US Open Note – Virus spikes favor safe havens; US equity futures point lower
May 17, 2021 1:25 pm
Stocks tumble as Covid outlook gets cloudy again
Markets traded with mixed feelings during the European session as Covid success countries such as Taiwan, Singapore, and Hong Kong reported the highest number of daily infections since the start of the pandemic, forcing the resumption of fresh social distancing measures and the closure of schools, cafes and bars. On the other side of the planet, European economies were moving forward with their reopening plans, with the UK lifting its international travel bans and allowing indoor meals in restaurants and pubs despite the number of identified cases of the fast-contagious Indian variant doubling the past week in some regions.
Downbeat Chinese retail sales and industrial data added to downside risks, further enhancing global appetite for safer assets. The pan-European STOXX 600 index followed its Asian counterparts lower after an outstanding recovery last week, with losses mostly gathered in energy, industrial and financial sectors. Among companies, however, the industrial part supplier Diploma managed to jump more than 7.0% after an exciting earnings release, whereas the Swedish investment company Kinnevik slumped by 35%.
But Covid it’s not the only bug in town. Traders are also nervous that the strong bounce in global CPI inflation indices could be something more than temporary as supply shortages mount in commodity sectors although the Fed continues to talk down the rising inflation expectations. US Treasury yields have erased a large portion of Wednesday’s upturn, but European bond yields gained fresh bullish momentum today, sending the Italian 10-year yield up to 1.1410% – the highest since September 2020.
US equity futures were moderately down on the day ahead of the US open. Tesla’s stock may attract some attention as investors wait for Elon Musk to clarify whether the company has sold or is ready to sell its bitcoin holdings.
Safe havens gain positive traction
In the FX space, investors shifted away from risk-sensitive currencies such as the Australian and New Zealand dollars and searched for safety into the Japanese yen and the Swiss franc. Dollar/yen tipped toed lower to 109.15, while dollar/Swissie was stable around 0.9014. Euro/dollar and pound/dollar were little changed from Friday’s closing levels, at 1.2140 and 1.4084 respectively, hovering slightly below key resistance levels.
In commodities, gold is at a make-or-break point, testing the surface of a long-term bearish channel and an extension of the short-term bullish trend within the 1,847 – 1,856 area.
Events to watch
Comments from Fed Vice chair Richard Clarida and Atlanta’s Fed President Raphael Bostic will be closely watched for any potential twists in monetary policy.
A busy UK calendar could bring the British pound under the spotlight during the rest of the week. Jobs numbers for March will be published on Tuesday at 06:00 GMT followed by inflation and retail sales on Friday. Japan’s GDP growth figures for Q1 will be out earlier at 23:45 GMT, though the yen rarely reacts on economic stats.
Stocks tumble as Covid outlook gets cloudy again
Markets traded with mixed feelings during the European session as Covid success countries such as Taiwan, Singapore, and Hong Kong reported the highest number of daily infections since the start of the pandemic, forcing the resumption of fresh social distancing measures and the closure of schools, cafes and bars. On the other side of the planet, European economies were moving forward with their reopening plans, with the UK lifting its international travel bans and allowing indoor meals in restaurants and pubs despite the number of identified cases of the fast-contagious Indian variant doubling the past week in some regions.
Downbeat Chinese retail sales and industrial data added to downside risks, further enhancing global appetite for safer assets. The pan-European STOXX 600 index followed its Asian counterparts lower after an outstanding recovery last week, with losses mostly gathered in energy, industrial and financial sectors. Among companies, however, the industrial part supplier Diploma managed to jump more than 7.0% after an exciting earnings release, whereas the Swedish investment company Kinnevik slumped by 35%.
But Covid it’s not the only bug in town. Traders are also nervous that the strong bounce in global CPI inflation indices could be something more than temporary as supply shortages mount in commodity sectors although the Fed continues to talk down the rising inflation expectations. US Treasury yields have erased a large portion of Wednesday’s upturn, but European bond yields gained fresh bullish momentum today, sending the Italian 10-year yield up to 1.1410% – the highest since September 2020.
US equity futures were moderately down on the day ahead of the US open. Tesla’s stock may attract some attention as investors wait for Elon Musk to clarify whether the company has sold or is ready to sell its bitcoin holdings.
Safe havens gain positive traction
In the FX space, investors shifted away from risk-sensitive currencies such as the Australian and New Zealand dollars and searched for safety into the Japanese yen and the Swiss franc. Dollar/yen tipped toed lower to 109.15, while dollar/Swissie was stable around 0.9014. Euro/dollar and pound/dollar were little changed from Friday’s closing levels, at 1.2140 and 1.4084 respectively, hovering slightly below key resistance levels.
In commodities, gold is at a make-or-break point, testing the surface of a long-term bearish channel and an extension of the short-term bullish trend within the 1,847 – 1,856 area.
Comments from Fed Vice chair Richard Clarida and Atlanta’s Fed President Raphael Bostic will be closely watched for any potential twists in monetary policy.
A busy UK calendar could bring the British pound under the spotlight during the rest of the week. Jobs numbers for March will be published on Tuesday at 06:00 GMT followed by inflation and retail sales on Friday. Japan’s GDP growth figures for Q1 will be out earlier at 23:45 GMT, though the yen rarely reacts on economic stats.
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