- Investors weigh positive China data against global coronavirus cases increase
- WHO sees some stability in European outbreak spread
- Despite China PMI beat, Q1 GDP is anticipated to have sharply contracted
Key Events
Optimistic economic data out of China, released early Tuesday morning, has boosted contracts for the S&P 500, Dow Jones and NASDAQ, as well as European shares. In addition, most Asian markets closed higher this morning after Wall Street's positive finish yesterday.
Still, yields fell, indicating investors continue to balance the upbeat news out of China against the still-climbing number of confirmed global coronavirus cases. That figure, nearing 788,000, includes more than 164,000 in the U.S.; the death toll in New York City alone reached 914 fatalities at time of writing.
Global Financial Affairs
With its Manufacturing and Non-Manufacturing PMIs for March both showing a return to growth, China appears to have found its footing, at the same time the World Health Organization (WHO) sees some stabilization in the pandemic's spread in Europe. Nonetheless, analysts expect a severe contraction in China’s first quarter GDP—its first in 30 years—scheduled to be released at the end of April.
Of remaining concern for markets, a COVID-19 vaccine remains elusive.
After earlier slumping during the Asian session, futures contracts on the S&P 500 rebounded and are now taking on the intraday highs from Thursday and Friday.
From a technical perspective, S&P Futures have been congesting within a rising flag pattern, bearish after the preceding plunge. A downside breakout would signal another leg down.
A rally in travel and leisure sector shares, is lifting the pan-continent Stoxx Europe 600 Index which is heading toward Thursday’s highs.
Most of the Asian session was also in the green. Among the bigger regional players, South Korea’s KOSPI outperformed (+2.19%). Australia’s ASX 200 (-2.02%), sealed its worst monthly performance on record, pressured by recession concerns.
U.S. stocks gained for a fourth day within five sessions on Monday, led by healthcare shares.
Technically, however, we consider this a sharp return move for the S&P 500, following a sharp selloff. Note, the index closed below Thursday’s highs, which closed below the top of the benchmark’s falling channel. The 50 DMA crossed below the 200 DMA, triggering the much-dreaded Death Cross.
More than just a signal of falling prices over a broad range of measures, it generally indicates longer-term bearish conditions. Thus, the aptly named technical indicator resonates for all types of analysts, including those staunchly focused on fundamentals.
Yields, including for the benchmark 10-year Treasury, fell this morning, even with the apparent return of risk sentiment.
From a technical perspective, yields were forced lower after completing a rising flag, bearish in the aftermath of its downturn.
The U.S. dollar climbed for a second day.
It found support by the 50 DMA. If prices cross back over 100.00 we might see a second ascending trough, which would establish an uptrend.
Crude oil has rebounded above $21, after yesterday falling briefly below $20, intraday. As the price of oil continues to crater, Saudi Arabia and Russia aren't the only ones slugging it out for shrinking market share.
WTI's price is still below what we see as a bearish pennant, the second in a row, making it hard for bulls to carry the price higher. After the recent plunge, both RSI and MACD are looking good for a rally.
Up Ahead
- Wednesday’s ADP Nonfarm Employment Change report is expected to plunge; ISM Manufacturing is seen to contract further.
- On Thursday, we expect U.S. Initial Jobless Claims will continue to skyrocket.
- Friday’s Nonfarm Payrolls release is forecast to show that U.S. job creation has tumbled deeply into negative territory.
Market Moves
Stocks
- Futures on the S&P 500 Index climbed 0.6%.
- The Stoxx Europe 600 Index increased 1.5%.
- The MSC Asia Pacific Index fell 0.3%.
Currencies
- The Dollar Index climbed 0.3% to 99.49.
- The euro decreased 0.5% to $1.0995.
- The British pound fell 0.9% to $1.2298.
- The Japanese yen yen dipped 0.7% to 108.50 per dollar.
Bonds
- The yield on 10-year Treasuries decreased four basis points to 0.69%.
- Germany’s 10-year yield rose one basis point to -0.48%.
- Britain’s 10-year yield climbed seven basis points to 0.402%.
Commodities
- Gold fell 0.4% to $1,615.76 an ounce.
- West Texas Intermediate crude rose 5.1% to $21.11 a barrel.