by Pinchas Cohen
After yesterday’s initial relief rally following Sunday's French elections, global equity enthusiasm waned and the rally dissipated. That is, except for Japan's TOPIX which held on to its gains, after leading most Asian markets higher, climbing to its highest level since December 2015, and closing at the trading high of the day, above its March peak. European markets didn’t gain momentum over the course of the day yesterday, and soon declined to close lower.
Today, however, Asian stocks slipped. The Stoxx Europe 600 gained on better-than-expected results from Commerzbank (DE:CBKG). The dollar pushed higher and oil erased some of its recent losses.
China's Shanghai Index has been fluctuating, heading up because of buyers who think that a $500 billion devaluation offers an attractive opportunity, then slipping down on sellers who believe there’s still more fat to be trimmed. The slippage hasn't been helped by the Chinese government whose crackdown on risky trading has spurred a month-long sell-off in the major index.
The S&P 500 saw a nine point, record close yesterday, after hitting a 38-point, intraday record high. Yesterday’s solid gain midday, fell afterward though the index manged to eke out a miniscule gain on the day. A Doji pattern was formed during yesterday's trading, a sign of weakness. It is primed to descend, possibly as soon as today, in an attempt to create a double top.
Overall, US equities are holding on to record levels due to renewed faith in the global economy, on the heels of the positive outcome—from a markets perspective—for the French election. This gives investors space to now focus on the continued growth of the labor market and earnings.
In particular, the CBOE Volatility Index, the VIX, encapsulates current investor sentiment. Yesterday it fell to a low of 9.67, its lowest reading since December 29, 1993, when the index sunk to 8.89, the all-time lowest level of volatility for the S&P 500 the gauge's inception in 1990. Yesterday’s low was the second lowest volatility reading in the indicator's history. Currently the VIX is at 9.86.
Investors will surely sift through the language and nuance of comments by Federal Reserve Bank of Minneapolis President Neel Kashkari today, for clues on upcoming Fed policy. Federal Reserve Bank of Boston President Eric Rosengren and Federal Reserve Bank of Dallas President Robert Kaplan also speak. Each could provide additional clues to current Fed thinking.
South Korea is holding presidential elections.
Australia’s Treasurer, Scott Morrison, will deliver his budget later today. The country’s top-level credit rating is currently considered to be at risk. Morrison has pledged fairness and growth that reins in debt, as he targets the country's Big Four banks.
Stocks
The MSCI Asia Pacific Index climbed 1.02% to 150.57, its highest level since June 2015, while Japan’s Topix fell 0.26% to 1581.77. The Shanghai Composite rose 0.6% to 3080.527, after it sold off to the lowest level since October. It's now down 0.74% YTD. South Korean markets are closed for election day.
The Stoxx Europe 600 gained 0.31%, up to 395.28, after being up 0.5% earlier, while the Euro Stoxx 50 is doing better at 0.4%. France's CAC 40 is up 0.35 at 5400.76. Germany's DAX Index is up 0.27% to 12792.24 but is fluctuating. Spain's IBEX 35, was the biggest gainer in yesterday’s European futures, and led the early European rally on French elections certainty. Today, however it's up only 0.14% to 11111.70. The FTSE 100 Index is up 0.29% at 7322.35 but is also fluctuating.
S&P 500 Futures are down 0.11% to 2395.00, while both the Dow and NASDAQ 100 futures are up, 0.4% at 20950.00 and 0.1% at 5656.00, respectively.
Currencies
The US Dollar Index eked out a 0.05% gain today.
The Aussie, on the other hand, fell 0.6% to its lowest level since January 10 on a continued weaker read of retail sales data, further weakening the outlook for the country. It's also currently battling falling iron ore prices, its top export.
The euro is down 0.08% vs the US dollar, to 1.0915. That's slightly back into the pennant it has created since April 24. This after it fell 0.7% yesterday, subsequent to Macron’s victory and after trading at its highest level since November 2016.
The pound is up 0.3% to 1.2943 while the yen is down 0.32% at 113.63
Bonds
Globally, yields on 10-year bonds were little changed. Treasury notes gained four basis points to 2.39 percent, Australia’s Australia's 10-year rose one basis point to 2.68 percent and France's’s climbed by two basis points to 0.87 percent.
Commodities
Gold has been trading in a tight, 0.4% range, shifting from a high of 1228.67 to 1223.98. Currently, it’s right in the middle, flat as of yesterday’s close, which halted a four-day decline.
WTI Crude is up 0.30% to $46.57, erasing an earlier decline, ahead of government data on US crude supplies.
Iron ore futures declined 0.6% on fears of mounting supply and China’s leverage crack-down.