Opening Bell: Earnings, Trade Hopes Boost Futures; Safe Havens Slip

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  • Global stocks, futures rebound as investors focus on earnings and hopes of trade war resolution
  • Safe haven yen, gold and US Treasurys drop on improved sentiment
  • Dow and S&P 500 flirt with correction territory, but close above threshold

Key Events

European shares built on yesterday’s regional advance this morning while futures for the S&P 500, Dow and NASDAQ 100 took their cues from an Asian stock rebound earlier today, as market focus shifted to the positive outlook posted by corporate earnings results, as well as a potential trade deal on the horizon between the world’s two largest economies.

US futures contracts jumped after US President Donald Trump hinted to “a great deal with China,” which was enough to reverse the selling that had ensued after reports that Washington was preparing to announce tariffs on all remaining Chinese imports by early December, if talks between the two countries failed to come to an acceptable agreement.

The STOXX Europe 600 opened higher on earnings beats from some marquee companies such as BP (LON:BP) and Volkswagen (DE:VOWG_p).

Earlier, during the Asian session, the MSCI Asia Pacific Index found its footing after a five-day slide, though it still closed 0.19 percent in negative territory. Japan’s Nikkei 225 outperformed with a 1.44 percent gain, helped by a weaker yen. Hong Kong’s Hang Seng underperformed, dropping 0.91 percent on lingering trade war worries and earnings weakness.

Global Financial Affairs

During yesterday’s US session, stocks continued to slide, with both the S&P 500 and the Dow flirting with a correction, amid the steepest monthly declines in ten years.

The SPX slipped 0.66 percent after rebounding from a 2.07 percent loss, reaching an aggregate decline of over 11 percent from its most recent peak, taking it well into correction territory. However, the index managed to trim losses in the final 15 minutes of the session, crawling above the 10-percent decline mark, finishing 9.88 percent below its top.

Losses were led by Energy (-1.87 percent), Technology (- 1.69 percent) and Communication Services (-1.55 percent) stocks, but were offset by gains in Real Estate (+1.65 percent), Utilities (+1.41 percent) and Consumer Staples (+1.15 percent).

The Dow Jones Industrial Average edged 0.99 percent lower, though also rebounding from a 2.28 percent intraday drop of more than 500 points, for an 11 percent decline from the mega cap index’s October 3 peak. After paring the drop, it closed 8.92 percent from the top, managing to climb above correction territory.

The tech-heavy NASDAQ Composite underperformed, as the rout in tech shares continued. The index gave up 1.63 percent. The small cap Russell 2000 outperformed, dropping only 0.51 percent.

Opening Bell: Earnings, Trade Hopes Boost Futures; Safe Havens Slip

UST 10-Y Daily Chart

Meanwhile, safe haven assets inched lower. The yield on 10-year US Treasurys gained ground, testing the underside of an uptrend line since late August. Technically, a failure to cross back above the trend line might end up forming an HS& top.

Opening Bell: Earnings, Trade Hopes Boost Futures; Safe Havens Slip

USD/JPY Daily Chart

The yen lost 0.37, for a combined two-day loss of 0.74 percent, testing the October highs after it found support by the uptrend line since late March.

Gold also weakened on the back of investors’ new-found optimism on both company results and a trade war resolution.

The euro halted losses following news reports that German Chancellor Angela Merkel will not run for re-election as chairwoman of the Christian Democratic Union. The single currency was seen hovering below neutral levels in the late European morning session.

Up Ahead

  • Monetary policy decisions are due in Japan and the U.K.
  • On Friday, the last US jobs report before the November 6 mid-term elections is expected to show nonfarm payrolls rose about 190,000 and the unemployment rate held at a 48-year low of 3.7 percent.

Earnings

      • Facebook (NASDAQ:FB) is expected to release earnings today after market close, with a $1.46 EPS forecast from $1.59 the same quarter last year. The report may shed some light on whether the social media giant will be able to re-gain investors’ confidence, and thereby on whether the stock has bottomed.
      • Apple (NASDAQ:AAPL) is scheduled to report Thursday after market close, with a $2.78 EPS prediction, after last year’s $2.07.
      • Exxon Mobil (NYSE:XOM) is set to post corporate results Friday before market open, with an EPS forecast of $1.21 from $0.93 in the same quarter last year.

Market Moves

Stocks

      • Futures on the S&P 500 gained 0.5 percent.
      • The Stoxx Europe 600 fell less than 0.05 percent.
      • The UK’s FTSE 100 gained 0.2 percent to the highest level in more than a week.
      • Germany’s DAX lost 0.1 percent.
      • The MSCI Asia Pacific Index gained 0.6 percent, the first advance in more than a week and the largest climb in almost two weeks.
      • The MSCI Emerging Market Index dropped 0.1 percent.

Currencies

      • The Dollar Index climbed 0.1 percent set for the highest close in 16 months.
      • The euro gained less than 0.05 percent to $1.1377.
      • The British pound gave up 0.1 percent to $1.2779, the weakest level in more than 10 weeks.
      • The Japanese yen declined 0.4 percent to 112.80 per dollar, the weakest level in more than a week.

Bonds

      • The yield on 10-year Treasuries gained three basis points to 3.12 percent, the largest climb in almost two weeks.
      • Germany’s 10-year yield climbed two basis points to 0.40 percent, the highest level in a week.
      • Britain’s 10-year yield rose two basis points to 1.419 percent, the largest rise in more than a week.
      • The spread of Italy’s 10-year bonds over Germany’s declined three basis points to 2.9257 percentage points to the smallest premium in more than three weeks.

Commodities

    • West Texas Intermediate crude climbed less than 0.05 percent to $67.06 a barrel. Oil prices now await direction from multiple macro drivers, first and foremost from the start of Iranian sanctions on November 4.
    • Gold lost 0.5 percent to $1,223.74 an ounce, the weakest level in more than a week on the biggest dip in more than two weeks.

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