Opening Bell: NASDAQ Futures Lead Stock Fall; US Yields Ease After Fed-Led Jump

Key Events

Traders around the globe shed their equity exposures on Thursday amid renewed trade fears. US futures reflected the broader shift to risk off, with contracts on the NASDAQ 100 leading the dip and those on the Dow and S&P 500 following suit.

The STOXX 600 slipped lower for a the second day, gapping down 0.24 percent on the open and then extending the drop to 0.89 percent at 10.30am GMT.

US President Donald Trump's threat to increase tariffs on $200 billion worth of Chinese goods, followed by Beijing's vows to retaliate, soured investor mood during the previous Asian session as well.

Japan's TOPIX dived a full percentage point. Technically, the decline added confirmation to the downtrend line since the May 21 high. On the other hand, the consolidation since July 27 opens up the possibility of a pennant, a bullish pattern, following the 6 percent bounce from the July 5 low around 1,670.00

China's Shanghai Composite plunged as much as 3.45 percent, which seems to have prompted some traders to buy the dip, trimming losses on the index to 2.16 percent. Still, shares on the mainland benchmark tumbled about 4 percent over two days and around 5 percent over six out of seven sessions, wiping out the preceding three-day jump of 4.85 percent—the biggest in two years. Technically, however, the bounce off today’s low confirms the support of the Three Advancing White Soldiers.

Hong Kong’s Hang Seng sank 2.21 percent, hitting a four-day plunge of 4 percent. Technically, the index provided a downside breakout to a consolidation since June 26, as it reached the lowest level since September and extended the downtrend since the January 20 all-time high, under 33,500, as it posted a lower trough.

South Korea’s KOSPI fell 1.6 percent, erasing five days of gains. Technically, it penetrated the bottom of a symmetrical triangle, bearish after the near-14 percent selloff from January 29 record high above 2,600, which topped out with a massive Complex H&S pattern spanning 11 months. Still, with only a 0.3 percent penetration and a 0.14 percent close below the triangle, investors should beware of a bear trap.

Australia’s S&P/ASX 200 confirmed a tendency to outperform when trade jitters peak, shedding just 0.55 percent, or 0.62 percent over two days.

Global Financial Affairs

During the US session, the S&P 500 retreated 0.1 percent, weighed down by Energy stocks (-1.39 percent), which were tracking oil prices lower, and Industrials shares (-1.35 percent), the most sensitive to tariffs headwinds.

The Technology sector found some solace (+0.9 percent) from the most significant two-day selloff since February, helped Apple (NASDAQ:AAPL)'s earnings beat offset some of the losses sparked by the downbeat results from Netflix (NASDAQ:NFLX), Twitter Inc (NYSE:TWTR) and Facebook (NASDAQ:FB). This helped the NASDAQ Composite climb 0.46 percent and fare as the only US major to close in the green.

Dow Jones Industrial Average slid 0.32 percent, as investors tend to shed the mega-cap companies listed on the index when trade worries escalate, due to their strong dependence on exports for business growth. Technically, the index crossed below its uptrend line since June 28; the MACD turned lower, and the RSI confirmed that momentum is falling with prices.

The Russell 2000 slipped 0.1 percent lower. Small caps listed on the index should benefit from reassurance by the Fed yesterday that it will press ahead with its tightening plans, , despite Trump’s recent criticism. Smaller companies have tended to historically perform well in a rising interest rate environment.

Yields on 10-year Treasurys wavered around the 3.00 percent psychological level, after closing above it for the first time since May 21 yesterday. The move follows the Federal Reserve’s unanimous decision to leave rates unchanged while making it clear borrowing costs are gradually heading higher.

Meanwhile, Japan's 10-year yields touched 0.145 percent, the highest level since February 2017, before subsiding as the Bank of Japan offered to buy bonds.

The dollar tracked rising yields, advancing 0.23 percent for an aggregate three-day gain of 0.58 percent. This could help the Dollar Index finally breach the 95.5 area, where sell orders have been pressuring it since June 21. The USD ascent kept weigh on emerging market currencies and equities, as investors rotate into dollar-denominated assets.

The pound dropped 0.33 percent to a weekly low ahead of the Bank of England's interest rate decision, even if policymakers are expected to raise rates to 0.75 percent from 0.5 percent.

The Turkish lira tumbled about 2 percent, hitting a fresh record low as the US imposed sanctions on the country over the imprisonment of a US citizen.

Oil edged 0.18 percent lower, giving up a half-percentage point gain, after the Energy Information Administration reported a surprise 3.8 million weekly jump to 409 million barrels. Inventories are now 1 percent below the five-year average for this time of the year, from 5 percent below that average one month ago. WTI prices were also boosted by the stronger dollar, which denominates the commodity.

Up Ahead

• Canadian Trade Balance for June is released Friday.

• The US jobs report, out on Friday, is predicted to show a healthy labor market, with 192,000 new jobs.

• Earnings continue:

• Barclays (LON:BARC), due Thursday, EPS $0.28 & revenue $6.94B forecast

• Berkshire Hathaway (NYSE:BRKa), due Friday, EPS 3,398.89 & revenue 61.64B forecast Toyota, due Friday, EPS $3.95 & revenue $65.15B forecast

Market Moves

Stocks

• Canada’s S&P/TSX Composite fell 0.35 percent on Wednesday.

• The STOXX 600 fell 0.5 percent.

• Futures on the S&P 500 declined 0.3 percent.

• The MSCI All-Country World Index fell 0.5 percent to the lowest level in more than a week.

• The MSCI Emerging Market Index slipped 1.5 percent to the lowest level in more than a week.

Currencies

• The Canadian loonie was down 0.25 per cent against the U.S. greenback early Thursday, trading at 0.7674.

• The Dollar Index gained 0.3 percent to the highest level in almost two weeks.

• The euro dropped 0.3 percent to $1.1629, the weakest level in almost five weeks.

• The British pound slid 0.4 percent to $1.3072, the weakest level in almost two weeks.

• The Japanese yen gained less than 0.05 percent to 111.71 per dollar.

Bonds

• Canada’s 10-year yield was down early Thursday at 2.352, a 0.72-percent decrease.

• The yield on 10-year Treasuries decreased one basis point to 2.99 percent.

• Germany’s 10-year yield was unchanged at 0.48 percent, the highest level in seven weeks.

• Britain’s 10-year yield rose one basis point to 1.37 percent, the highest level in seven weeks.

Commodities

• The Bloomberg Commodity Index gained less than 0.05 percent.

• West Texas Intermediate crude rose less than 0.05 percent to $67.69 a barrel.

• LME copper lost 0.2 percent to $6,157.50 per metric ton, the lowest level in more than a week.

• Gold climbed 0.2 percent to $1,218.10 an ounce.