Stocks in Asia climbed along with U.S. Equity Futures and the yuan after the American and Chinese presidents reached a truce in the trade war and agreed to resume talks. Treasuries, Gold and the Japanese Yen declined. Futures on the S&P 500 rose 0.9% and the risk-on trade strengthened Monday with benchmarks in Japan and China up almost 2% in afternoon trading. European futures pointed to more modest gains. The deal between Presidents Xi Jinping and Donald Trump validated investor hopes after mixed signals heading into Saturday’s meeting. Oil rose as Russia struck a deal with Saudi Arabia to extend the OPEC+ production deal potentially into early 2020. In a move that showcases the increasing danger of diplomatic disputes to trade and to markets, Japan said it plans to slap export restrictions on some tech items to South Korea. That pulled down the shares of Samsung Electronics Co. and Japanese suppliers. Even so, the tech sector led gains in Asia after Trump’s weekend decision to allow China tech champion Huawei Technologies Co. to buy some products from U.S. suppliers. For example, Largan Precision surged 10% in Taiwan trading. Hong Kong is closed today for a holiday.
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Equities
The S&P 500 Index pushed its June advance to 6.9% and rose by more than 3.5% in the Quarter, rebounding from the rout in May. Materials producers surged 11% in June, buoyed by crude’s best month in five and Gold’s biggest rally since the Brexit vote. Chipmakers saw the best monthly gain since 2011 as the sector has shown signs of resilience amid the trade war.
Banks led benchmarks after the Federal Reserve cleared the way for better-than-expected payouts, while Apple Inc. weighed on tech after a report said it was moving some production from the U.S. to China. The S&P 500 Index advanced 0.6% to close at 2937. This morning the Futures Market is trading nearly 40 Handles higher at 2975. The Stoxx Europe 600 Index gained 0.7%.
The MSCI Emerging Market Index was little changed. Overnight the Nikkei closed 2.13% higher at 21,730.
Currencies
Here is a summary of the main changes in F.X. Markets:
The US Dollar was little changed versus peers, heading for it’s worst month since January.
The Euro was steady at $1.1372. However this morning the Euro is opening lower at $1.1330 in London.
The British pound gained 0.2% to $1.2704, the biggest gain in a week.
The Japanese Yen fell less than 0.05% to 107.83 per dollar.
Bonds
Ten-year Treasury yields lingered above 2%, dropping nearly 40 basis points since the end of the last Quarter, as fresh evidence that American manufacturing growth is slowing boosted expectations for deep rate cuts this year. The yield on 10-year Treasuries fell one basis point to 2.00%. In Europe, Germany’s 10-year yield dropped one basis point at -0.327%, and Britain’s 10-year yield gained one basis point to 0.833%.
Commodities
Although Gold advanced 0.1% to close at $1,413.70 an ounce in New York last Friday, it is opening 1.80% lower in London this morning at $1385 West Texas Intermediate crude fell 2.3% at $58.06 a barrel, but this move lower on Friday is completely reversed this morning, trading 2.6% higher at $59.60 after Russia struck a deal with Saudi Arabia as mentioned in my Economic Commentary above.
This morning on the Economic Front we have German Unemployment and Manufacturing PMI at 8.55 am. This is followed at 9.00 am by Euro-Zone Money Supply and Manufacturing PMI. At 9.30 am we have UK Consumer Credit and Mortgage Approvals, followed by Euro-Zone Unemployment at 10.00 am. Next, we have US Manufacturing PMI at 2.45 pm. Finally, at 3.00 pm we have ISM Manufacturing PMI and Construction Output.
September S&P 500
This morning the S&P is trading 40 Handles above where the Cash S&P closed at 9.00 pm last Friday, to hit yet another new all-time high. Thankfully we had no sell levels on Friday in any of the Indices that I cover as despite a weakening economy, equity markets are fully valued at this time. The S&P is close to my 3020/3070 target level that I first mentioned over 18 months ago. Today I will be a small seller on any further rally to 2992/3002 with a 3015 stop. I will also raise my buy level to 2945/2955 with a 2936 stop.
EUR/USD
I am still flat the Euro and today I will now lower my buy level slightly to 1.1250/1.1290 with a 1.1215 stop. Despite the lower Euro I still do not want to be short the market at this time.
September Dollar Index
The Dollar just missed my buy level on Friday before rallying 60 points and I am still flat. Today I will raise my buy level to 95.20/95.60 with a 94.85 stop.
September DAX
This morning the DAX is trading 200 points higher at 12580 as the market finally breaks the key 12250/12400 resistance level that has held the DAX for most of the past two months. This area should now act as strong support on any sell-off and I will now raise my buy level to 12390/12460 with a 12335 stop.
September FTSE
This morning the Cash FTSE is trading close to all-time highs. However I would not chase this market higher as we are close to the top of the Daily Bollinger Band. The September FTSE has resistance from 7455/7495 and today I will be a seller on any rally to this area with a 7525 tight stop.
Dow Rolling Contract
Despite the fact that the S&P is making a new all-time high this morning the Dow is still trading 80 points below its October 26951 high. This is negative divergence. If we do not make a new high when the US Markets open this afternoon then we could see a quick reversal in the Dow. Helping the Dow over the past week was the fact that the Dow Jones Transportation Average ended June above it’s 200 Day Moving Average. This scenario has worried Dow Theorists who like to see both Dow Averages rising together. Last week’s upward spike in the ratio is an encouraging sign for both and should lead to higher prices in the short-term. This key development (despite the ongoing negative divergence) is one reason why I still do not want to be short the Dow at this time. Today I will move my buy level higher to 26510/26670 with a 26430 stop.
September NASDAQ
I am still flat the NASDAQ which is trading 150 points higher from where I marked prices last Friday. The market has strong resistance from 7870/7920 and today I will be a small seller in this area with a 7965 stop.
September BUND
I am still flat the Bund as the market just missed my 172.85 sell level on Friday with a 172.84 high print. Today I will raise my sell level to 172.95/173.25 with the same 173.55 stop.
Gold Rolling Contract
Gold got hammered on the re-open of the Futures Markets last night. As a result I bought Gold at the bottom of my buy range at 1385. I will now lower my stop on this position to 1372. I will look to T/P on this position at 1392 and if any of the above levels are hit I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Thankfully I lower my exit level on my 15.37 long position to 15.30 which was filled after lunch on Friday. This morning Silver is trading at 15.11 and today I will be a buyer on any further dip to 14.55/14.95 with a 14.20 stop.
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