- Yield curve flashes recession warning
- Bitcoin climbs for nine days straight
- Apple (NASDAQ:AAPL) rally longest since 2003
- US GDP is reported on Wednesday
- China's official manufacturing and non-manufacturing PMIs print on Thursday
- OPEC+ monthly ministerial meeting to discuss production targets wraps on Thursday
- The US monthly nonfarm payrolls report is released on Friday
- The Stoxx Europe 600 fell 0.6%
- 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 1.2%
- The MSCI Emerging Markets Index rose 1%
- The Dollar Index fell 0.3%
- The euro rose 0.3% to $1.1118
- The Japanese yen fell 0.7% to 121.88 per dollar
- The offshore yuan fell 0.1% to 6.3633 per dollar
- The British pound rose 0.3% to $1.3132
- The yield on 10-year Treasuries declined one basis point to 2.38%
- Germany's 10-year yield advanced three basis points to 0.66%
- Britain's Britain's 10-year yield was little changed at 1.64%
- WTI crude advanced 2.2% to $106.55
- Brent crude rose 2.1% to $112.49 a barrel
- Spot gold rose 0.3% to $1,925.59 an ounce
Key Events
US futures for the S&P 500, Dow Jones, NASDAQ, and Russell 2000, and European shares were lower on Wednesday as skepticism escalated regarding the success of current Ukraine-Russia peace talks. Ukrainian military leaders have voiced doubt about Russia's sincerity regarding a cessation of hostilities, characterizing any military retreat as a maneuver simply to mislead.
Fading hopes of a ceasefire pushed oil prices into a rebound and the US dollar softened.
Global Financial Affairs
Late last week, Bank of America warned that the 11% jump in US stocks in the past two weeks is a telltale sign of a bear-market rally, saying the surge occurred despite weakening fundamentals.
Another signal BofA cited is a central bank that turns very hawkish. The lender cautioned that sharp rallies are typical of bear markets, with analysts reminding investors of the dot-com and 2008 crashes.
Another leading indicator of such events is the yield curve, with many focusing particularly on 2-year/10-year Treasuries. In a healthy economy, debt holders of longer-term maturity dates are rewarded for their patience and commitment with higher yields than those received by holders of shorter-term debt instruments.
On Tuesday, the 10-year–2-year spread briefly inverted before correcting, but the curve remains narrow. However, the traditional signals mentioned by BofA are unclear in an economy that has been flooded by stimulus.
All four US contracts are in the red at the time of writing, with futures on the NASDAQ 100 lagging, while those on the Dow are 'outperforming.'
The Stoxx Europe 600 Index ended a three-day gain, today, which took the pan-European benchmark to its highest level on Tuesday. Banks and automakers underperformed after yesterday leading the rally. Conversely, energy and mining shares jumped as commodities gained once again on the lower chances of a military de-escalation between Russia and Ukraine.
Earlier in Asia, regional benchmarks, save for Japan's Nikkei 225 advanced, as prospects for a diplomatic breakthrough in Eastern Europe still looked bright. Shipbuilders, steel producers, and marine transport stocks dragged the index lower, perhaps on high oil prices. Japan is among the world's most significant oil importers.
On Tuesday, during the New York session, US stocks advanced on optimism for progress in the Russian-Ukrainian talks. The S&P 500 Index gained for a fourth straight day, closing above 4,600 for the first time since January. Energy was the only losing sector.
The tech-dominated NASDAQ 100 gained over 1.5% as shares of Apple rallied for the 11th straight day, the longest winning streak for the iPhone-maker since 2003.
The dollar fell for a second day.
Nevertheless, the greenback remained within a range that may prove to be a continuation pattern upon completing an H&S configuration.
Gold jumped both because of the weaker dollar as well as the return of risk-off sentiment.
The precious metal still traded along a small H&S top.
Bitcoin climbed for a ninth straight session before reversing lower intraday.
If one accepts our interpretation of the neckline of the cryptocurrency's H&S top (black line) as correct, that would explain why the token is stuck for the third day on an intraday basis, having developed repeated long upper shadows. If some reader interpretations are correct (red line), the H&S would be invalidated.
Oil jumped on the increased risk of supply disruptions on additional, harsher sanctions on Russia, the world's second largest oil exporter.
WTI's price rebound occurred after it neared the bottom of a symmetrical triangle, presumed bullish, after an uptrend. It would be complete with an upside breakout.