Opening Bell: China Slowdown Offsets Trade Hopes; Stocks Mixed, Oil Gains

Key Events

Asia market exuberance this morning, fueled by yesterday's additional day of new Wall Street records, was trimmed back as the day progressed, pressured by China's shrinking economy which weighed on U.S. futures—including for the S&P 500, Dow Jones and NASDAQ—and European shares. The opening advance in the STOXX Europe 600 Index slipped, with declines in travel and leisure companies offsetting gains for miners.

SPX Futures Hourly Chart

Contracts on the major U.S. indices whipsawed, as prices struggled to maintain the recent sharp incline that's been driven by repeated record-breaking U.S. sessions. On the hourly SPX chart, the 3144 level has been a significant support/resistance position in maintaining the uptrend.

Equities rose across Asia except in China, as investors monitored Sino-U.S. trade negotiation developments. Australia’s ASX 200 outperformed (+0.93%) after the country’s central bank laid out a road map for rate cuts and quantitative easing.

Global Financial Affairs

China’s Shanghai Composite underperformed (-0.13) as the Asian country's industrial profits fell 9.9% in October, on an annual basis. It was the sharpest decline for the metric in eight months, fueled by falling demand both domestically and abroad. This marks the seventh month of slowing growth for the world's second largest economy. Chinese sales managers report the worst conditions on record, with both manufacturing and services in contraction. Nevertheless, the yuan strengthened.

Yesterday, U.S. President Donald Trump declared that talks on the first phase of a deal were nearly done after negotiators from both sides spoke by telephone. Nevertheless, the path to an actual resolution is rife with potholes. U.S. support for Hong Kong's pro-democracy protestors, via Congressional legislation currently sitting on the president’s desk, is something of a potential ticking time bomb, with ongoing conflicting reports about Trump's intentions—whether he'll sign or veto.

Adding to the dizzying array of geopolitical hurdles making life for investors even more difficult there's the U.S. president's reelection bid even as the possibility of impeachment looms. And finally, there's China’s consistently shrinking growth. Still, the market has remained optimistic, relying on the incentives for a trade resolution on both sides: China’s economy and Trump’s reelection.

US 10-Y Daily

Yields, including for the U.S. 10-year Treasury note, are falling, for the fourth straight session, moving below the long-term downtrend line since November 2018. The activity is set to challenge a recent uptrend line since Nov. 1 of this year—while rates range within a short-term rising channel since the Sept. 3 bottom.

DXY Daily

The dollar climbed, fluctuating below its highest level since Sept. 23, while the USD trades within a rising channel since Nov. 1.

Bitcoin, as expected, reached its lowest level since May 10, as it moved below $6,900 before reversing higher.

WTI Daily

Oil held on to two days of gains, as optimism that a limited trade deal is getting closer offset an industry report showing an increase in U.S. crude stockpiles. Technically, the price is trading a third of a percent below the highest level since Sept. 17, near the top of a rising channel.

Investors are awaiting fresh U.S. home sales data, a key measure of inflation, and Washington’s latest quarterly estimate of economic growth, both to be released later today.

Up Ahead

• U.S. consumer spending data is due Wednesday, along with initial jobless claims and durable goods orders.
• The U.S. celebrates Thanksgiving on Thursday; equity and bond markets will be closed.
• Euro-area inflation for October is due on Friday.
• The Bank of Korea sets policy on Friday.

Market Moves

Stocks

• The Stoxx Europe 600 Index increased 0.1%.
• Futures on the S&P 500 Index gained 0.1%.
• Spain’s IBEX 35 climbed 0.1%.
• The MSCI Asia Pacific Index jumped 0.3%.
• The MSCI All-Country World Equity Index advanced 0.1%.

Currencies

• The Dollar Index gained 0.15%.

Bonds

• The yield on 10-year Treasuries dipped less than one basis point to 1.74%.
• Germany’s 10-year yield fell two basis points to -0.37%.
• Italy’s 10-year yield declined one basis point to 1.157%.

Commodities

• West Texas Intermediate crude was little changed at $58.34 a barrel.