Opening Bell: U.S. Futures Slip; USD Stabilizes; Global Bonds Hit

Key Events

European equities along with futures for the S&P 500, Dow and NASDAQ 100 slipped lower on Monday after finance leaders from the Group of 20 warned that trade tensions threaten the global economy. US Ppresident Donald Trump sparked a global selloff as well as the biggest USD slump since March after he threatened to extend tariffs to all Chinese imports and criticizsed the Federal Reserve for on its monetary policy.

Since the Trump administration has opposed a strong dollar from the outset, we can only expect it to step up its scrutiny over currency moves as the global trade dispute intensifies. This could, in turn, warrant more volatility for the greenback, as well as for equities.

The pan-European STOXX 600 was weighed down by travel companies, after Ryanair (LON:RYA), the largest European airline, unveiled a 20 percent profit setback for the first quarter.

Earlier, during the Asian session, regional shares posted a lacklustre performance. Japan's TOPIX fell 0.4 percent, dragged lower by a stronger yen, reversing an early rise and suffering an aggregate three day loss of 0.7 percent.

Sharp gains in the financials sector, led by Mitsubishi UFJ Financial Group (T:8306), weren't enough to offset losses in exporters shares, led by electric appliances and automakers.

Technically, the Japanese benchmark is resuming a falling trend, upon nearing the downtrend line since May 21.

Reuters reported that the Bank of Japan was engaging in “unusually active discussions” ahead of its July decision, leading to speculations that the last major global central bank to be engaged in a heavily accommodative quantitative easing was considering scaling back. That sent the country's currency higher: technically, the price bounced on its uptrend line since March 27, guarded by the 50 DMA, after it crossed above the 200 DMA, triggering a golden cross. On the other hand, both MACD and RSI provide sell signals.

The news reports also pushed Japanese bonds into a free fall, dragging European bonds along.

Global Financial Affairs

Ironically, China's Shanghai Composite outperformed despite the latest trade salvo from the US. The mainland index reversed earlier losses and climbed 1.07 percent, for an aggregate two day gain of 3.23 percent, hitting the highest close since June 22. Gains in banks and industrials shares offset a drop in healthcare stocks. Technically, the benchmark posted a new peak, suggesting a corrective uptrend from the July 6, 2691.02 low, after having entered a bear market.

Perhaps, the downward trajectory of the Chinese yuan, which is set to close at a year low, is boosting the country's exports and countering the impact of Trump’s tariff threats.

Technically, the price is retesting Friday's shooting star. Should supply hold demand at bay, it would increase the probability of a correction for the USD/CNY pair.

Hong Kong’s Hang Seng managed to close 0.11 percent in the green after swinging between gains and losses intraday.

South Korea’s KOSPI slipped 0.87 percent, weighed down by blue-chip tech stocks: SK Hynix Inc (KS:000660) sank 7 percent, while Samsung Electronics (KS:005930) tumbled 2 percent.

Australia’s S&P/ASX 200 dropped 0.93 percent, wiping out two-and-half days of gains.

During Friday's US trade, Trump's threats spoiled chances, for the SPX, to move closer to its all-time high. Technically, the US major remains in an uptrend

Since the 2016 Brexit vote equity traders have often shown they disregard geopolitical risks. Currency traders, however, have shown a more pronounced risk aversion, as we witnessed with the 15 percent dollar dive that occurred between Trump's warning that "The dollar is killing us" in January 2017 and the February 2018 bottom.

Will dollar bulls run for the hills again amid Trump's rhetoric, or will they focus on fundamentals and charge ahead? As of now, we are providing the uptrend the benefit of the doubt.

Fundamentally, the buck has been enjoying rallies both during risk-on and risk-off markets and has lately replaced the yen, the Swiss franc and gold as the ultimate safe-haven asset, similarly to what happened during the 2008 financial crash. The widening differential between global interest rates is also giving the greenback a strong head start.

Elsewhere, WTI crude traded near $68 a barrel on concerns that mounting trade jitters will squeeze energy demand, undermining reassurance from Saudi Arabia that it won’t flood global crude markets. At 11.45am GMT, the commodity climbed 1.1 percent higher to near $69. Meanwhile, emerging-market currencies edged higher.

Up Ahead

• Earnings season continues:

• Alphabet (NASDAQ:GOOGL), due today after market close, $9.51 EPS forecast, VS $5.01 same quarter last year

• AT&T (NYSE:T), due tomorrow, after market close, $0.85 EPS forecast, VS $0.79 same quarter the previous year

• Facebook (NASDAQ:FB), due Wednesday after market close, $1.75 EPS forecast VS $1.32 same quarter last year

• Advanced Micro Devices (NASDAQ:AMD), due Wednesday after market close, $0.1 EPS predicted VS $-0.01 same quarter previous year

• Qualcomm (NASDAQ:QCOM), due Wednesday after market close, $0.58 ESP forecast, VS $0.7 same quarter last year

• Amazon.com (NASDAQ:AMZN), due Thursday after market close, $2.49 EPS forecast, VS $0.4 same quarter last year

• Intel (NASDAQ:INTC), due Thursday, after market close, $0.99 EPS forecast, VS $0.72 same quarter last year

• Twitter Inc (NYSE:TWTR), due Friday before market open, $0.07 EPS forecast, VS $-0.02 same quarter last year

• Boeing (NYSE:BA), due Wednesday before market open, $3.48 EPS forecast, VS $2.55 same quarter last year

• Visa, due Wednesday after market close, $1.08 EPS forecast, VS $0.86 same quarter last year

• Canadian Wholesale Sales for May are released on Monday.

• European Central Bank’s policy decision comes out on Thursday.

• U.S. gross domestic product, out on Friday, is forecast to have increased by about 4 percent in the second quarter, the most since 2014.

Market Moves

Stocks

• Canada’s S&P/TSX Composite lost 0.75 percent on Friday.

• The STOXX 600 Europe 600 dropped 0.3 percent to the lowest in a week.

• Futures on the S&P 500 fell 0.1 percent to the lowest in a week.

• The MSCI All-Country World Equity Index fell less than 0.05 percent.

• The MSCI Emerging Markets Index gained less than 0.05 percent.

Currencies

• The Canadian loonie was up 0.09 percent against the U.S. greenback early Monday, trading at 0.7614.

• The Dollar Index slipped 0.05 percent, set to close the lowest since July 10.

• The euro fell 0.1 percent to $1.1718.

• The British pound declined less than 0.05 percent to $1.3135.

• The Japanese yen climbed 0.3 percent to 111.03 per dollar, the strongest in almost two weeks.

Bonds

• Canada’s 10-year yield was up early Monday at 2.184, a 0.41-percent increase.

• The yield on 10-year Treasuries gained less than one basis point to 2.90 percent, the highest in more than a month.

• Japan's 10-year yield climbed five basis points to 0.084 percent on the most significant increase in more than 23 months.

• Britain’s 10-year yield advanced one basis point to 1.232 percent.

Commodities

• The Bloomberg Commodity Index declined 0.1 percent.

• West Texas Intermediate crude slid 0.2 percent to $68.09 a barrel, the first retreat in a week.

• LME copper advanced less than 0.05 percent to $6,149.50 per metric ton.

• Gold gained less than 0.05 percent to $1,229.72 an ounce, the highest in a week.