Opening Bell: Fed's Hawkish Turn Boosts Futures, Global Stocks; Bonds Sell Off
Investing.com | Mar 22, 2022 09:14AM ET
- Fed turns more hawkish, opening the possibility for half-point hike in May
- Dollar, financials jump on spiking yields h2 Key Events/h2
- The US EIA reports Crude Oil Inventories on Wednesday
- The UK's Annual Budget Release takes place on Wednesday
- US President Joe Biden attends a NATO emergency summit in Brussels on Thursday
- Eurozone Manufacturing PMI prints on Thursday
- US Initial Jobless Claims, Durable Goods Orders reports are released Thursday
- The Stoxx Europe 600 rose 0.5%
- Futures on the S&P 500 rose 0.3%
- Futures on the NASDAQ 100 rose 0.4%
- Futures on the Dow Jones Industrial Average rose 0.4%
- The MSCI Asia Pacific Index rose 1%
- The MSCI Emerging Markets Index rose 1.1%
- The Dollar Index was little changed
- The euro was little changed at $1.1006
- The Japanese fell 0.8% to 120.43 per dollar
- The offshore yuan was little changed at 6.3723 per dollar
- The British pound rose 0.1% to $1.3186
- The yield on 10-year Treasuries advanced five basis points to 2.34%
- Germany's 10-year yield increased three basis points to 0.50%
- Britain's 10-year yield rose three basis points to 1.66%
- WTI crude dropped 3.74% to $107.94 a barrel
- Brent crude fell 1.6% to $113.77
- Spot gold fell 0.5% to $1,926.60 an ounce
U.S. futures for the Dow Jones, S&P 500, NASDAQ and Russell 2000 joined global stocks on Tuesday in a cautious advance as the bond selloff continued. Investors have moved out of safe haven Treasuries and back into risk assets after the Fed signaled it would be taking a tougher approach to fighting red-hot inflation via the possibility of a 50 basis point rate hike going forward.
However, ongoing Russia-Ukraine jitters kept a lid on gains. Still, the dollar and Bitcoin both rose.
h2 Global Financial Affairs/h2All four major US equity benchmark contracts were trading in the green this morning, with futures on the Russell 2000 outperforming at time of writing.
European stocks opened higher on Tuesday, boosted by energy sector companies, even as oil prices turned lower. Banks also outperformed after Federal Reserve Chair Jerome Powell yesterday made comments markets interpreted as more hawkish than the stance presented at last week's policy decision meeting. Cyclicals like automakers also performed well.
The STOXX Europe 600 Index opened 0.1% higher and extended the rally to 0.5%, stretching its advance for a fifth consecutive session.
Technically, the pan-European benchmark is now a crossroad.
The European benchmark is trading in the area of an H&S top's neckline, as it contends with the 50 DMA.
The FTSE 100 opened 0.25% higher and extended the rally to 0.6%. The UK index was leading among regional peers this morning, for a second straight day. The English benchmark, which is oil-exporter heavy, is highly sensitive to rising oil prices.
Earlier Tuesday, Asia-Pacific indices jumped. Hong Kong's Hang Seng popped over 3% higher as shares of China's Alibaba Group (HK:9988) surged more than 12% intraday after the Asian internet giant announced it was increasing its share buyback program to $25 billion.
Get The News You Want
Alibaba shares in Kong Kong closed up more than 11%, finishing right below the 50 DMA, which coincided with the neckline of an H&S Continuation pattern. It's unclear how much resistance will remain at this level after the pattern more than realized its implied objective.
The increasing outlook for escalating interest rates has made current Treasury yields—including for the 10-year benchmark—seem paltry, causing investors to exit the safe haven assets. An oversupply forced sellers to find buyers at lower prices, widening the margin between the bond's price and its payout.
Rates soared to their highest level since May 2019, after completing a massive H&S bottom in play since July 2019.
The dollar rose for a third day, as the prospect of higher interest rates increased demand for the currency's escalating yield.
The greenback pared most of its advance upon reaching the top of a range that an upside breakout may prove is a falling flag. This would be doubly bullish right after the USD completed an H&S bottom.
Gold lost some of its luster yesterday, after Powell's hawkish remarks, as the precious metal slipped lower. However, concerns that the Fed could keep chasing inflation that got out of hand rather than contain it before that happens could bolster ongoing demand for precious metals, including gold.
That technical indecision is apparent on the chart. Gold may be forming a slight H&S top right above of a massive symmetrical triangle that's lasted for over a year but has reached its implied target.
Bitcoin pushed higher, which is surprising considering the outlook for rising rates. Technically, we're still bearish on the digital token.
The cryptocurrency is developing a symmetrical triangle after a sizeable H&S top.
Oil prices gave up gains and reversed, even as the Russia aggression versus Ukraine approached the one-month mark with no end in sight.
WTI may have performed a return move before it continued lower after developing an H&S top that reached only about 50% of its implied target. A decline below $93 will establish a short-term downtrend for the energy commodity.
h2 Up Ahead/h2
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.