- January 10, 2019
- Posted by: Trading
- Category: Market Overview
- US futures, European shares extend Asian rally
- Oil sees its longest rally in 17 months, advancing for eight straight session
- Yields rise, dollar slips ahead of Fed minutes
- Small caps provide a possible divergence to trade resolution hopes
European shares and futures on the , and extended a rally this morning, echoing solid Asian gains, as hopeful investors increased their risk appetite amid ongoing trade negotiations between the world’s two largest economies.
US contracts were higher for a fourth straight session, their longest winning streak since November, as President Donald Trump’s address to the nation on border security had little impact on investors compared to the easing of two of the key drivers of recent market jitters: the Fed’s and the US-China trade dispute. Investors’ renewed optimism for growth, helped by Fed Chief Jerome Powell’s shift towards taking into account market conditions when fine-tuning interest rates hikes, was further buoyed by Friday’s , which showed a healthy economy.
The climbed, buoyed by automobile makers and miners, export-reliant sectors that benefit from mending trade relations.
In the earlier Asian session, Hong Kong’s (+2.27%) led regional indices higher, thanks to greater demand for Chinese companies after the PBoC reduced bank’s reserve requirements, increasing liquidity. Tencent Holdings (HK:) jumped 3.80 percent, lifting the index. China Mobile (HK:) leaped 1.72 percent after Nomura upgraded the stock.
The bank stated that, due to the telecom firm’s market share, it is set to benefit dramatically from the development of the 5th generation mobile network in China. The analysts also cited the company’s strong balance sheet.
Ironically, the mainland’s advanced only 0.71 percent, underperforming regional peers.
Global Financial Affairs
Yesterday, equities in the US extended the ‘dovish Fed-trade negotiations’ rally. The (+1.38%) edged higher for a third straight day, as it continued to outperform, perhaps providing a negative divergence to expectations for a resolution of the US-China trade spat. If investors believed an end to the trade war is at hand, small caps should have been discarded in favor of large caps, since the outlook for relaxed tariffs should truly increase.
The climbed for a fourth day, ticking 0.97 percent higher with all 11 sectors in the green. (+1.74%), a key beneficiary of a slower tightening cycle, led the advance, while (+0.08%) lagged, as the outlook for bank profits took a hit from the same catalyst.
The rose for the third straight session, gaining 1.09 percent. Boeing (NYSE:) (+3.79%) helped lift large caps with a strong fourth quarter delivery report. Pacific Gas & Electric (NYSE:) took the biggest fall, dropping 7.34 percent amid reports that the California utility giant is considering filing for bankruptcy.
NASDAQ Composite Daily Chart
The also inched higher yesterday, for a third day, climbing 1.08 percent. Technically, it formed a hanging man, confirming the new resistance of the October-December resistance, and we see the arrival of the 100 DMA and the 100 DMA crossing below the 200 DMA.
UST 10-Year Daily Chart
Meanwhile, Treasury yields extended a rally to a fourth day, to above 2.7, ahead of the release of from the Federal Reserve’s December meeting.
DXY Daily Chart
Conversely, the slipped lower in anticipation of the release, which may shed more light on the Fed’s dovish turn.
WTI Daily Chart
climbed above $50, extending its longest rally in 17 months to an eighth straight day, after China stepped up measures to spur consumption—a move that also pushed most industrial metals higher. We have reported of a potential bearish flag with a downside breakout. The flag is still intact.
While it’s very difficult to determine the point where the pattern dynamic dissolves, we estimate it will be at the pressure point between the former support November 23-December 17, the downtrend line since December 4 and the downtrend line since October 4. The ‘X’ on the chart marks that spot—somewhere between $51 and $52.
- Wednesday sees the release of minutes from the Fed’s Dec. 18-19 policy meeting. Powell will speak to the Economic Club of Washington D.C. on Thursday.
- Britain’s Parliament resumes a debate on the Brexit withdrawal bill, with Prime Minister Theresa May seeking to avoid defeat in a vote set for the week of Jan. 14.
- Futures on the S&P 500 rose 0.1 percent, the highest in more than three weeks.
- The STOXX Europe 600 climbed 0.5 percent to the highest in almost four weeks.
- The UK’s increased 0.6 percent to the highest in almost five weeks.
- Germany’s gained 0.7 percent to the highest in almost four weeks.
- The jumped 1.4 percent, hitting the highest level in almost four weeks with its fifth straight advance.
- The advanced 1.3 percent to the highest in almost five weeks.
- The Dollar Index dropped 0.1 percent.
- The gained 0.2 percent to $1.1464.
- The increased 0.1 percent to $1.2735.
- The fell 0.1 percent to 108.85 per dollar.
- The yield on 10-year Treasurys slid one basis point to 2.72 percent.
- Britain’s yield climbed one basis point to 1.284 percent, the highest in more than a week.
- WTI climbed 1 percent to $50.26 a barrel, hitting the highest level in more than three weeks with its eighth consecutive advance.
- fell 0.2 percent to $1,282.93 an ounce, the weakest level in a week.