Opening Bell: Stocks Fall On China Trade Data; Yen, Gold Climb; WTI Drops
Frankfurt (Jan 14) Global equities and futures on the S&P 500, Dow and NASDAQ 100 dropped this morning, reinforcing the outlook that Friday's equity slip on Wall Street may be the end of a corrective rally within a downtrend. This would in turn confirm that the market stands inches away from a bear market, as seen during Christmas Eve's stock rout.
Chinese trade data posted the worst performance since 2016, with imports falling 7.6 percent and exports sliding 4.4 percent lower, seen as a direct result of the country's trade war with the U.S. While the reading exacerbated preexisting fears of an economic slowdown, some investors may hope it sways U.S.-Sino trade talks toward a compromise.
Meanwhile, however, trade-sensitive sectors such as miners and tech firms drove Europe's STOXX 600 lower.
In the earlier Asian open, Hong Kong’s Hang Seng (-1.38%) took the hardest hit from China's trade data miss. Australia’s ASX 200 was unscathed, edging only 0.02 percent lower. However, the Aussie dollar was sold off, as its fate is tied to China, Australia's largest trading partner. Japan’s shares were spared, as local markets were closed for a holiday.
The dollar kept falling against the Chinese yuan after Goldman Sachs upgraded its outlook for the currency. Technically, the USD/CNY may have topped out. However, investors should brace for a pullback, as the 50 DMA approaches the support of the 100 DMA, the price drop stalls above the 200 DMA and the RSI is the most oversold since February.
The pound wavered as UK Prime Minister Theresa May struggles to garner support around her Brexit proposal ahead of a critical vote in the House of Commons on Tuesday.
Global Financial Affairs
U.S. equities retreated slightly on Friday, stalling the post-Christmas rally. Small-cap stocks were the exception, outperforming when they should have lagged as the anti-trade resolution proxy. In another unusual occurrence, market structure was all over the place, with sector performance going off the rails. It’s interesting to note the renminbi bottomed with the start of trade talks.
Treasurys climbed for a second day, as traders shifted from risk to safety. Technically, the yield on 10-year bonds tested the downtrend line since November 7—for the third time in as many sessions—when it had reached 3.25 percent, the highest rate since May 2011. After the recent Death Cross, it seems that bears are not giving up. Yields have reached their lowest levels in a week.
Slipping yields also dragged the dollar lower, ending a two-day rally. Technically, the greenback completed a return move after topping out, as Friday’s price peaked over the neckline but closed below it. Today, again, it attempted to rise but was pushed back below the neckline.
The next test for the downtrend is the 200 DMA, just below the psychological 95.00 level. Overall, the DXY might be forming a rising flag, bearish in a downtrend, which could could be just what it needs to overcome the support of the 200 DMA.
Investing.com
