Opening Bell: Fears Of Sputtering Economy, Tapering Pressure Dollar, Stocks

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  • Economic slowdown and stimulus easing now conflicting market themes
  • Oil fluctates
  • Bitcoin recovered

Key Events

US futures contracts on the , , and as well as European shares extended a slide in trading on Thursday on fears of slowing economic recovery after US disappointed last week and the prospect of central banks beginning to tighten monetary policy.

Despite US Treasuries rallying, the dollar fell. 

Global Financial Affairs

All four US futures were in the red today—Russell 2000 contracts were the deepest, 0.5% in negative territory, as of the time of writing while NASDAQ 100 contracts were outperforming, down just 0.2%. This paradigm may suggest a reversal of the reflation trade.

Small caps underperformed in yesterday’s Wall Street session during which the Index suffered its longest rout in two months and the had its worst fall in two weeks. The , which mainly includes small-cap, domestic firms plunged 1.13%

Equities in Europe this morning followed Asian regional benchmarks into negative territory, on the could be getting ready to announce when it will start to pare its bond purchasing program. The Index fell 0.8% to a three week low, led by travel stocks (-1.8%), technology shares (-1%) and automakers (-1.4%). The UK’s dropped 1.1%, underperforming the region. Germany’s declined 0.3% to a monthly low. 

Asian stocks also headed south, tumbling the most in two weeks, on a continued regulatory clampdown in China on the tech sector and fears that global central banks will announce the removal of supports, just when the economy may be starting to sputter. The MSCI’s broadest of Asia-Pacific stocks excluding Japan was down over 1.25% in its worst daily rout since mid-August, when markets were nervous about tapering by the Us Federal Reserve.

The slide in US markets yesterday may be the result of conflicting market themes. On the one hand, having reached sky high valuations, tech shares are being sold off on the prospect of the long-anticipated removal of central bank safety nets. On the other hand, cyclicals are suffering from the ongoing social restrictions in place due to the global coronavirus pandemic. For now, both are falling, with value stocks underperforming, having provided superior results so far this year. 

Treasuries rose for the second day, pushing yields on the Treasury note down, back to the possible neckline of a H&S bottom or the top of a symmetrical triangle.

10-year Treasuries Daily

Either way, the upside breakout suggests yields are headed higher. Drawing a trendline through the recent highs may create the top of an ascending triangle, bullish as well. Note, yields found support precisely on the top of the H&S neckline/ symmetrical triangle’s top.

Surprisingly, the fell. The expectation of stimulus tapering as well as Treasury buying should strengthen the greenback.

Dollar Index Daily

Presumably, the US currency is experiencing technical pressure, as the USD may be forming a H&S top, below the resistance of the Mar. 31 high. However, if this resistance is overcome, dollar bulls will have completed a massive bottom since November.

climbed on dollar weakness.

Gold Daily

From a technical perspective, the yellow metal found support above the falling channel it escaped two weeks ago. However, the precious metal is still in a downtrend since its August record peak. Nevertheless, the precious metal may be forming a H&S bottom, which would help it break out of that channel too.

found its footing after a two-day selloff—including Tuesday’s collapse that erased 3 weeks of gains—as is the latest country to legalize the digital currency.

Bitcoin Daily

After achieving the target of a falling flag, the cryptocurrency found intraday support by the 50 DMA while closing above the 200 DMA two days running. Is the cryptocurrency forming a H&S top?

traders attempted to find direction amid a slow return to production after Hurricane Ida as well as differing for the market from OPEC+ and Morgan Stanley. 

Oil Daily

Technically, the price of crude is fluctuating between the 50 and 100 DMAs. Bulls have momentum stacked up against them as the price is congesting at the top-range of a falling channel.

Up Ahead

  • The UK announces its  figures on Friday. 
  • On Friday US for August is released.
  • Canada publishes data on Friday. 

Market Moves

Stocks

  • The STOXX 600 fell 0.7%
  • Futures on the S&P 500 fell 0.5%
  • Futures on the NASDAQ100 fell 0.3%
  • Futures on the Dow Jones Industrial Average fell 0.5%
  • The Index fell 1.1%
  • The fell 1.2%

Currencies

  • The Dollar Index was little changed
  • The was little changed at $1.1825
  • The rose 0.3% to 109.92 per dollar
  • The was little changed at 6.4593 per dollar
  • The was little changed at $1.3778

Bonds

  • The yield on 10-year Treasuries declined two basis points to 1.32%
  • Germany’s yield was little changed at -0.33%
  • Britain’s yield was little changed at 0.74%

Commodities

  • was little changed
  • rose 0.1% to $1,791.69 an ounce