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S&P Set For 53rd Record High After Powell Gives The Green Light To Buy

Courtesy of ZeroHedge View original post here.

After stocks closed on Friday at their 52nd record high of the year, when Powell's unexpecteldy dovish Jackson Hole sparked a meltup in risk assets and a meltdown in the dollar, on Monday all indications are that we will get the 53rd record high with 2021 set to have a record number of all time highs. At 7:30 a.m. ET, Dow e-minis were up 10 points, or 0.03%, S&P 500 e-minis were up 3.50 points, or 0.07%, and Nasdaq 100 e-minis were up 16.25 points, or 0.11%. Oil dropped then gain, the dollar rebounded from Friday's mauling and precious metals continued their ramp higher.

The S&P 500 closed at its 52nd all-time high of the year after Powell said the U.S. central bank could begin slowing asset purchases this year, but won’t be in a hurry to raise interest rates. Stocks globally traded higher on Monday amid continued optimism.

“The fact that the Fed did not give a definitive timetable for tapering on Friday gives stock and bond ‘bulls’ a needed boost of confidence,” Bankhaus Metzler analyst Sebastian Sachs wrote in a note. “As long as accommodative monetary policy remains in place, investors’ fear of missing out is greater than their fear of losing money.”

In the aftermath of Hurricane Ida, oil prices fluctuated and energy giants such as Chevron, Exxon and Halliburton rose between 0.3% and 0.8% after leading sectoral gains last week. Schlumberger and Occidental Petroleum, however, slipped between 0.1% and 0.3% on lost output in the Gulf. U.S.-listed shares of Chinese gaming firm NetEase Inc slumped 7.8% as Chinese regulators slashed the amount of time players under the age of 18 can spend on online games to an hour on Fridays, weekends and holidays. Shares of satellite transporter startup. Here are some of the biggest U.S. movers today:

  • Astra Space (ASTR) slumps 21% in premarket trading after the company’s rocket failed to reach orbit while carrying a test payload for the U.S. Space Force.
  • Globalstar (GSAT) soars 22% in premarket trading after AppleInsider cited a TF International Securities analyst as saying the iPhone 13 will be able to use satellite communications.
  • NetEase (NTES) drops 6.9% after China limited teenagers to three hours a week playing online games.
  • Support.com (SPRT), a little-known software company that’s attracted a following among day traders after it became the target of Wall Street short bets, rallies 35% in premarket trading, adding to a 199% rally last week.
  • Shares of U.S. insurance companies, energy firms, utilities and refiners may be active when trading starts Monday after Hurricane Ida slammed ashore, hitting the Louisiana coast with winds more powerful than Hurricane Katrina.

Investors had been waiting to see whether Powell  would give a clear indication of his views on timing of the central bank's tapering of asset purchases or hiking interest rates to start removing monetary stimulus. However, in his prepared remarks, he offered no indication on cutting asset purchases beyond saying it could be "this year", causing stocks to close at all time highs. And after Friday's Powell J-Hole speech turned out to be a nothingburger, now all eyes will be on the Labor Department's monthly jobs report, which could set the stage for the Fed's Sept. 21-22 policy meeting, when a majority now believe the Fed will announce a November taper.

"A strong payrolls print could instigate a debate for a September tapering start," Rodrigo Catril, senior FX strategist at NAB, said in a note.

Similar to the US, European stocks rose in a muted session where the UK was closed for holiday. Here are some of the biggest European movers today:

  • John Mattson gains as much as 13%, most since June 2019, after newspaper Dagens Industri recommends readers to buy the stock.
  • Atlantic Sapphire gains as much as 8.6% after the company said it has been able to source additional LOX deliveries, and said it has restarted feeding of fish across its fresh- and salt-water systems. By midday however, the shares had erased the gains, following rating downgrades by Kepler Cheuvreux, Arctic Securities and Pareto Securities. The stock plunged 31% last week.
  • Encavis shares decline as much as 4.7% after the German renewables firm announced on Saturday that it would convert EU149.5m worth of bonds to ordinary bearer shares early.
  • Green Landscaping falls as much as 7.5%. Analysts at Pareto say in note they were surprised by the margin decline in the Swedish company’s 2Q report, published Friday.
  • Collector shares decline 2.4% as the Swedish bank allegedly leaked personal customer data to Facebook in the first half of this year, Swedish Radio’s Ekot reports.
  • Gaming stocks including Evolution and Ubisoft fell after news that China’s regulators are setting a new set of tighter regulations over the country’s games industry, including limiting the number of hours that minors can play.

Asian stocks extended gains after their best weekly advance since early February as technology shares climbed and investors took comfort in Federal Reserve Chairman Jerome Powell’s remarks at an annual policy forum in Jackson Hole. The MSCI Asia Pacific Index climbed as much as 1% on Monday, adding to last week’s 3.3% gain. Alibaba Group Holding and Taiwan Semiconductor Manufacturing were among tech giants providing the biggest boosts to the gauge. Fortescue Metals Group and some industry peers rose after the world’s No. 4 iron-ore exporter said annual profit more than doubled to a historic high.

