Opening Bell: U.S. Dollar Soars, Bonds Rise, Equities Tumble, Gold Rout Deepens

Key Events

U.S. futures for the Dow Jones, S&P 500 and NASDAQ have been fluctuating this morning, in the wake of Wednesday's savage volatility storm, in which equities, oil and even precious metals were all jettisoned by investors. Only the U.S. dollar surged, along with rising sovereign bonds.

Notwithstanding broad-based efforts by world leaders to shore up panic-stricken markets, most equity traders were mauled as just about all markets ended lower. Even some safe havens were battered: the USD now rules that roost as it easily surpassed the yen while the gold rout deepened.

Global Financial Affairs

Contracts for the S&P are currently down close to 2.0%, having trimmed an earlier 5.7% decline.

From a technical perspective, the price remains within a downtrend. However, this is the second consecutive hammer, as well as the sixth day in which the contract remains above the 2,400 line.

Earlier, the Stoxx Europe 600 Index Index was up 1.60%, having rebounded from a 0.8 percent lower open. It's currently down 0.31%.

Asian stocks extended yesterday's Wall Street selloff after the Dow dropped 6.3% even with (or maybe because of) government help. South Korea’s KOSPI underperformed, plummeting 8.4% as foreign investors withdrew $317 million dollars of value.

Australia’s ASX 200 fell 3.4% this morning after the country's central bank announced it was cutting its policy rate to a record low of 0.25%, among other fiscal measures.

Yields on the U.S. 10-year Treasury gave up an advance, as investors increased their sovereign bond holdings.

Technically, yields are forming an intraday shooting star, whose bearish signal increases as it respects the previous day’s session high—and for now, the session closing price. Note the playing out of a technical principle: what was formerly a support has turned into a resistance, as human psychology and market mechanics flip.

Government bonds in Europe leaped after ECB President Christine Lagarde announced a gargantuan 750-billion-euro bond-purchasing package, with the central bank saying it will continuously defend the EU economy as “there are no limits.” Lagarde also tweeted: “extraordinary times require extraordinary action.”

The Dollar Index gave up session highs but retained its advance, strengthening for the eighth consecutive day, hitting its highest levels since March 2017. It extended a penetration to a strong resistance since Oct. 1.

The Japanese yen capitulated to the current king of FX. In times of exceptional distress, such as the 2000 and 2008 market crashes, the world tends to turn to the U.S. dollar for stability.

Coronavirus appears to have undone any initiatives to replace the dollar as the global reserve currency. World powers have been envious of America’s influence via its dollar for a very long time. Indeed, this was the impetus behind the launch of the euro common currency in the early 90’s. More recently, as China sought to become the leading global power, among other efforts it has tried to launch yuan-based oil futures contracts.

Weakened by the dollar's surge, gold fell for the eighth out of nine days.

The precious metal was pushed even further below its 200 DMA, after closing yesterday beneath it, for the first time since December 2018.

After Wednesday's breathtaking 24% dive, which left prices at 18-year lows, WTI jumped on Thursday, paring some of the losses.

Based on its technicals, oil could potentially be starting a return move to retest a bearish pennant, before it continues heading lower.

Up Ahead

• The Philadelphia Fed Manufacturing Index is expected to plunge to 10.0 from 36.7 when it's released later today
• Tomorrow, Canada prints Core Retail Sales figures for January; these are anticipated to drop to 0.2% from 0.5%
• Also on Friday, the U.S. announces Existing Home Sales for February. They're seen to still be on the rise, to 5.50M from 5.46M

Market Moves

Stocks

• Futures on the S&P 500 Index decreased 0.3%.
• The Stoxx Europe 600 Index increased 1.7%.
• The MSCI Asia Pacific Index declined 2.7%.
• The MSCI Emerging Markets Index fell 2.9%.

Currencies

• The Dollar Index gained 0.2%, giving up a 0.6 gain%.
• The euro decreased 0.5% to $1.0862.
• The British pound dropped 0.8% to $1.1516.
• The onshore yuan weakened 0.6% to 7.091 per dollar.
• The Japanese yen slipped 0.9% to 109.10 per dollar.

Bonds

• The yield on 10-year Treasuries declined three basis points to 1.16%.
• The yield on 2-year Treasuries fell four basis points to 0.50%.
• Germany’s 10-year yield sank nine basis points to -0.33%.
• Britain’s 10-year yield decreased less than one basis point to 0.795%.
• Japan’s 10-year yield increased less than one basis point to 0.083%.

Commodities

• West Texas Intermediate crude rose 13.5% to $23.11 a barrel.
• Brent crude climbed 7% to $26.62 a barrel.
• Gold weakened 0.4% to $1,480.84 an ounce.