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Opening Bell: U.S. Futures, Global Stocks Surge; Gold Jumps, USD, Bitcoin Fall

By Pinchas CohenMarket OverviewJan 04, 2021 07:09
ca.investing.com/analysis/opening-bell-us-futures-global-stocks-surge-gold-jumps-usd-bitcoin-fall-200444491
Opening Bell: U.S. Futures, Global Stocks Surge; Gold Jumps, USD, Bitcoin Fall
By Pinchas Cohen   |  Jan 04, 2021 07:09
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  • Gold rallies after posting largest yearly gains in a decade
  • Dollar nears 6-year low
  • USD weakness, boosts commodities, reinforces cyclical rotation

Key Events

Futures on the Dow, S&P, NASDAQ and Russell 2000 as well as European stocks rose Monday, the first day of 2021 trading, on renewed optimism. However, the dollar dropped, boosting commodities and related stocks.

The MSCI All-Country World Equity Index, which covers 40 countries, jumped almost half a percent to a record high. 

Global Financial Affairs

Investors remain optimistic despite global coronavirus infections topping 85 million, with US cases at over 21 million. The FTSE 100 is up over 2.5% as the UK begins}} dispensing the vaccine from AstraZeneca (NASDAQ:AZN) and the University of Oxford, even though the country is adjusting to tighter restrictions as the rate of contagion there rises.

Futures contracts on the Russell 2000 are outperforming, up twice as much as the other major US indices, after its underlying gauge was the only one of those indices to fall at the end of trade last week. Small caps are one of the market sectors that is part of the cyclical rotation.

In European trading on Monday, the STOXX 600 Index advanced right out of the gate, as the historic, Christmas eve Brexit deal—which was believed to be a lost cause—compounded by a COVID-19 vaccination drive across the continent, revived optimism in a strong economic recovery.

There is one caveat. The Brexit deal did not include Britain’s financial sector—the second largest in the world. However, it is still unclear whether that will hurt the UK or the EU economy. Cyclical sectors led the march upward, as energy and travel & leisure shares provided the best returns, while oil neared the $50 mark.

Almost all of Asia was green. Japan’s Nikkei 225 gave up early gains and declined 0.7% after Prime Minister Joshihide Suga confirmed the government was considering a state of emergency for Tokyo and three surrounding prefectures due to increasing coronavirus cases. 

South Korea’s KOSPI jumped 2.47%, its sharpest gain in six months, to a record high on robust chip demand and improved global demand, providing further signals of a return to recovery, despite a resurgence in the virus there.

China’s Shenzhen Index also surged 2.47%, the precise advance by the KOSPI, after a private survey released on Monday showed manufacturing activity expanded in December, pointing to a continued economic recovery.

Thursday was the last day of trading for 2020 on Wall Street and the S&P 500 Index and the Dow Jones Industrial Average posted records. 

The dollar extended a decline below the 90 level last reached on Apr. 13, 2018 and less than 0.5% from its low in December 2014.

Dollar Index Daily
Dollar Index Daily

The USD is trading at the very bottom of the range resuming the downtrend within a falling channel, upon completing back-to-back continuation patterns.

Gold finally broke free from its falling channel-rut since its August record, its first since 2011.

Gold Daily
Gold Daily

The yellow metal showed dramatic flair, achieving a rising gap, after completing a pennant, which included a return-move to a H&S bottom.

Bitcoin suffered its first drop since Dec. 27, after soaring on Sunday to over $34,000, a fresh all-time high.

Bitcoin Hourly
Bitcoin Hourly

It is ironic that as Bitcoin has been reaching new heights, it has been doing so amid dollar weakness and perhaps even at the expense of gold. After doubling in value since November, it seems some profit-taking is in order.

The cryptocurrency's hourly chart completed a H&S top. However, because of its rising slope, it already achieved its implied target.

OPEC+ will decide later today whether to resume restoring {{8849|oil supplies without capsizing the price recovery.

Oil Daily
Oil Daily

Oil suddenly dropped from within an inch of $50 at 04:00. Should prices remain at these levels, they will have completed a shooting star, a bearish signal that can lead to a top.

Up Ahead

  • OPEC+ alliance energy ministers hold their monthly virtual gathering later today to decide whether to add as much as 500,000 barrels a day to production.
  • On Tuesday, the state of Georgia holds a run-off election for two US Senate seats that will decide control of the chamber.
  • The US Congress meets on Wednesday to count electoral votes and declare the winner of the 2020 Presidential election.
  • On Wednesday, FOMC minutes are released.
  • US nonfarm payrolls for December are released on Friday.

Market Moves

Stocks

Currencies

  • The Dollar Index fell 0.5% to 89.45.
  • The euro increased 0.5% to $1.227.
  • The British pound was little changed at $1.3677.
  • The onshore yuan strengthened 1% to 6.463 per dollar.
  • The Japanese yen strengthened 0.3% to 102.86 per dollar.

Bonds

  • The yield on 10-year Treasuries gained two basis points to 0.93%.
  • The yield on two-year Treasuries was unchanged at 0.12%.
  • Germany’s 10-year yield sank three basis points to -0.60%.
  • Britain’s 10-year yield fell three basis points to 0.169%.
  • Japan’s 10-year yield was unchanged at 0.021%.

Commodities

  • West Texas Intermediate crude gained 2% to $49.49 a barrel.
  • Brent crude surged 2.2% to $52.96 a barrel.
  • Gold strengthened 1.8% to $1,933.30 an ounce.
Opening Bell: U.S. Futures, Global Stocks Surge; Gold Jumps, USD, Bitcoin Fall
 

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Opening Bell: U.S. Futures, Global Stocks Surge; Gold Jumps, USD, Bitcoin Fall

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