Opening Bell: U.S. Futures, Europe Stocks Hit Highs Ahead Of FOMC; BTC Rallies

Key Events

Stocks in Europe set new records, while US futures on the Dow, S&P, NASDAQ and Russell 2000 also flirted with all time-highs in trading on Monday as speculation increased that the Federal Reserve will persist in its dovish policy despite the economic rebound and higher inflation.

The dollar slid and gold traded lower.

Global Financial Affairs

In Europe, the STOXX 600 Index extended its four straight-week rally, after the European Central Bank proved persistent in its ultra-loose monetary policy.

Although US contracts were trading in the green, traders will be closely watching the US Federal Reserve two-day policy meeting and they will parse through the verbiage to find any signpost that the Fed may tapering its gargantuan QE program.

Asia was mixed in light holiday trading, including China, Hong Kong and Australia. Japan’s Nikkei 225 saw modest gains.

Yields on the 10-year Treasury note extended towards 1.47%, perhaps on their way back to the top of a falling channel.

The move reflects anticipation that the US central bank will reaffirm its unprecedented easing.

Economists forecast that officials will project rising rates in 2024 when the economic expansion picks up.

The dollar pared Friday’s surge, as the greenback may still be developing a rising channel, after having fallen below the (red) uptrend line since the Jan. 6 low.

A downside breakout would suggest another retest of that low, before falling to a 2018 low. A return above the red trend line would increase the odds of a resumption of the uptrend following the massive wedge since the 2020 peak.

Gold fell to a monthly low, as it is finally showing signs of a meaningful correction, having fallen out of its rising channel. The yellow metal is expected to drift ahead of the Fed meeting.

If the yellow metal will fall below the 200 DMA, completing a small H&S top, it will retest the top of its broad falling channel since the 2020 record peak, from which it broke out on May 17, as it traversed above the 200 DMA at the same time.

Bitcoin jumped over the weekend after Elon Musk surprised again saying Tesla (NASDAQ:TSLA) may resume transactions with the digital currency when mining is done in a more environmentally friendly way.

The cryptocurrency blew out a bearish pennant, putting the digital token in a trajectory that will take on the extended neckline of the H&S top, whose implied target wiped out more than half of its value.

Oil extended a three-week rally on views that the economic restart will be sustained in the summer with increased demand in the US and Europe as consumers celebrate life outside of their homes. Hedge funds increased net bullish positions to an almost three-year high.

Oil extended the breakout of a bullish triangle.

A report that the Biden administration is considering ways to afford US refiners relief on biofuel sent corn, soybeans and soybean oil futures into a selloff.

US corn futures completed a bearish wedge that would challenge the uptrend line since the August low.

Soybean futures were struggling to complete a H&S top.

Up Ahead

• An EU-US summit takes place in Brussels on Tuesday.
• On Tuesday, US industrial production, producer prices and retail sales are released.
• President Joseph Biden and Russian President, Vladimir Putin meet on Wednesday in Geneva.
• On Thursday, US Treasury Secretary Janet Yellen testifies before a House panel on the federal budget.

Market Moves

Stocks

• Futures on the S&P 500 Index increased 0.1.
• The STOXX 600 Index rose 0.3%.
• The MSCI Asia Pacific Index was little changed.
• The MSCI Emerging Markets Index declined 0.1%.

Currencies

• The Dollar Index was little changed.
• The euro rose 0.1% to $1.2116.
• The British pound declined 0.1% to $1.4099.
• The onshore yuan weakened 0.1% to 6.399 per dollar.
• The Japanese yen was little changed at 109.69 per dollar.

Bonds

• The yield on 10-year Treasuries jumped one basis point to 1.46%.
• The yield on two-year Treasuries climbed less than one basis point to 0.15%.
• Germany’s 10-year yield gained less than one basis point to -0.27%.
• Japan’s 10-year yield gained one basis point to 0.041%.
• Britain’s 10-year yield increased less than one basis point to 0.711%.

Commodities

• West Texas Intermediate crude climbed 0.8% to $71.45 a barrel.
• Brent crude increased 0.9% to $73.34 a barrel.
• Gold weakened 1% to $1,858.74 an ounce.