- Traders monitoring geopolitical situation
- Rising risk-off sentiment putting gold in an uptrend
- Bitcoin falls further
Key Events
On Thursday, US futures on the Dow Jones, S&P 500, NASDAQ and Russell 2000 stumbled and European stocks dropped on increased tension at the Ukraine border, offsetting positive corporate results.
Oil slipped on the prospect of a nuclear deal between the US and Iran.
Global Financial Affairs
All four main US benchmark contracts were trading in the red this morning, with futures on the Russell 2000 underperforming, vying currently with contracts on the NASDAQ which have slipped lower. The small cap contract reversed its lead from yesterday. The tech sector remains under pressure because it is particularly sensitive to tightening monetary policy, as rising borrowing costs render the usual equity market leaders overpriced.
European stocks fluctuated for the second day. Having traded in the red on Tuesday, the STOXX 600 Index still closed higher yesterday but was lower at the open today.
According to reports, Russian-supported separatists have accused Ukraine of breaking a cease-fire agreement. It is essential to note that both sides regularly make such claims about the other. The Kremlin has periodically denied any intention to invade its neighbor to the west, despite the build-up of troops on the border, and now the US and NATO has accused Russia of lying about withdrawing troops yesterday.
In Europe, French luxury goods group, Kering (PA:PRTP), opened 5.22% higher; the shares extended their climb to over 7% continuing their advance for a fourth day, after sales at its top brand, Gucci soared to more than pre-pandemic levels.
UK-based Reckitt Benckiser (LON:RKT) opened 3.5% higher, despite announcing a pre-tax loss, after it reported strong sales and forecast like-for-like sales growth.
The stock completed an Island Reversal, a bullish pattern showing how weaker hands passed on shares of the stock to stronger hands.
Swiss food giant, Nestle (SIX:NESN) was 0.5% lower after warning of potential shrinking profitability for a second consecutive year.
While the global food producer clawed back 1.4% after a lower open, it found resistance by the possible neckline of an H&S top.
Yields on the US 10-year note trimmed most of a decline as investors increased Treasury holdings amid the return of geopolitical tensions. Rates returned to above 2.00% levels.
From a technical perspective, we expect yields to keep rising after rates have completed back-to-back bullish patterns. If this occurs, stocks will have a hard time returning to their rallies, as higher rates render stock prices more expensive and higher-yielding bonds offer a more competitive investment venue.
The dollar rebounded but was still under short-term downward pressure.
The greenback was trapped in a falling channel, aiming toward the base of the earlier rising wedge.
Gold surged for a second day on its haven status due to the geopolitical crisis. This environment could be what the yellow metal needs to finally break out of its range.
The price blew past a Bearish Engulfing pattern, a two-day formation denoting a top. The structure's failure is bullish. Moreover, the price action developed above a triangular range lasting 2021. If the price of gold manages to create a base above the triangle's top, it will make a case for a return to at least $2,000.
We have been bearish on gold due to concerns that higher US interest rates will boost the dollar, but we find the Bearish Engulfing pattern's blowout above the triangle very bullish. After Donald Trump won the White House in 2016, both gold and the dollar climbed.
Bitcoin dropped for a second day.
The fall came after retesting the neckline of an H&S top, upon which we rely far more than the small one recently developed.
Oil dropped on the likelihood of a return of Iranian oil exports if sanctions are lifted, as the talks on a nuclear deal with the US enter the final stage. However, tensions in Ukraine should limit the slide.
Up Ahead
- UK retail sales are reported on Friday.
- Canadian retail sales are printed on Friday.
- On Friday, US existing home sales are published.
Market Moves
Stocks
- The STOXX 600 was little changed
- Futures on the S&P 500 fell 0.3%
- Futures on the NASDAQ 100 fell 0.3%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The MSCI Asia Pacific Index rose 1.5%
- The MSCI Emerging Markets Index rose 1.2%
Currencies
- The Dollar Index rose 0.2% to 95.90
- The euro retreated 0.12% to 1.1360
- The Japanese yen fell 0.32% to 115.08 per dollar
- The offshore yuan was little changed at 6.3316 per dollar
- The British pound rose 0.16% to $1.3605
Bonds
- The yield on 10-year Treasuries declined one basis point to 2.02%
- Germany's 10-year fell to 0.26%
- Britain's 10-year yield fell to 1.49%
Commodities
- WTI crude dropped 1.3% to $92.41 a barrel.
- Brent crude fell 1.17% to $93.72 a barrel
- Spot gold rose 0.4% to $1,877.14 an ounce