Opening Bell: Caution Prevails Ahead Of Fed Decision; Oil Spike Eases

 | Sep 18, 2019 07:49AM ET

  • U.S. futures slide on investor caution ahead of Fed announcement
  • Oil prices ease as Saudi Arabia reassures markets over supply capacity
  • Yields slide for third straight day on rate cut expectations

Key Events

Futures on the S&P 500, Dow and NASDAQ 100 traded in a holding pattern below neutral levels this morning, marking time ahead of an expected U.S. interest rate cut. In the background, lingering concerns about U.S.-China trade tensions—with working-level negotiators set to resume talks ahead of higher-level meetings in October—contributed to investor caution.

Europe's STOXX 600 rebounded from a drop, with gains in telecom stocks offsetting declines in household goods and financial shares—the latter being weighed down by an increased outlook for lower interest rates.

Earlier, in the Asian session, regional indices ended mixed, with South Korea’s KOSPI (+0.41%) outperforming and China’s Shanghai Composite (+0.25%) ranking second. Australia’s S&P/ASX 200 (-0.2%) led the session’s losses.

Meanwhile, oil prices extended Tuesday's steep slide that pared about half of Monday's spike, after Saudi Arabia moved to reassure markets over supply recovery.

Global Financial Affairs

On Tuesday, the S&P 500 gained 0.26%, weighed down by Energy stocks (-1.47%) before Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman announced the country was repairing its oil facilities and would restore full output capacity by the end of the month. Real Estate shares fared as the session’s outperformers (+1.39%).

UST 10-Year Daily Chart

Meanwhile, the yield on 10-year Treasurys tumbled for the third straight day, as investor appetite for government bonds surged ahead of expected monetary policy easing. Technically, the three-day drop followed the test of the 100 DMA’s resistance below the downtrend line since November.

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The dollar gained against the yen but remained below yesterday’s highs of a shooting star’s resistance. It still hovered above the 100 DMA and the top of a falling channel, demonstrating how crucial the next move could be for the ongoing trend.

WTI prices slightly extended yesterday’s 5.66% plunge but remained above yesterday’s lows, suggesting support.

Technically, the wild swings of the initial knee-jerk reaction—seen on both the U.S. benchmark and the global benchmark, Brent—may solidify into a stable short-term uptrend after establishing an ascending series of peaks and troughs.

Up Ahead

  • The Federal Reserve is widely expected to lower U.S. interest rates in response to slowing global economic growth and muted inflation. Chairman Jerome Powell will hold a post-decision press conference on Wednesday.
  • The Bank of Japan monetary policy decision is on Thursday, followed by a briefing from Governor Haruhiko Kuroda.
  • Bank Indonesia and Bank of England also decide policy on Thursday.
  • Australia jobs figures are out on Thursday.
  • Quarterly expiration of futures and options on indexes and stocks on Friday could add to this week's key calendar events to boost volatility.

Market Moves

Stocks

  • Spain’s IBEX 35 increased 0.2%.

  • The MSCI Emerging Markets Index gained 0.3%.

    • Currencies

  • The Dollar Index climbed 0.13 out a 0.6% hole%.

  • The British pound declined 0.2% to $1.2469.

  • The euro dropped 0.1% to $1.1059.

  • The Japanese yen weakened 0.1% to 108.19 per dollar.

    • Bonds

  • The yield on 10-year Treasurys slipped two basis points to 1.78%.

  • The yield on 2-year Treasurys fell two basis points to 1.71%.

  • Britain’s 10-year yield dropped two basis points to 0.673%.

  • Japan’s 10-year yield declined three basis points to -0.185%.

    • Commodities

  • West Texas Intermediate crude fell 0.2% to $59.25 a barrel.

  • Gold held steady at $1,501.93 an ounce.

  • Iron ore increased 0.3% to $93.45 per metric ton.

    • Written By: Investing.com

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