Opening Bell: Stocks Sold On Trump, Euro Climbs On Manufacturing
Investing.com | Aug 23, 2017 07:00AM ET
by Pinchas Cohenh3 Key Events/h3
After almost two weeks of market turmoil with North Korea tensions, Charlottesville and President Donald Trump’s moral equivalency speech, and European terror attacks– investors are finally emitting a sigh of relief. Yesterday, a report stated that Trump and the Republicans were making headway on a tax reform which put traders in a willing mood, as stocks advanced, with the S&P 500 leaping a full one percent and the Dow Jones adding nearly 200 points. The bullish mood gave the dollar a boost, as risk appetite momentum increased.
The euro was the only major currency which rose, as strong European data boosted confidence in the region’s growth.
However, last night in Phoenix, Trump’s effect on the markets returned with a vengeance when he threatened to abolish the NAFTA agreement and even shut down the government, if he does not receive funding for his border wall with Mexico. In reminiscence to the bygone days of the campaign, the crowd responded with chants of “Build the wall!” Following his remarks, S&P 500 futures slid, while safe haven assets gold, Treasury yields, and the yen climbed.
Investors are now taking a step back. The VIX is rising, global stocks from Asia to Europe are slumping—even with best manufacturing growth in years—which offset the market. Meanwhile, WPP (NASDAQ:WPPGY), the world’s largest advertising company, cut its revenue forecast.
h3 Global Affairs/h3With Trump's speech in Phoenix being the fourth risk inducing event—three of which are connected to the President—in less than two weeks, investors are worried that his unpredictability will continue to startle markets. For example, Trump may go back to criticizing the trade deals with China and Japan.
Throughout all this uncertainty, investors still have to worry about North Korea, after the US sanctioned Chinese and Russian individuals and companies it accused of assisting the country in developing nuclear weapons and ballistic missiles.
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Investors are also trying to steer clear of repeated risk, while remaining focused on this Thursday’s big event – the Jackson Hole summit in Wyoming. This summit has became a landmark for investors’ growing concern on the listless inflation and what it means for monetary policy – both the path to rising rates as well as shrinking the balance sheet. Both the Fed and the ECB have a quandary with raising rates and descaling from the biggest balance sheet in history.
The Federal Reserve is concerned with inflation's unwillingness to rise. The ECB is concerned that the euro is rising toward multi-year highs, which will hurt exports and therefore put a damper on growth. In addition, the ECB can’t manage policy in a vacuum and must incorporate the US economy and its policies into its own.
h3 Up Ahead/h39:45: US - Manufacturing and Services PMI (August, flash): manufacturing expected to remain at 53.3 while services fall to 52.8 from 54.7.
- Markets to watch: S&P 500, Dow Jones Industrial Average, NASDAQ, USD crosses
10:00: Eurozone - Consumer Confidence (August, flash): forecast to rise to -1.4 from -1.7.
- Market to watch: EUR crosses
10:00: US - New Home Sales (July): set to increase 0.8% from previous reading MoM.
- Market to watch: USD crosses
10:30: US - EIA crude inventories (w/e/ 18 August): expected to see stockpiles fall by 760,000 barrels, from 8.9 million a week earlier.
- Markets to watch: Brent, WTI, SPDR S&P Oil and Gas Exploration and Production (NYSE:XOP)
Whole Foods (NASDAQ:WFM) shareholders vote on the proposed $13.7 billion acquisition by Amazon (NASDAQ:AMZN). The June 16 report of this acquisition made the jump surge 29.20 percent in one day, whereabouts it’s been lying in wait for the next move. Should the vote not go through, the stock would fall back to $33.
Hewlett Packard (NYSE:HPQ) is scheduled to report earnings after the bell.
The May 25, $19.58 peak, the highest since March 2011, has proven a point of resistance to the very cent, both on July 25 and August 4. The close below $18.82 completed a small double-top, whose target price is $18.00.
Yesterday’s report of a potential headway on tax reform, compounded by the relief of geopolitical tension from North Korea gave the stock a 2.45 percent bump, its biggest one-day climb since May 30th. It then returned to its neckline of the small double-top.
However, should this early-morning’s risk-off mood remain—as already reflected in S&P 500 futures—until market open, it would compound the neckline’s resistance and shoot the price back down. Should the price fall below $17.00, it will have created a much more significant double bottom with a target implication of $15.50
h3 Market Moves/h3Stocks
- S&P 500 Futures decreased 0.2 percent.
- The STOXX Europe 600 Index sank 0.3 percent as of 9:23 in London (4:23 EDT)
- The MSCI All Country World Index dipped less than 0.05 percent.
- The UK’s FTSE 100 declined less than 0.05 percent.
- Germany’s DAX fell 0.1 percent.
- Japan’s TOPIX rose 0.3 percent at the close.
- South Korea’s KOSPI added 0.1 percent.
- Australia’s S&P/ASX 200 Index declined 0.2 percent.
- China’s Shanghai Composite fluctuated before slipping 0.1 percent.
- The MSCI Asia Pacific Index rose 0.1 percent.
Currencies
- The euro jumped 0.2 percent to $1.1789.
- The Dollar Index dipped 0.15 percent.
- The British pound fell 0.2 percent to $1.2804, its weakest in more than seven weeks.
- The Japanese yen gained 0.2 percent to 109.40 per dollar.
Bonds
- The yield on 10-year Treasuries increased less than one basis point to 2.22 percent.
- Germany’s 10-year yield gained one basis point to 0.41 percent.
- Britain’s 10-year yield advanced one basis point to 1.097 percent.
Commodities
- West Texas Intermediate crude declined 0.4 percent to $47.64 a barrel.
- Gold increased 0.1 percent to $1,286.15 an ounce.
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