Stocks advanced as a broad easing of risks across the globe gave investors a reprieve. The US Dollar fell the most since June, while Treasuries were mixed. The S&P 500 rebounded from Tuesday’s losses along with European and Asian shares as political tensions appeared to subside in Hong Kong, Italy and the U.K., while indicators in China and Europe hinted global economic growth may not be as bad as some expected. Technology shares, which led yesterday’s decline that was the first in four sessions, paced the advance. The 10-year Treasury yield traded around 1.45%, while the US Dollar gained versus the yen. Equities in Hong Kong rose the most since 2018 after embattled leader Carrie Lam said she formally withdrew legislation to allow extraditions to China, the detonator for three months of often-violent protests. In the U.K., the Pound held gains after a law that would block a no-deal Brexit passed a key Vote in Parliament. The Euro advanced after Purchasing Managers Indexes for the region beat expectations, while the onshore Chinese Yuan gained following another stronger-than-forecast currency fixing. Meanwhile, British Prime Minister Boris Johnson’s premiership was thrown into crisis after Parliament dealt a triple blow to his radical plan for breaking away from the European Union whatever the cost. In a dramatic series of votes on Wednesday, members of Parliament moved to stop Johnson forcing the U.K. out of the bloc without a deal next month, effectively wrecking his mission to deliver Brexit by Oct. 31. When he responded with a desperate appeal for a snap general election, Parliament rejected that, too. It was the third major defeat for Britain’s new leader in 24 hours. The Pound rose more than 1% during the day as the prospects of a damaging no-deal Brexit receded.
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Traders are rushing back into riskier assets as event risks seem to be receding, from a possible Chinese crackdown in Hong Kong to confrontations between the European Union and two of its biggest members. At the same time, investors remain on the alert for any news on China-U.S. trade talks. And remaining in the background is the upcoming Federal Reserve meeting, and the speculation surrounding how much the Central Bank may cut this year to stave off a potential economic slowdown.
The S&P 500 Index rose 1.1% to close at 2938 and the Futures are now trading a further 1% higher this morning.
The Nasdaq Composite Index gained 1.3%.
The Stoxx Europe 600 Index advanced 0.9%
The U.K.’s FTSE 100 Index climbed 0.6%.
The MSCI Emerging Market Index jumped 1.8%
The Nikkei has just closed with an impressive gain of 2.12%, closing at 21085.
Here is a summary of the main changes in F.X Markets:
The Bloomberg Dollar Spot Index sank 0.6%, the biggest slide since June 20.
The Euro gained 0.5% to $1.1031.
The British Pound increased 1.2% to $1.2222.
The Japanese Yen weakened 0.4% to 106.36 per dollar.
Finally, the Canadian Dollar rose after the Bank of Canada left interest rates unchanged.
The yield on 10-year Treasuries was steady at 1.45%.
The yield on two-year Treasuries fell two basis points to 1.43%.
In Europe on the back of the worsening political situation, Britain’s 10-year yield jumped eight basis points to 0.493%.
Finally, on the back of the ‘’risk on’’ Germany’s 10-year yield climbed three basis points to -0.67%.
In the U.S., with Florida orange groves seemingly escaping major damage from Hurricane Dorian, concern now turns to soy, corn and cotton fields as well as livestock in Georgia and the Carolinas as the storm churns northward.
West Texas Intermediate crude advanced 4.4% to $56.31 a barrel.
Gold rose 0.5% to $1,564.10 an ounce, However on the back of the calmer equity markets Gold is trading 0.5% lower at $1548 as I go to press.
This morning on the Economic Front we already had the release of German Factory Orders which came in much weaker than the -1.4% expected with a fall of 2.7%. At 1.15 pm we have U.S. ADP Employment Change. This is followed at 1.30 pm by Weekly Jobless Claims, Nonfarm Productivity and Unit Labour Costs. Next, we have Markit Composite/Services PMI at 2.45 pm. Finally at 3.00 pm we have Factory Orders and ISM Non-Manufacturing PMI.
