Opening Bell: Retreating Yields Boost U.S Technology Futures, Gold And Dollar Slip

Key Events

Futures on the Dow, S&P and Russell 2000 were wavering in trading on Monday, after a mixed Asian session, while NASDAQ futures extended a rebound amid receding yields. Markets were also spooked after Turkish President Recep Tayyip Erdogan fired his central bank chief, sending the lira plummeting 15%. 

Global Financial Affairs

Futures on the NASDAQ 100 were the only contracts in green ahead of the US open, almost one percent higher, at the time of writing. On the other hand, futures on the Russell 2000 were only marginally higher, demonstrating a reversal of the reflation trade. While the Fed’s dent in growth expectations may have caused profit-taking, it isn’t enough to say bets on the cyclical rotation will stop.

In Europe, technology stocks, that outperformed during lockdowns, and carmakers, which increased profits as the economy reopened, were in positive territory, even though the STOXX 600 Index was only slightly up.

In Asia earlier today, China’s Shanghai Composite (+1.1) outperformed in what we consider a corrective move, within what we expect will prove to be a downtrend, as regulators have been consistently warning of a bubble.

The overall demand for Chinese shares has been so weak, amid a negative divergence in momentum, that the price failed to form the right shoulder of a H&S top. After falling below what would have been the neckline, the price found resistance and has been developing a rising flag, bearish after the preceding plunge, complete with a downside breakout.

Japan’s Nikkei 225 (-2.1) underperformed after a fire at a semiconductor supplier plant raised concerns of a global shortage of automotive chips.

Wall Street was volatile on Friday amid the quadruple witching, when options and futures expire. The Dow Jones closed deep in the red, and the S&P edged lower. On the other hand, both the Russell 2000, representing value stocks, and the NASDAQ 100, representing growth stocks, outperformed, with a slight edge to small caps, that benefit from a reopening economy.

Yields jumped after the Fed didn’t renew a COVID accommodation for banks, which amounted to it indirectly tightening policy, even though it vowed not to do so. 

Today, stocks are enjoying a boost amid retreating yields, including on the 10-year Treasury note.

The dollar traded well off its highs but stilled retained an edge.

The greenback is staying above a bullish flag and the neckline of potential bottom after completing a falling wedge since the March high.

Gold was pushing against the bottom of a rising flag.

The yellow metal is bearish after the preceding fall. The strength of the dollar and rising bond yields have been anathema to gold. 

Bitcoin was little changed.

The cryptocurrency is trading within a bullish pennant inside a rising channel.

Oil looks to be developing a H&S top, after blowing a bullish flag and falling below its rising channel.

Up Ahead

• Today, Federal Reserve Chair Jerome Powell is due at the BIS Innovation Summit. Followed by the President of the ECB, Christine Lagarde, Chair of the Bank of England, Andrew Bailey as well as chiefs from Sweden, Canada, Mexico and Brazil.
• Powell and Treasury Secretary Janet Yellen make their first joint appearance before the US House Financial Services committee to testify on pandemic policies on Tuesday.
• EIA crude oil inventory report is released on Wednesday.
• On Friday, February US personal income and spending data arrives.
• This week and next the US auctions two-, five-- and seven-year Treasuries.

Market Moves

Stocks

• Futures on the S&P 500 Index dipped 0.1%.
• The STOXX Europe 600 Index declined 0.2%.
• The MSCI Asia Pacific Index fell 0.2%.
• The MSCI Emerging Markets Index climbed 0.1%.

Currencies

• The Dollar Index rose 0.1%.
• The euro declined 0.1% to $1.1888.
• The British pound dipped 0.1% to $1.3855.
• The onshore yuan was little changed at 6.509 per dollar.
• The Japanese yen strengthened 0.1% to 108.72 per dollar.

Bonds

• The yield on 10-year Treasuries fell four basis points to 1.68%.
• The yield on two-year Treasuries decreased one basis point to 0.14%.
• Germany’s 10-year yield declined three basis points to -0.32%.
• Britain’s 10-year yield dipped three basis points to 0.812%.
• Japan’s 10-year yield dipped three basis points to 0.083%.

Commodities

• West Texas Intermediate crude declined 0.9% to $60.86 a barrel.
• Brent crude decreased 0.7% to $64.07 a barrel.
• Gold weakened 0.8% to $1,730.97 an ounce.