Opening Bell: Positive Sentiment Lifts U.S. Futures, Global Stocks; USD Falls

Key Events

Global markets as well as futures on the Dow, S&P, NASDAQ and Russell 2000 remained in positive territory on Wednesday, as traders were upbeat on prospects for a Brexit deal, passage of another round of US stimulus, COVID-19 vaccine progress and the Fed’s upcoming policy decision.

Oil is higher along with gold, while the dollar continues to slide. 

Global Financial Affairs

The Fed is expected to announce a shift in its bond buying program when it meets on Wednesday. Economists believe the US central bank will deliver fresh guidance on its asset purchases, already at $120 billion a month. The move will demonstrate a stronger commitment to support the economy with Quantitative Easing and historically low rates.

Uncharacteristically of late, contracts on the NASDAQ 100 performed better than the S&P 500 and Dow amid a rally led by technology large caps. Last Friday was the only other day we witnessed a similar move in the index since markets lifted off the Oct. 30 bottom amid a cyclical rotation into value shares. However, Russell 2000 futures continue to outperform, carrying on the current trend of small caps outperforming larger cap stocks.

In Europe the Stoxx 600 Index jumped on hopes that a Brexit deal is imminent. The UK will officially leave the EU on Dec. 31, and Michel Barnier, chief EU negotiator has said that a deal is still possible.

However, the pan-European benchmark faces technical resistance.

Stoxx Daily

The price struggled upon reaching the highs of a shooting star formed precisely one week ago, while volume has been providing a negative divergence to the tightly ranged rising price.

Asia was flashing green across the digital board this morning. China’s Shanghai Composite was the only regional gauge to close in the red and then just barely so, after dropping 0.01% following reports the co-CEO of Semiconductor Manufacturing International Corp (HK:0981)—the country’s biggest chipmaker—resigned, overshadowing recoveries in financial and energy shares. The uncertainty around SMIC is a sensitive issue as the US battles with China on technology issues. 

American stocks ended a four-day selloff on Tuesday as Congress moved on a fiscal plan to buoy the economy. Republican Senate Majority Leader, Mitch McConnell, vowed he will keep lawmakers in Washington despite the upcoming holiday, until an agreement is reached.

The S&P 500 Index advanced after its longest losing streak since September.

Yields, including on the 10-year Treasury, climbed for the second day, ahead of the Fed policy meeting.

10-year Treasuries Daily

Investors are rotating out of Treasuries in favor of stocks. That's forming a falling flag and increasing the view of a continued climb within the rising channel, which is bearish for Treasuries and bullish for stocks.

The rising odds of stimulus hammered the dollar, extending the penetration of a bearish flag.

Dollar Index Daily

We believe the greenback will break below the 90.00 level. 

Gold rose for the second day, for the first time in over a week, in what appears to be a recalibration, a negative correlation with the weakening dollar. That's something that has been scarce since the yellow metal posted its August all-time high.

Gold Daily

Technically, the commodity is taking on the 50 DMA, which has been keeping a lid on its price since early October, as it has traded within a falling channel.

Bitcoin may have completed a bullish flag, which could boost the digital currency toward the all-time high of $19,870, posted in December 2017. 

Bitcoin Daily

We would prefer to see a more decisive move for the cryptocurrency, accompanied by spiking volume.

Stimulus and vaccine progress shone a light for oil bulls at the end of the lockdown tunnel. 

Oil Daily

The news boosted WTI's price for the third straight day—the first time since crude broke out of its bullish flag over two weeks ago.

Up Ahead

• On Wednesday US retail sales figures will be reported. 
• US Initial jobless claims are printed on Thursday. 
• Policy decisions from the Bank of England and central banks in Mexico, Switzerland are announce on Thursday. 
• On Friday the Bank of Russia and Japan release interest rate decisions. 

Market Moves

Stocks

• Futures on the S&P 500 Index increased 0.1%.
• The Stoxx Europe 600 Index climbed 0.7%.
• The MSCI Asia Pacific Index increased 0.8%.
• The MSCI Emerging Markets Index gained 0.7%.

Currencies

• The euro gained 0.1% to $1.2165.
• The British pound advanced 0.2% to $1.349.
• The Japanese yen strengthened 0.2% to 103.41 per dollar.

Bonds

• The yield on 10-year Treasuries gained less than one basis point to 0.91%.
• The yield on two-year Treasuries gained less than one basis point to 0.12%.
• Germany’s 10-year yield increased less than one basis point to -0.61%.
• Britain’s 10-year yield climbed two basis points to 0.278%.

Commodities

• West Texas Intermediate crude was little changed at $47.58 a barrel.
• Gold strengthened 0.1% to $1,855.35 an ounce.