🔴 LIVE: The Secrets of ProPicks AI Success Revealed + November’s List FREEWatch Now

Opening Bell: Futures, Stocks Slump As Inflation Fears Escalate; Oil Rebounds

Published 2021-02-22, 07:21 a/m
EUR/USD
-
GBP/USD
-
USD/JPY
-
XAU/USD
-
HD
-
DX
-
GC
-
HG
-
ESZ24
-
CL
-
RTYZ24
-
1YMZ24
-
NQZ24
-
PL
-
LOW
-
GB10YT=RR
-
DE10YT=RR
-
US2YT=X
-
US5YT=X
-
US10YT=X
-
US30YT=X
-
SSEC
-
MSCIEF
-
MIWD00000PUS
-
MIAP00000PUS
-
BTC/USD
-
  • Gold, platinum, copper and yields rise
  • Commodity demand boosts the dollar
  • Equites are trading in the red
  • Key Events

    Fears that rising inflation will upend the economic recovery dampened the markets' bullish spirits even as coronavirus vaccines seem to be helping reduce the spread of the virus. Futures contracts on the Dow, S&P, NASDAQ and Russell 2000 were all lower on Monday as the trading week kicked off.

    Bitcoin slumped while oil rebounded.

    Global Financial Affairs

    Metals have been surging following rising Treasury yields, driven by inflation concerns. Platinum was trading near its 6-year high, as institutions have been redirecting the flow of capital to precious metals as a cheaper store of value after gold’s rise last year.

    Platinum Futures Daily

    The price of platinum is struggling for the second week at the top of its rising channel, as inflation concerns push the precious metal into a steeper incline, whereas reflation hopes return it to retest the bottom of its current rising channel. Meanwhile, the weekly moving averages entered bullish formation, with each major MA higher than its longer counterparts.

    Also, copper has rallied, surging as much as 4% today. The base metal is on track for its eleventh monthly advance in February, for the first time in history. Demand has skyrocketed on the expectations of an economic recovery, which is ironic, as it is the opposite to the reason given for the increased demand for platinum.

    Still, we have often seen and reported contradictory market narratives. For example, the current inflation concerns versus the reflation trade. Reflation is considered positive for economic recovery, as rising prices are seen as part and parcel of rising output after an economic dip. Rising prices are also considered a benefit to everyone in the economy, as rising company profits lead to expansion and job creation. However, the current market narrative dictates that inflation is a headwind to the same economic recovery the reflation trade is banking on.

    Investors have been selling off Treasuries, including the 10-year note, as their current yields are now considered low. Instead they have been buying metals or holding onto their cash in order to purchase new bond issues with a higher yield.

    10-year Treasuries Daily

    The benchmark yield has broken through its rising channel, increasing the odds for a higher incline.

    The spread between the 5- and 30-year yields—a measure used to predict rising inflation—touched the highest level in over five years.

    Yields were also rising in other countries, including the UK, Australia and Spain, raising fears that central banks may be forced to tighten policies to keep inflation in check.

    The MSCI All-Country World Index—tracking 49 countries—fell 0.4% at the European open.

    All four major US futures were well into negative territory on Monday morning with contracts on the NASDAQ 100 falling the most. Though declining tech has been manifesting the outlook for a reopening economy, futures on the Russell 2000 were close behind, suggesting broad profit taking from either side of the cyclical rotation.

    Still, from a technical perspective, NASDAQ 100 futures weren’t looking good.

    USTEC 240 Minutes

    They completed a H&S top on the four-hour chart.

    In Europe, the STOXX 600 was also led lower on Monday led by technology shares. The pan-European benchmark was down 1% at a ten day low.

    In Asia, China led declines, as the PBoC left rates unchanged. It is somewhat surprising that this was the stated reason for the underperformance, given keeping the one-year loan prime rate at 3.85% was the consensus.

    DXY Daily

    The dollar found support above the falling wedge since the March peak, after a second upside breakout.

    The same inflation concerns boosted gold as an inflation-hedge.

    Gold Daily

    But the outlook for the yellow metal is still bearish after the rising flag that achieved only half its implied target amid a falling channel and after a death cross.

    Bitcoin fell, wiping out two days of gains. The cryptocurrency is trading at the bottom of the session.

    Oil rebounded from a two-day selloff, but the commodity failed to hold on to an attempted advance back above $60.

    Gold Daily

    Oil traders will be closely watching the crude oil inventories report after the production stop in Texas last week due to storms and freezing weather.

    Up Ahead

    • Federal Reserve Chairman Jerome Powell delivers the central bank’s semi-annual monetary policy report to the Senate Banking Committee on Tuesday.
    • Lowe’s (NYSE:LOW) and Home Depot (NYSE:HD) are reporting earnings on Tuesday and Wednesday respectively.
    • EIA crude oil inventory report is out on Wednesday.
    • Finance ministers and central bankers from the G-20, including US Treasury Secretary, Janet Yellen will meet virtually on Friday.

    Market Moves

    Stocks

    Currencies

    • The Dollar Index advanced less than 0.15 to 90.42
    • The euro declined 0.1% to $1.2103.
    • The British pound dipped 0.1% to $1.4007.
    • The Japanese yen weakened 0.3% to 105.81 per dollar.

    Bonds

    • The yield on 10-year Treasuries jumped four basis points to 1.37%.
    • The yield on two-year Treasuries increased less than one basis point to 0.11%.
    • Germany’s 10-year yield gained one basis point to -0.30%.
    • Britain’s 10-year yield advanced two basis points to 0.717%.

    Commodities

    • West Texas Intermediate crude gained 0.7%.
    • Gold strengthened 0.6% to $1,795.22 an ounce.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.