Opening Bell: Trade-Driven, Global Equities Rally Loses Steam; Sterling Sinks

Key Events

European shares, as well as U.S. futures contracts on the S&P 500, Dow Jones and NASDAQ have all slipped lower—after earlier struggling to maintain gains with which to build on yesterday's fresh records. The about-face was triggered by increasing doubt on what looks to be an unbaked partial trade deal, with few actual details, between the world’s most powerful two economies. Oil was flat. The pound plunged while the dollar and Treasurys rose.

Global Financial Affairs

U.S. futures gave up most of an advance.

S&P Futures Daily

SPX futures are forming a bearish shooting star.

The STOXX Europe 600 Index fell for the first time after a five day rally which included a breakaway gap, suggesting a pullback within the rally.

Stoxx 600 Daily

Bank shares weighed on the pan-European index, as Lloyds Banking Group PLC (LON:LLOY), (NYSE:LYG) dropped after a stinging report by Citigroup indicated the UK-based lender had the worst performance in a BoE stress test. Consumer goods declined as well, after Unilever (NYSE:UL) warned about lagging sales growth.

Earlier today, before the negative sentiment took hold, Asian benchmarks closed almost entirely in the green, with Australia’s ASX 200 the only major index to slip slightly into the red (-0.04%). China’s Shanghai Composite, (+1.27%), and South Korea’s KOSPI, (+1.27%), equally outperformed.

Yesterday, Wall Street, still drunk on earlier euphoria from the possible resolution of the U.S.-China Phase 1 deal, started the trading week on a positive footing: the S&P 500, NASDAQ and Dow all carved out new records. Adding to the mood, the NY Empire State Manufacturing Index came in below forecasts, but still reached a five month high.

DXY Daily

The dollar gained, finding resistance at the October and November lows, after falling below the 200 DMA, with the 50 DMA rushing toward it for a possible death cross.

GBP/USD Daily

Fresh from his resounding election victory, UK Prime Minister Boris Johnson said "he will use his control of parliament to outlaw any extension of the Brexit transition period beyond 2020," which would revive the possibility of a no-deal Brexit. The pound sank.

WTI Daily

West Texas Intermediate crude is hovering near a three-month high.

In the precious metals market, palladium surged, breaking through $2,000 an ounce to hit a new record amid a global shortage. Technically, the price has slowed for a third day, after breaking out of a bullish pennant, ahead of the top of a falling triangle since late-April.

Up Ahead

• Policy decisions are due Thursday from the Bank of Japan and the Bank of England.
• Federal Reserve district bank presidents including Robert Kaplan of Dallas, Eric Rosengren of Boston and John Williams of New York are scheduled to speak this week.
• Revised U.S. GDP data will be released Friday.
• Also on Friday markets will see quadruple witching in the U.S., the simultaneous expiration date of stock index futures, stock index options, stock options and single stock futures. Expect elevated trading volume, particularly in the last hour of trade.

Market Moves

Stocks

• The Stoxx Europe 600 Index sank 0.5% as of 8:18 a.m. London time.
• Futures on the S&P 500 Index were little changed.
• Germany’s DAX dropped 0.3%.
• The U.K.’s FTSE 100 Index dipped 0.1%.
• The MSCI Asia Pacific Index jumped 0.8%.

Currencies

Bonds

• The yield on 10-year Treasuries decreased one basis point to 1.86%.
• Germany’s 10-year yield dipped two basis points to -0.29%.
• Britain’s 10-year yield fell one basis point to 0.778%.

Commodities