September S&P 500
The S&P is following my roadmap perfectly so far for September with the market hitting a high of 2970 overnight before slipping back to trade at 2952 as I go to press. Unfortunately the S&P just missed my 2913 buy level yesterday afternoon before resuming its upward march to possible new all-time highs over the coming two weeks before running into more sustained selling. The spike higher in the S&P if sustained will see the market recover the 2949/2953 remaining ‘’Open Gap’’ from the close on August 1. Crucially the market is now trading above it’s 50 Day Moving Average which comes in at 2944 this morning. With the Non-Farm Payrolls due tomorrow I would expect the S&P to stay firm ahead of this key release. As a result I will now raise my buy level to 2933/2943 with a 2925 tight stop. I still do not want to be short the S&P at this time.
Last Friday the Daily Sentiment Index for the Euro closed at just 9% bulls so it is little wonder that the Euro which bottomed at 1.0926 on Monday rallied over 100 points since this low. Yesterday’s move higher saw the Euro hit my 1.1010 T/P level on my average 1.0975 long position and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.0930/1.0970 with a 1.0890 stop.
December Dollar Index
Monday’s 99.00 high saw the DSI for Dollar hit 93% bulls before the market sold off over the past 48 hours and is now trading at a price of 98.05. I am still flat and today I will again lower my sell level to 98.55/98.95 with a 99.30 stop.
I have had the correct bullish view for the DAX but unfortunately the market has not given me a chance to get a long position on board and I am now flat. This morning the DAX is now trading just above the key 12000/12100 resistance area at 12120. If the DAX can push on from here and close higher then despite the vicious August we could well see an acceleration to the topside. This bullish scenario comes against a very weak economic backdrop, but as I said yesterday a market that does not fall on bad news has to be ‘’Respected’’. Today I will move my buy level higher to 11920/11990 with a 11850 stop.
No Change as I am still a seller on any rally higher to 7360/7400 with the same 7445 stop.
Dow Rolling Contract
The Dow traded to an overnight high of 26676 before having a small sell-off to currently trade at 26520 as I go to press. The 50 Day Moving Average which has held the Dow for most of the past six weeks comes in a 26558 this morning. On top of this the Dow has an ‘’Open Gap’’ from August 1 at 26583. This is a key session for the Dow because if the market can close above 26600 this evening then there is every chance we could see a move to new highs over the next couple of weeks. Thankfully we have had no sell levels in this market this week as yet again the ‘’buy the dip’’ wins. Today I will raise my buy level to 26230/26380 with a 26150 tight stop.
I am still flat the NASDAQ as yet again the market just missed my buy level before trading higher. The NASDAQ has strong resistance from 7840/7890 and I will be a small seller in this area with a 7935 stop.
I am still flat the Bund which never came close to my sell level as the market sold off on the back of the higher equity markets. Ahead of the NFP tomorrow I am reluctant to chase this market lower and today I will leave my 176.40/176.80 sell level unchanged with the same 177.20 stop.
Gold Rolling Contract
The further rally in Gold over the past few days sees the Managed Money Accounts with a net-long 287,851 Gold Futures Contracts which is a new record. The DSI remains high with a reading of 91% bulls. I know the DSI has not worked for the precious metals so far but eventually this market will roll-over in my opinion. Today I will leave my 1495/1505 buy level unchanged with the same 1487 stop.
Silver Rolling Contract
Yesterday the DSI for Silver jumped to 95% bulls which is the highest reading since the 97% reading on July 4, 2016 when Silver hit a then high of $21.17 before falling over 25%. Tuesday’s 4.3% one-day advance in spot prices was the largest since July 1, 2016 (5.6%), days prior to the July 4, 2016 top. I am still flat Silver and today I will be a small seller on any further rally to 19.90/20.30 with a tight 20.55 stop. I will still be a buyer on any dip lower to 18.60/19.00 with a 18.35 tight stop.