommodation
- Asian equities evaluations linger at 3-month low on trade woes
- Treasury yields leap on risk-on shift
- WTI gains ground on Saudi Arabia’s energy minister replacement
Key Events
Global stocks extended a rally and futures on the S&P 500, Dow and NASDAQ 100 edged higher this morning on investors' anticipation for further monetary policy easing.
The STOXX 600 climbed for the fourth straight day with energy and carmaker shares, to reach within 1.4% from the July 4 peak.
Expectations for an interest rate cut by the European Central Bank at its policy meeting on Thursday added to bullishness over stimulus in the world's second-largest economy—after the People's Bank of China said it will reduce banks’ cash requirements, releasing liquidity to shore up the domestic economy—and an increased outlook for an upcoming rate cut in the U.S.—with Fed Chairman Jerome Powell signaling the bank will continue to act “as appropriate” to support expansion.
After the PBoC's and Powell's statements on Friday, China's trade data underscored the need for more stimulus on Sunday, as exports unexpectedly fell in August as shipments to the U.S. plummeted.
In the earlier Asian session, China’s Shanghai Composite (+0.84%) led the regional rally with a sixth straight day advance, to 0.65% from the July 1 high. Japan’s Nikkei 225 (+0.56%) followed, sealing a total five-day gain of 3.5%, to above the 200 DMA.
Hong Kong’s Hang Seng (-0.04%) was the only major regional index to close in the red after the local government warned against foreign interference, as U.S. Democrats Senators looked to prioritize work on a human rights bill concerning the Asian city.
Overall, even after the current rally, Asian valuations are standing at a 3-month low after the latest U.S.-China trade escalation prompted a selloff throughout August.
Global Financial Affairs
On Friday, U.S. stocks eked out a third-day advance. Traders’ almost muted response suggested that Powell’s dovishness was already priced in and that the overall 2.5% weekly surge was rather on the improved U.S.-China trade outlook.
Yields on 10-year Treasurys jumped to the highest level in two-and-half weeks, as expected global stimulus measures—aimed at stretching out the longest economic expansion on record—swayed investor funds back into risk assets. Technically, the price may be completing a rounding bottom, whose upside breakout would contend with the downtrend line since November 2018.
The dollar strengthened against the yen. Technically, the USD/JPY pair tested the neckline of a small double bottom, at the bottom of a falling channel since March.
The pound bounced back this morning after taking a hit from Brexit woes on Friday, as the likelihood of snap elections increased. Positive GDP data for July helped the rebound. Technically, the price found resistance by the Aug. 27 high. After the falling channel’s upside breakout, it’s considered a correction before a continued rally.
Gold rebounded mildly after hitting the lowest price in two and a half weeks, weighed down both by a firmer dollar and risk-on sentiment.
Bitcoin felll to the lowest level in a week, crossing below the 100 DMA.
WTI opened higher, extending an advance to the fourth straight day, as Saudi Arabia's energy minister Khaled al-Falih was replaced by Prince Abdulaziz bin Salman, a member of the ruling family, ahead of an OPEC + committee meeting to monitor compliance with production cuts. Technically, the price failed to cross above the downtrend line since April 24 as the U.S.-China trade war fallout sparked concerns of dwindling demand.
Up Ahead
- A bill endorsed by both chambers last week, requiring British PM Boris Johnson to ask for a three-month extension of the Brexit deadline, is set to receive royal assent on Monday.
- OPEC’s monthly oil market report, which includes demand forecasts and production estimates, is due on Wednesday.
- ECB policymakers are widely expected to back an interest rates cut on Thursday and discuss all stimulus options, including QE. They will also publish forecasts for growth and inflation and President Mario Draghi will hold a press conference.
Market Moves
Stocks
- The U.K.’s FTSE 100 Index climbed 0.3%.
- The MSCI Emerging Market Index rose 0.3% to the highest in more than five weeks.
Currencies
- The Dollar Index eked out a 0.02% gain after rising 0.13%.
- The euro was steady at $1.1031.
- The British pound slid 0.3% to $1.2244.
- The Japanese yen was little changed.
Bonds
- The yield on 10-year Treasurys gained two basis points to 1.58%.
- Britain’s 10-year yield rose three basis points to 0.531%.
- Germany’s 10-year yield increased two basis points to -0.62%.
Commodities
- West Texas Intermediate crude climbed 0.9% to $57.05 a barrel.
- The Bloomberg Commodity Index increased 0.2%.