Opening Bell: Fear Of Growing U.S. Trade Blacklist Grips Futures

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Dow Daily Chart


  • U.S. futures slip on fears of further U.S. bans on Chinese companies
  • Yields ease after Fed’s Bullard comments on potential rate cuts
  • Pound hit by MPs rebuke to prospect of second Brexit referendum

Key Events

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European stocks were trading in a holding pattern and futures on the , and pared much of yesterday’s gains at the opening, as investors awaited further trade war developments after reports the Trump administration was mulling extending to Chinese video surveillance firm Hikvision.

By the late European morning session, the managed to climb into green territory—with personal and household goods offsetting declines in real estate.

Earlier, the news of potential additions to the U.S. trade blacklist weighed more markedly on Asian markets. China’s slipped 0.49% and Japan’s erased a 0.48% climb at the open, to close barely positive (+0.05%).

Conversely, Australia’s (+0.16%) held near an 11-year high after the announcement of looser home mortgage requirements and of a possible interest rate cut from the Reserve Bank of Australia in June.

Global Financial Affairs

In yesterday’s U.S. session, stocks rebounded on the news the White House had partly lifted restrictions on Huawei for three months, boosting trade-sensitive sectors.

The sealed a 0.85% gain. (+1.54%) outperformed, followed by (+1.23%) and (+1.18%). (-0.21%) was the only sector in red, while (+0.19%) fared as the second-worst performer after hitting an all-time high on Monday.

Technically, the SPX climbed toward the top of a pennant and found resistance by the 50 DMA, and the 100 DMA stopped below the 200 DMA.

Dow Daily Chart

The bounced 0.77% to the top of its pennant-shaped trading pattern, where it reiterated the resistance since Friday. Meanwhile, the climb pulled the 100 DMA over the 200 DMA.

The leaped +1.08%, bouncing off the bottom of its own pennant formation, yanking the 100 DMA over the 200 DMA.

The (+1.27%) outperformed its U.S. peers, resuming a trend that contradicts the market narrative whereby trade is the single biggest headwind at present. We’ve suggested that, perhaps, the strengthening dollar is .

VIX Daily Chart

VIX Daily Chart

Meanwhile, the fell to its lowest level in two weeks—but it may have followed a trend reversal, suggesting the current decline is a correction within a rising trend.

Overall, we have been warning against trading based on the U.S.-China trade narrative since the dispute between the two economic powers started about a year ago, and as recently as yesterday we advised traders , arguing that the temporary lift on the Huawei ban seemed like a small band aid over an expanding wound.

Elsewhere, St. Louis Fed President James Bullard told Bloomberg that it’s premature to talk about a rate cut but admitted the Fed’s recent hike may have been too restrictive—which made the current Treasury rate suddenly look attractive. The Increase in Treasurys demand that ensued pushed yields on notes back lower after a three-day advance.

The advanced alongside government bonds ahead of the release of from the last FOMC monetary policy meeting, resuming an advance on a breakout of an ascending channel, as it takes on the April 26 peak. This morning, though, yields were seen slightly higher and the USD mildly lower.

On the other side of the Atlantic, the fell to the lowest level since Jan. 3 after U.K. Prime Minister Theresa May offered parliament a vote on holding a second Brexit referendum. The news initially propelled cable higher, but gains quickly turned into losses after key conservative lawmakers criticized the move, stepping up calls for May’s resignations.

In commodities, fell for the second day on rising U.S. crude .

Up Ahead

  • Minutes from the April 30-May 1 FOMC policy meeting will be released today.
  • On Thursday, the ECB publishes its of the April monetary policy decision.
  • Counting of votes from the Indian general elections takes place on Thursday as Prime Minister Narendra Modi attempts to secure a second term.
  • The European Parliament holds continent-wide elections on May 23-26.

Market Moves

Stocks

  • The U.K.’s climbed 0.45%
  • The gained less than 0.05%.

Currencies

  • The Dollar Index climbed less than 0.1%
  • The declined 0.1% to $1.1153, the weakest in almost four weeks.
  • The strengthened 0.1% to 110.41 per dollar, the largest increase in more than a week.
  • The weakened 0.1% to 6.911 per dollar.

Bonds

  • The yield on 10-year Treasurys slid one basis point to 2.42%.
  • The yield on Treasuries dropped one basis point to 2.24%, the first retreat in a week.
  • Germany’s yield declined one basis point to -0.07%.
  • Japan’s yield slipped one basis point to -0.056%.

Commodities

  • West Texas Intermediate crude fell 1.1% to $62.46 a barrel, the lowest in a week.
  • leaped 2.6% to $98.62 per metric ton on its sixth consecutive advance.
  • surged 1.6% to $0.1181 a pound on the largest jump in almost five weeks.





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