Opening Bell: Risk-On Boosts Stocks; Ruble Tumbles; Bitcoin Slips

Key Events

Traders gave the risk-off, risk-on daily merry-go-round another spin today, as they rotated out of safe havens and into growth assets yet again, pushing stocks higher in the Asian session. The rally rolled over onto European trade, boosting US futures along the way. Will traders hang on to the upbeat rally or will they be thrown off the carousel again and reverse direction one more time?

By mid European session, NASDAQ 100 futures had already bounced 1.50 higher, followed by the Dow and S&P 500 Futures, jumping 1.15 and 1.10 percent respectively.

Fueling today's rally: the conciliatory comments on global trade made by Chinese President Xi Jinping at the Boao Forum for Asia earlier this morning.

XI Jinping signaled that China—the world's second largest economy and single largest manufacturer since it outstripped the US in 2010—will open its economy further and favor a level playing field for foreign competitors, 'significantly' lowering import tariffs. This would include duties on vehicles, which are at the heart of the trade spat with the US. International companies would also be favored by a better intellectual property and investment framework.

Asian stocks rallied across the board on XI Jinping's remarks, from Japan's TOPIX to South Korea's KOSPI and Hong Kong's Hang Seng, which led the pack leaping 1.35 percent. However, China's mainland Shanghai Composite initially underperformed with a paltry 0.26 percent gain, until it finally joined the rally in the final hour.

The saying "a billion Chinese can't be wrong" could take on an ominous meaning here: did Chinese traders mistrust Xi Jinping's words at first? Or have they already realized, as a Financial Times piece claims, that the speech was merely a 'rehash' of Xi's Davos address? As such it offers no big concessions to Trump.

Global Financial Affairs

Though the easing of trade war jitters is the current market narrative, yesterday's US session was instead dominated by the FBI raiding the office, home and hotel room of Michael Cohen, US President Donald Trump's long-time personal lawyer, a key figure in several legal issues swirling around the president including Russia's meddling with the 2016 presidential election and payments to an adult film actress.

After the news broke, during the final hours of trade, most of the Dow's 400 point intraday gains were erased. At about 2PM Monday, the S&P 500 also reversed, after jumping as much as 1.8 percent during the first four hours of trade. The early rally would have fully recouped last week’s losses. Instead about two-thirds of the earlier advance was trimmed.

The SPX ended by closing 0.33 percent in the green, helped by gains in Health Care (+0.99 percent) and Technology (+0.78 percent) stocks. If the ascent of tech stocks attests to investor faith in growth, the underperformance of Industrials (-0.30 percent) reveals that the trade war risk is still gnawing at markets.

Even though global equities and US futures shrugged off yesterday's late session risk-off turn this morning, investors may not be fully in risk-on mode either. Dallas Fed President Robert Kaplan warned on Monday that the trade dispute is unlikely to be resolved anytime soon and that the longer it takes to arrive at an agreement, the greater the risk of endangering global economic growth, which has been on a synchronized upward trajectory for the first time since the Great Recession.

The complexity of the current market environment and its lack of leadership may be illustrated most clearly by the 4-hour chart of the benchmark index, above. An H&S bottom is forming right on the uptrend line since the February 2016 bottom, right above the February 2018 low. The neckline is the line in the sand for bears, at 2,680; the February 2018 low is the bull's red line, at 2,530. A breach of the territory belonging to either side will almost certainly be a catalyst for a much bigger move.

In Russia, the country's main ruble-denominated MOEX Russia Index tumbled the most in four years and the ruble plunged the most among global FX peers after the US added sanctions targeting Kremlin-connected oligarchs and their companies. Analysts are warning that other Russian companies may be next, which would exacerbate the crash of Russian assets.

Technically, the Russian ruble completed a double bottom and the MOEX topped out.

Bitcoin is again trading under $7,000. According to Thomas Lee, Head of Research for Fundstrat Global Advisors, the digital token would be under pressure from capital gains taxes imposed on cyptocurrency holdings in the US. This has prompted investors to cash out ahead of the April 17 tax filing deadline for 2017 earnings.

This may also mean that additiional, 'massive' selling may yet take place. Technically, a bearish pennant is forming. Should strong selling resume, providing a downside breakout, the price is likely to also register a lower peak than in February, resuming the downtrend.

Up Ahead

• China's CPI is expected to have slipped to -0.5 percent from 1.2 percent MoM, and to 2.6 percent from 2.9 percent YoY.

• Facebook(NASDAQ:FB) CEO Mark Zuckerberg testifies at two Congressional hearings on Tuesday and Wednesday.

• US CPI is expected to have dropped to 0.0 percent from 0.2 percent MoM, and increased to 2.4 percent from 2.2 percent YoY.

• FOMC minutes are due on Wednesday. Traders will be seeking clues on more than just interest rates, after Kaplan's remarks that US-China trade issues won't go away as easily as the market seems to think or hope.

Market Moves

Stocks

• The STOXX Europe 600 gained 0.7 percent as of 8:15 a.m. London time, to the highest level in more than three weeks.

• Futures on the S&P 500 Index increased 1.3 percent.

• The MSCI All-Country World Index climbed 0.3 percent.

• The UK’s FTSE 100 climbed 0.5 percent to the highest level in almost six weeks.

• Germany’s DAX jumped 1.1 percent to the highest in more than four weeks.

• The MSCI Emerging Market Index surged 0.7 percent to the highest level in two weeks.

• The MSCI Asia Pacific Index advanced 0.7 percent to the highest level in two weeks on the largest gain in two weeks.

Currencies

• The Dollar Index decreased less than 0.05 percent to the lowest in almost two weeks.

• The euro dipped less than 0.05 percent to $1.2316.

• The British pound gained 0.1 percent to $1.4145, the strongest in two weeks.

• The Japanese yen fell 0.3 percent to 107.11 per dollar.

Bonds

• The yield on 10-year Treasuries gained two basis points to 2.80 percent.

• Germany’s 10-year yield dipped one basis point to 0.50 percent, the lowest in three months.

• Britain’s 10-year yield decreased less than one basis point to 1.407 percent.

Commodities

• WTI crude gained 1.3 percent to $64.25 a barrel, the highest in more than a week.

• Copper increased 0.8 percent to $3.10 a pound, the highest in more than three weeks.

• Gold decreased 0.2 percent to $1,333.77 an ounce.