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Opening Bell: Global Rally Fades On Hawkish Fedspeak, Hong Kong Risk

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewAug 20, 2019 05:23AM ET
www.investing.com/analysis/opening-bell-global-rally-fades-on-hawkish-fedspeak-hong-kong-risk-200456586
Opening Bell: Global Rally Fades On Hawkish Fedspeak, Hong Kong Risk
By Investing.com (Pinchas Cohen/Investing.com)   |  Aug 20, 2019 05:23AM ET
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  • Global stock rally dies down, U.S. futures drop as hawkish Fedspeak offsets trade optimism
  • Hong Kong risk, Twitter and Facebook measures overshadow Huawei trade reprieve
  • Dollar and gold strengthen simultaneously
  • Oil hits trend resistance

Key Events

Futures on the S&P 500, Dow and NASDAQ 100 slipped into red territory this morning after a mixed Asian session, following some hawkish Fed rhetoric that offset the bullishness of a U.S.-China trade ceasefire.

Europe's STOXX 600 also dropped after posting some mild gains. From a technical perspective, the pan-European benchmark’s advance was halted at the month’s highs, suggesting a line of supply. The index returned to above the 200 DMA, but only after posting a trough lower than June's low, thereby putting the uptrend into question.

In the earlier Asian session, regional stocks ended mostly higher as investors weighed long-term recession fears against short-term stimulus—as well as a 90-day extension, from the U.S. Commerce Department, on a trade reprieve that allows Huawei to buy equipment from U.S. suppliers.

However, Hong Kong’s Hang Seng (-0.23%) underperformed, as civil unrest continued unabated. Both Twitter and Facebook (NASDAQ:FB) suspended a number of accounts believed to spread misinformation, by Chinese state-backed parties, about Hong Kong protestors. China’s Shanghai Composite (-0.11%) ranked as the second worst performer.

Conversely, Australia’s S&P/ASX 200 (+1.2%) outperformed, rising for the second day, to back above the 100 DMA. It’s noteworthy that despite the index’s reliance on the Chinese market, the two stood at opposite ends of the performance spectrum. Perhaps, the Aussie dollar’s weakest price in a decade boosted local shares.

Global Financial Affairs

Yesterday, U.S. equities climbed for a third day with chipmakers on reports that Huawei restrictions would be postponed for a three-month grace period.

The NASDAQ Composite (+1.35%) benefited the most from the news.

The S&P 500 leaped 1.21%, driving every single sector into green territory from defensive Utilities (+0.60%) to Energy stocks (+2.21%). The latter tracked oil prices, which surged after a drone attack in Saudi Arabia boosted lingering Middle East tensions.

Dow Daily Chart
Dow Daily Chart

Meanwhile, the Dow Jones Industrial Average (+0.96%) remained below its uptrend line since the December bottom.

UST 10-Year Daily Chart
UST 10-Year Daily Chart

In the bond market, the yield on 10-year Treasurys resumed a slide after paring some of Monday's losses as Fed Bank of Boston President Eric Rosengren pushed back against further rate cuts, arguing he’s not convinced that slowing global growth and trade will significantly dent the economy. Meanwhile, U.S. President Donald Trump urged the central bank to cut rates by “at least 100 basis points.“

Technically, the move is considered a pullback after a bearish flag.

The dollar climbed for the fifth session out of six, within an ascending channel.

XAU Daily Chart
XAU Daily Chart

Gold strengthened even against a rising USD due to risk off likely creeping back into markets on one side and technicals on the other, with the price finding support from previous lows as the precious metal nears a channel top—all at the $1,500 psychological level.

WTI Daily Chart
WTI Daily Chart

Oil struggled against the top of a falling channel despite renewed Mideast uncertainty.

Up Ahead

  • Minutes of the Fed’s July meeting, due on Wednesday, will provide details on the discussions leading to the first interest-rate cut in a decade.
  • Kansas City Federal Reserve Bank hosts its annual central banking symposium in Jackson Hole, Wyoming, starting on Thursday. Fed chair Jerome Powell will give remarks on Friday.
  • Flash PMIs are out for the euro area on Thursday.
  • Also on Thursday, the Bank of Indonesia is scheduled to decide oninterest rates, followed by a press conference with Governor Perry Warjiyo.

Market Moves

Stocks

Currencies

    • The Dollar Index climbed less than 0.05%.
    • The British pound fell 0.3%.
    • The euro was unchanged at $1.1078.
    • The Japanese yen climbed 0.2% to 106.42 per dollar.

Bonds

  • The yield on 10-year Treasuys slid two basis points to 1.58%.
  • Britain’s 10-year yield dropped one basis point to 0.463%.
  • Germany’s 10-year yield fell two basis points to -0.67%.
  • Italy’s 10-year yield advanced one basis point to 1.448%.

Commodities

    • Gold climbed 0.2% to $1,499.46 an ounce.
    • Silver gained 0.7% to $16.99 per ounce.

  • West Texas Intermediate crude was unchanged at $56.21 a barrel.

Opening Bell: Global Rally Fades On Hawkish Fedspeak, Hong Kong Risk
 
Opening Bell: Global Rally Fades On Hawkish Fedspeak, Hong Kong Risk

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Rio Fadly
Rio Fadly Aug 20, 2019 8:01AM ET
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how about Bitcoin ?
CE CE
CE CE Aug 20, 2019 7:53AM ET
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Trade the trade
Atomical Kitten
Atomical Kitten Aug 20, 2019 7:51AM ET
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what people cancomment ar invest.
icouldnotthink67 .
icouldnotthink67 . Aug 20, 2019 7:50AM ET
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What changed overnight?
Sunil Singh
Sunil Singh Aug 20, 2019 7:50AM ET
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Exactly...Yesterday the headlines were - "recession fears fade", today they come back...
 
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