- Commodities fall on rising dollar
- Oil slides
- Bitcoin traded higher
Key Events
Futures on the Dow, S&P, NASDAQ and Russell 2000 as well as US Treasuries declined in pre-US open trading on Monday on continued inflation concerns. Saturday's announcement from the G7 meeting in London, that it will set a global minimum corporate tax rate that will likely dent technology firms' profits, was also weighing on markets. Comments from Treasury Secretary, Janet Yellen, that higher US interest rates may not be a bad thing for the economy provided support to the greenback, but the stronger dollar weighed on commodities, including copper and gold.
Global Financial Affairs
All four major US contracts opened at least 0.2% in the red, but the Russell 2000 was almost 0.6% down compared to the NASDAQ 100's 0.3% loss, suggesting a possible rollback to the reflation trade.
Shares in Europe, including on the STOXX 600 were pulled back from all-time highs by sliding commodity prices, after disappointing Chinese trade data compounded inflation concerns. Miners declined by over 1%, after copper fell more than 0.5% over concern that a slower rate of Chinese recovery—the world’s biggest commodities importer—will lower demand.
Copper is developing a descending triangle.
Stocks in Asia painted a mixed picture, as the increase in coronavirus cases, persistent in that part of the globe, offset last week's strong performance on Wall Street. Asian economies are behind the US and Europe in the reopening process, but the vaccine distribution effort there is increasing pace. South Korea’s KOSPI outperformed with a 0.4% gain, followed by Japan’s Nikkei’s 0.25% advance. Hong Kong’s Hang Seng lagged, falling more than 0.3%.
On Sunday, Janet Yellen, former Federal Reserve Chair, said that an interest rate hike would not be a bad thing, if it came as a result of President Joseph Biden’s $4 trillion spending plan, pushing yields on the 10-year Treasury note higher.
The rate found support by the bottom of a descending triangle that was helped by the 100 DMA. Yellen’s comments increased the outlook for higher rates, slightly supporting the dollar.
The greenback may be forming a small rounding bottom, which may be the prelude for a return to rallies, after the recent rising wedge achieved its implied target, returning to the massive falling wedge, since the March 2020 peak, bullish implications.
The outlook for higher rates, which is positive for the dollar, renders gold’s value relatively lower, pushing the yellow metal into a dip.
At long last, gold fell to the bottom of its rising channel. It found support by the 200 DMA and may not continue with its breakout from the falling channel since the 2020 record high.
Bitcoin slightly rose for the second day.
The direction of the breakout will likely determine its next move, whether it be a bearish pennant or a bullish, small, H&S bottom.
The 200 DMA bears down on the wedge, while the $29,000 is our red line.
Oil fell back from $70 on concerns of short-term demands as Iran could be nearing a deal to export its oil.
Oil recently completed a bullish triangle, which convinces us that a decline now would be a buying dip.
Up Ahead
- Apple (NASDAQ:AAPL) holds its annual Worldwide Developers Conference (WWDC) through June 11.
- On Thursday, the European Central Bank announces its rate decision and holds a press conference with President Christine Lagarde.
- Talks on the Iranian nuclear deal reconvene in Vienna on Thursday.
- The US announces the consumer price index on Thursday.
Market Moves
Stocks
- The STOXX 600 fell 0.4%
- Futures on the S&P 500 fell 0.3%
- Futures on the NASDAQ 100 fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The MSCI Asia Pacific Index was little changed
- The MSCI Emerging Markets Index fell 0.1%
Currencies
- The Dollar Index rose 0.1%
- The euro fell 0.2% to $1.2148
- The Japanese yen was little changed at 109.57 per dollar
- The offshore yuan was 0.1% higher to 6.3960 per dollar
- The British pound fell 0.2% to $1.4123
Bonds
- The yield on 10-year Treasuries advanced two basis points to 1.57%
- Germany’s 10-year yield was little changed at -0.21%
- Britain’s 10-year yield was little changed at 0.80%
Commodities
- Brent crude fell 1%
- Spot gold fell 0.5% to $1,883 an ounce