Opening Bell: Dollar Declines; Oil Adds Gains; Markets Await Fed

The two largest groups by weighting, tech and financials, were the only major S&P sectors to advance, offsetting broader declines among the remaining nine sectors.

Earlier this morning, Asian equities were mixed, continuing yesterday’s market lack of clarity, as investors work to find a coherent strategy regarding earnings ahead of tomorrow's Federal Reserve policy decision.

The MSCI Asia Pacific Index fluctuated near its 10-year high, in a tug of war between rising stocks in Australia, and falling shares in Japan and China.

Oil extended gains to $47 a barrel on a Saudi Arabian promise to deepen cuts to crude exports next month and lower the global oversupply.

The dollar resumed its decline, after yesterday’s recovery on the US's manufacturing PMI which hit a four-month high in July, even as the eurozone’s economy grows at its slowest pace in six months—as shown by its Composite PMI falling to 55.8 in July from 56.3 in June. The fact that the dollar is resuming its decline, even against the euro, to its lowest level since June 23, 2016 (the day of the Brexit referendum vote) sends a extremely bearish message: traders don't want to touch the dollar with a ten-foot pole.

Can the two-day FOMC meeting bring back optimism on the greenback? That would require a masterful balancing act after Fed Chairwoman Janet Yellen’s recent dovish remarks. If she becomes hawkish again investors may lose faith in her, due to her increasingly changing economic outlook. After being directed to slow down their outlook for rising rates, traders’ focus will now be on any signal from the Fed on their balance-sheet reduction plan.

Already bearish dollar traders are keeping an eye on the political turmoil in Washington on the heels of the President's son-in-law and senior advisor Jared Kushner yesterday said he had no improper contacts with Russian officials during the campaign. Kushner and former Trump campaign manager Paul Manafort will be questioned by Senate committees on Wednesday.

• The UK is holding post-Brexit trade talks with the US in Washington.
• China posts industrial profits for last month; early indicators point upward.
• Japanese data for June is due this week and may show sluggish CPI levels, even amid a tightening labor market and increased household spending.
• Fed policymakers begin their meeting on Tuesday, with a rate decision due on Wednesday.
• The US economy probably gained traction in the second quarter as spending by American consumers picked up after a lull early this year. The GDP report follows the two-day Fed policy meeting.
• Chipotle Mexican Grill (NYSE:CMG), McDonald’s (NYSE:MCD) Advanced Micro Devices (NASDAQ:AMD) and JetBlue (NASDAQ:JBLU) all report today.

Currencies

• The Dollar Spot Index was flat as of 8:33 a.m. in London (3:33 EDT), erasing an earlier 0.1 percent loss.
• The euro rose less than 0.1 percent to $1.1649, after dropping 0.2 percent on Monday. The currency is trading near its highest level since January 2015.
• The yen eased at 111.10 per dollar, after advancing against the greenback for five straight days.
• The Australian dollar rose 0.1 percent, after erasing an earlier decline. Attention turns to two key events on Wednesday: The release of the June quarterly inflation data, and a speech on monetary policy and the labor market from Reserve Bank of Australia Governor Philip Lowe.

Stocks

• The Stoxx Europe 600 climbed 0.4 percent after sliding 1.6 percent over the previous three sessions.
• Japan’s TOPIX lost 0.3 percent.
• Australia’s S&P/ASX 200 Index added 0.7 percent.
• South Korea’s KOSPI retreated 0.5 percent.
• Hong Kong's Hang Seng was little changed while China's Shanghai Composite slipped 0.2 percent.
• S&P 500 futures were little changed after the underlying gauge slipped 0.1 percent.
• NASDAQ 100 futures declined after Alphabet slumped in after-hours trading as sales fell short of the most optimistic estimates.

Commodities