Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Opening Bell: Oil Bounces After Sharp Selloff; USD Weighs On EM FX

By (Pinchas Cohen/ OverviewJul 12, 2018 06:30
Opening Bell: Oil Bounces After Sharp Selloff; USD Weighs On EM FX
By (Pinchas Cohen/   |  Jul 12, 2018 06:30
Saved. See Saved Items.
This article has already been saved in your Saved Items
  • Oil rebounds from its sharpest selloff in a year

  • Global equity recovery looses some steam in Europe after strong Asian rally

  • EM currencies remain under pressure from dollar strength and trade war risk

Key Events

Global stocks showed signs of a rebound on Thursday, following reports that US and Chinese officials may resume high-level talks on trade issues. Investors have begun rotating out of safety trades including the dollar, which gave back just a small amount of yesterday's outsized gains. Treasury yields trimmed most of yesterday's drop as investors moved to riskier assets.

European shares, along with futures for the S&P 500, Dow and NASDAQ 100, are all flashing green, reversing Wednesday's sharp global selloff which saw WTI crude sliding the most in two years and US energy and material producer shares tumbling at least 2 percent—pushing the S&P 500 into its heaviest decline in two weeks.

Where are equities headed next? While pundits warn there are no winners in a trade war, US shares stand out as the outperformers. While Asian benchmarks (except for Australia's S&P/ASX 200) are in a downtrend and European indices are drifting, US majors remain in a clear uptrend.

We believe this will almost certainly create a virtuous cycle for US assets, prompting international investors to shed foreign holdings, sending them yet further down, even as these same investors ramp up their US exposures—driving up returns on US markets.

STOXX 600 Daily Chart
STOXX 600 Daily Chart

The STOXX 600 opened 0.25 percent higher—posting a more modest gain than Asian counterparts—but was pressured lower in early trade. Media companies and car manufacturers outperformed, helping the pan-European index move higher—to about 0.4 up at the time of writing. Technically, yesterday’s plunge extended the medium-term downtrend within a falling channel since the May peak, while potentially developing a massive H&S top since mid-May 2017.

Earlier this morning, during the Asian session, Chinese shares made up for Wednesday’s underperformance. The Shanghai Composite jumped 2.2 percent, wiping out yesterday's deep losses, adding another 0.35 percent in gains, setting up the mainland index for its highest close since June 29. Technically, today's vigorous rebound extended a turn-around from the July 6 low, triggering the most reliable buy signals of the MACD and RSI in five months, after these indicators reached their lowest levels since February, at the end of the global January selloff.

Hong Kong’s Hang Seng didn’t perform as strongly as its mainland counterpart. It settled 0.60 percent into positive territory after fluctuating between a 0.3 percent loss and a 1.17 percent gain.

South Korea’s KOSPI swung even more widely, between a 0.8 percent gain and a 0.1 percent loss, only to finish very near today's opening price, 0.2 percent above yesterday’s close.

Japan’s TOPIX advanced 0.48 percent, losing steam from the initial 0.8 percent rally.

S&P/ASX 200 Daily Chart
S&P/ASX 200 Daily Chart

Australia's S&P/ASX 200 climbed 0.85 percent this morning, erasing yesterday's losses and sealing an additional 0.15 percent advance. Technically, as we've been saying for a week, the Aussie benchmark has completed a bullish pennant pattern. Price moves on Friday generated the upside breakout, then extended gains on Monday. Tuesday and Wednesday trading completed a return-move, with prices penetrating the pennant slightly but closing above it. Today, prices bounced off the support of the pattern.

Global Financial Affairs

On Wednesday, commodities took a hit, with oil's retreat pushing WTI toward $70 a barrel and metals and crop futures slipping lower.

WTI Daily Chart
WTI Daily Chart

WTI rebounded from a 4.65 percent plunge, its sharpest daily decline in almost 13 months. The selloff was spurred by oil production resuming in Libya as well as by the increased outlook for waning demand, as a global trade war could hinder economic growth. Technically, the July peak at $75 verified the integrity of the uptrend, and the 50 DMA supported the plunge, suggesting there is demand, at the right price.

In the US equity market, Caterpillar (NYSE:CAT) and Chevron (NYSE:CVX) led US losses, weighting on the Dow Jones Industrial Average. On the other side of the Pacific, during yesterday's trade, emerging market shares fell the most since the end of June.

EM currencies also remain under pressure, dragged lower by two main drivers: the US-China trade war narrative made them look even riskier, while the stronger dollar prompted investors to shift into US assets.

USD/TRY Daily Chart
USD/TRY Daily Chart

Speculators buying the dip helped the Turkish lira recover, after hitting a fresh record low when a local television channel reported that President Recep Tayyip Erdogan sees both the exchange rate and interest rates dropping. Technically, yesterday’s fall caused a USD/TRY upside breakout to a symmetrical triangle, suggesting further declines are in the cards for the lira.

Up Ahead

  • The Canadian New Housing Price Index for May is released on Thursday.

  • Earnings season kicks off on Friday with JPMorgan Chase (NYSE:JPM) due to publish its results before market open. Consensus EPS forecast stands at $2.22, versus $1.82 the same quarter last year. Citigroup (NYSE:C) is expected to release corporate results tomorrow before market open, with a projected $1.55 EPS, from $1.27 last year.

  • The most noteworthy US data may be the June inflation report today, which consensus expects will show both headline and core price growth picking up.

  • Chinese trade data due at the start of next week will probably show slightly slower export growth after early indicators pointed to softer overseas demand and weaker export orders, Bloomberg Economics said.

Market Moves



  • The Canadian loonie was up 0.21 per cent against the U.S. greenback early Thursday, trading at 0.7586.

  • The Dollar Index is flat, fluctuating within a 0.1 percent range.

  • The euro climbed less than 0.05 percent to $1.1677.

  • The British pound gained 0.1 percent to $1.3213.

  • The Japanese yen lost 0.2 percent to 112.28 per dollar, the weakest level in six months.


  • Canada’s 10-year yield was up early Thursday at 2.165, a 0.70-percent increase.

  • The yield on 10-year Treasuries inched one basis point higher to 2.86 percent, the highest level in more than a week.

  • Germany’s 10-year yield gained less than one basis point to 0.37 percent, the highest level in more than three weeks.

  • Britain’s 10-year yield gained less than one basis point to 1.294 percent.


  • West Texas Intermediate crude climbed 0.4 percent to $70.64 a barrel.

  • Brent crude gained 1.5 percent to $74.48 a barrel, the most significant advance in almost two weeks.

  • Copper surged 1.4 percent to $2.78 a pound, the most substantial climb in five weeks.

  • Gold increased 0.2 percent to $1,244.28 an ounce.

Opening Bell: Oil Bounces After Sharp Selloff; USD Weighs On EM FX

Related Articles

Ross Hendricks
The Pandemic Boom Goes Bust By Ross Hendricks - Jan 29, 2022

The Pandemic Boom Goes BustWelcome to the great fiscal hangover. Over the last 18 months, the U.S. economy enjoyed the greatest stimulus infusion of all time. More than $5 trillion...

FactSet Research Systems Inc
Podcast : Financial Market Preview - Friday 28-Jan By FactSet Research Systems Inc - Jan 28, 2022

US equity futures are indicating a flat to slightly lower open as of 05:00 ET. European equity markets broadly lower, following mixed but mostly higher levels in Asia. Fed rate...

Opening Bell: Oil Bounces After Sharp Selloff; USD Weighs On EM FX

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email