- Unexpected Chinese central bank news boosts stocks
- Retail investors move on to silver, overwhelming physical sellers
Key Events
US futures on the Dow, S&P, NASDAQ and Russell 2000 and global equities all advanced on Monday as investors, nervous from the fallout of a war between retail investors and hedge funds, focused on Friday's news from China that credit tightening was not in the cards.
Silver surged past $30 for the first time since 2013, as the Reddit-fueled, social media trade face-off shifted its focus to the commodity. Gold also benefited.
Global Financial Affairs
Yesterday we outlined how the recent retail trading phenomenon is having unintended consequences, and today in Europe, the performance of the STOXX 600 Index has been driven higher by silver miner shares.
Silver contracts leapt as much as 12% as retail traders united to take on the precious metal trade, and weekend demand bought out silver bar and coin stocks.
Blackrock iShares Silver Trust (NYSE:SLV), the largest exchange-traded product tracking the metal, recorded an unprecedented $944 million net inflow on Friday.
All four major US futures were up this morning, with the NASDAQ 100 contracts outperforming the Dow and S&P. This pattern resumes last week’s surge in tech shares which continue to benefit from the expectation that coronavirus social restrictions will endure for some time as the virus keeps spreading and additional new strains emerge while vaccine distribution continues to prove challenging.
Stocks in Asia rose on Monday after AstraZeneca (NASDAQ:AZN) said it would increase its supply of COVID-19 vaccines to the European Union by 30%, easing concerns for a slower economic recovery.
South Korea’s KOSPI (+2.7%) led the region higher, as online traders in the country—no doubt inspired by the Reddit impact on the entire financial market—led a campaign to stop the government from lifting its restriction on short selling.
Hong Kong’s Hang Seng (+2.1%) rallied with the tech sector, after reports that Chinese Central bank officials denied rumors it had raised interest rates on a standing loan facility, offsetting the disruption created by the war of retail investors against hedge funds.
Copper prices were said to rise on the change in perception of China’s tightening. However, the red metal failed to hold on to gains, extending a decline.
Copper’s failure to keep up the price, appears to be part of a topping pattern. Today’s trading produced an inverted hammer, and the decline is within a range that could prove to be a bullish, falling hammer, following a near 6% surge within 5 sessions that preceded the flag.
Yields, including on the 10-year Treasury note, have broken the top side of a falling flag.
The move signals a resumption of the uptrend along the rising channel, as traders keep selling Treasuries, presumably, in favor of equities.
Gold was up 0.9%, though it's not clear the move had anything to do with Reddit warriors. The real story is in silver, up 12% or almost 20% over the past three sessions, crossing the $30 level for the first time since 2013, after completing an ascending triangle.
If the price will manage to stay above its rising channel, it is a signal of a more drastic rate of ascend to follow.
Bitcoin is up 3.3% after Elon Musk said the crypto is on “the verge of broad acceptance." However, that was not enough to provide a decisive upside breakout of a falling channel, that will likely propel the digital currency higher.
Oil rose 0.6%.
Still, it was trapped within a falling channel, whose upside breakout may take it towards the $60 mark.
Up Ahead
- The Reserve Bank of Australia’s policy decision comes on Tuesday.
- On Wednesday the EIA crude oil inventory report is released.
- The Bank of England sets rates on Thursday and an Indian central bank policy decision is also due.
- On Friday, the US January payrolls report will provide a first look at hiring in 2021.
Market Moves
Stocks
- Futures on the S&P 500 Index increased 0.6%.
- The Stoxx Europe 600 Index increased 1.9%.
- The MSCI Asia Pacific Index advanced 1.6%.
- The MSCI Emerging Markets Index advanced 1.6%.
Currencies
- The Dollar Index rose 0.1% to 90.71.
- The euro fell 0.1% to $1.2113.
- The British pound climbed 0.2% to $1.373.
- The Japanese yen was unchanged at 104.76 per dollar.
Bonds
- The yield on 10-year Treasuries gained one basis point to 1.08%.
- The yield on two-year Treasuries dipped less than one basis point to 0.11%.
- Germany’s 10-year yield advanced two basis points to -0.52%.
- Britain’s 10-year yield climbed four basis points to 0.325%.
Commodities
- West Texas Intermediate crude increased 0.4%.
- Gold strengthened 0.9% to $1,861.93 an ounce.