Opening Bell: U.S. Tariff Delay Prompts Global Rally; China Soars; Bonds Slip
Investing.com | Feb 25, 2019 05:34AM ET
- U.S. futures, Europe rally on U.S. trade tariff deadline delay
- China’s Shanghai Composite jumps into bull market with 5.6% surge
- Yields climb on risk-on mood; USD slips with Treasurys h2 Key Events/h2
- Fed Chairman Jerome Powell delivers semiannual testimony on monetary policy and the state of the economy to House and Senate committees today and tomorrow.
- U.K. Prime Minister Theresa May delayed a 'meaningful vote' on Brexit to before March 12, sparking speculations around a delay on the March 29 final deadline.
- U.S. President Donald Trump and North Korea leader Kim Jong Un are expected to meet for a second summit beginning on Tuesday.
- Macy’s (NYSE:M) reports Q4 results before market open on Tuesday, with forecasts of $2.53 EPS and $2.44 billion revenues. Forward guidance for 2019 will be closely watched after the company cut its full-year earnings expectations last mont, sending the stock further lower.
- U.S. GDP figures come out on Thursday.
- The Stoxx Europe 600 gained 0.27 percent, the highest since October.
- Futures on the S&P 500 climbed 0.4 percent to the highest in more than 15 weeks.
- The MSCI Asia Pacific Index rose 0.7 percent, hitting the highest in more than 20 weeks.
- The MSCI Emerging Markets gained 0.6 percent, reaching the highest in six months on its sixth consecutive advance.
- The Dollar Index slid 0.1 percent to the lowest in almost three weeks.
- The euro edged 0.1 higher percent to $1.1352, the strongest in almost three weeks.
- The Japanese yen ticked less than 0.05 percent higher to 110.67 per dollar.
- The MSCI Intl Emerging Market Currency inched 0.2 percent higher to 1,649.60, the highest in three weeks.
- South Africa’s rand gained 0.7 percent to 13.9039 per dollar, on the largest rise in almost four weeks.
- The yield on 10-year Treasurys increased one basis point to 2.67 percent.
- Germany’s 10-year yield climbed one basis point to 0.11 percent.
- Britain’s 10-year yield gained two basis points to 1.177 percent.
- The spread of Italy’s 10-year bonds over Germany’s fell 10 basis points to 2.6508 percentage points to the narrowest in almost three weeks.
- The Bloomberg Commodity Index gained 0.3 percent, reaching the highest in more than 10 weeks on its sixth straight advance.
- Brent crude slipped 0.2 percent to $67.00 a barrel, the largest fall in two weeks.
- LME copper rose 0.8 percent to $6,531.00 per metric ton, the highest in eight months.
- Gold climbed less than 0.05 percent to $1,329.69 an ounce. The yellow metal could lose some of its safe-haven spark if trade negotiations yield a substantial deal.
European shares and futures on the S&P 500, Dow and NASDAQ 100 tracked Asian stocks higher, after U.S. President Donald Trump delayed the dreaded March 1 tariff deadline on Chinese exports. China’s state-run Xinhua news agency, however, later warned against possible new uncertainties in the final stage of U.S.-china diplomatic talks.
The STOXX Europe 600 opened with a 0.18% gap higher, extended the rally to 0.53% but then buckled, paring the advance to 0.27% at the time of writing. Were prices to close at these levels, they would have formed a shooting star and a potential Evening Star, in Japanese Candlestick methodology, or an Island Reversal, in Western technical analysis. Carmakers and materials, the biggest beneficiaries of trade breakthroughs, jumped 1.1%. Banks shares also enjoyed some upbeat gains.
Earlier, during the Asian session, most regional indices rallied across the board, after reports broke of a U.S. tariffs deadline extension.
China’s Shanghai Composite surged 5.6%, the biggest leap in three years, to the highest close since July 15. The price jump was just enough to push the index back into bull market territory, gaining 20.18% since 2018's bottom.
Hong Kong’s Hang Seng, conversely, only ticked 0.5% higher, developing a high-wave doji, as institutional investors remained cautious ahead of earnings releases, in a sign that smart money in the region isn't easily convinced that global dynamics are really shifting. This posture begs the question: what will happen to Chinese shares—and indeed global stocks—if there is no substantial trade agreement?
h3 Global Financial Affairs/h3Friday saw a broad equity rally help the Dow Jones Industrial Average, NASDAQ Composite and the Russell 2000 seal a ninth consecutive weekly advance and the S&P 500 clinch a fourth straight week of gains.
In bond trading, although the yield on 10-year Treasurys is climbing on risk-on today, it is still within its range since January, with an obvious downward bias. Should the 2.6% level be broken, we could expect yields to retest December lows—an omen for stocks, which hold a direct relationship with yields.
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The Dollar Index slipped alongside Treasurys, but was still held up by the support of the broken downtrend line since mid November and the 96.00 level—the November-December double-top neckline.
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