“The faux pre-taper tantrum, sell-offs across various asset classes have been unceremoniously reversed in their entirety,” Jeffrey Halley, senior market analyst for Asia Pacific at Oanda Asia Pacific Pte., wrote in a note. Yet, “Asian markets are still retaining Covid-19 nerves, and more importantly, China clampdown nerves, with each day delivering something new on that front.”

The regional equity benchmark staged a strong comeback last week, after two straight weeks of losses, backed by a rebound in Chinese technology stocks.  A rally in emerging-market equity benchmarks including Indonesia’s Jakarta composite and Thailand’s SET helped sustain the positive mood on Monday amid easing worries about the virus outbreak. Thailand reported 15,972 new Covid-19 infections, the lowest level since July 27.  Still, investors in Asia Pacific were looking to the U.S. central bank as much as activities in the region for guidance. “The most notable feature of the speech was that Chair Powell managed to delink tapering and liftoff by noting that the Fed has ‘articulated a different and substantially more stringent test’ for liftoff,” Nomura strategists including Chetan Seth wrote in a note. “This was possibly, in our view, the reason behind stronger U.S. stocks (particularly cyclicals) post Powell’s comments despite him confirming an inevitable tapering.” 

Japanese equities rose, following U.S. peers higher. Electronics makers and trading houses were the biggest boosts to the Topix, which advanced 1.1%, with all industry groups in the green. Tokyo Electron and Daikin were the largest contributors to a 0.5% gain in the Nikkei 225. Speaking at the Fed’s annual Jackson Hole policy forum on Friday, Powell said the Fed may begin slowing down asset purchases this year as the U.S. economy recovers from the pandemic, but it won’t be in a hurry.

Australian stocks edged higher, supported by mining shares. The S&P/ASX 200 index rose 0.2% to close at 7,504.50, led by the materials sector. Fortescue was among the top performers after its annual profit more than doubled on the back of surging iron ore prices. Altium was the worst performer after its earnings guidance missed expectations. In New Zealand, the S&P/NZX 50 index rose 0.9% to 13,180.58.

The absence of a timetable for tapering caused U.S. benchmark Treasuries and the dollar to slip, and both trends continued on Monday morning in Asia. The yield on benchmark 10-year Treasury notes was 1.3087% slightly richer on the day while spreads are steady and within a basis point of Friday close compared with its U.S. close of 1.312%, and the dollar index which measures the greenback against a basket of currencies was around a two week low. Treasury futures were steady toward top of Friday’s range, holding a narrow band with low volumes amid U.K. bank holiday. Upon cash reopen, yields sit slightly richer vs. last week’s close. Full slate of data this week is headed by Friday’s jobs report, while U.S. auctions are set to resume on Sept. 7.

In FX, the Bloomberg Dollar Spot Index was steady and the dollar was mixed against its Group-of-10 peers. Norway’s krone led gains even as oil prices reversed an earlier advance. The Swiss franc dropped after a leading indicator of economic growth fell to 113.5 in August, missing the lowest estimate in a survey by a margin. The Australian dollar retreated from a near two-week high as the nation posted record daily Covid cases.

Purchasing manager surveys for manufacturing and services are both due this week, with traders waiting to see whether a trend towards slowing growth will continue, a shift that has not been helped by recent localised movement restrictions to cope with an increase in cases of the Delta variant of the new coronavirus.

"We expect both the manufacturing and services PMIs to moderate in August, given the widespread Delta variant and strict lockdown," said Barclays analysts in a note. "With slowing growth momentum and dovish signals from the (People's Bank of China) meeting this week, we expect more easing, but still at a measured pace."

In commodities, oil was also in focus after energy firms suspended 1.74 million barrels per day of oil production in the U.S. Gulf of Mexico as Hurricane Ida slammed into the Louisiana coast as a Category 4 storm. U.S. crude rose 0.86% to $69.34 a barrel. Brent crude rose 1.25% to $73.38 per barrel. Gold was slightly higher, with the spot price gold was traded at $1,817.7863 per ounce, up 0.07%.

The next big event on traders' calendars is U.S. nonfarm payroll figures for August due to be published Friday, as Powell has suggested an improvement in the labour market is one major remining prerequisite for action.

Market Snapshot

  • S&P 500 futures little changed at 4,509.00
  • STOXX Europe 600 little changed at 472.76
  • MXAP up 1.0% to 199.31
  • MXAPJ up 0.9% to 655.12
  • Nikkei up 0.5% to 27,789.29
  • Topix up 1.1% to 1,950.14
  • Hang Seng Index up 0.5% to 25,539.54
  • Shanghai Composite up 0.2% to 3,528.15
  • Sensex up 1.0% to 56,698.74
  • Australia S&P/ASX 200 up 0.2% to 7,504.54
  • Kospi up 0.3% to 3,144.19
  • Brent Futures down 0.8% to $72.11/bbl
  • Gold spot down 0.1% to $1,815.31
  • U.S. Dollar Index little changed at 92.65
  • German 10Y yield little changed at 0.421%
  • Euro little changed at $1.1803

Top Overnight News from Bloomberg

  • Hurricane Ida pummeled New Orleans and the Louisiana coast overnight with lashing rain and ferocious gusts, leaving much of the region without electricity and bracing for widespread floods and devastation
  • The European Central Bank is in a different situation than the Federal Reserve, and “there is no urgency for us to decide at our September meeting next week,” Governing Council member Francois Villeroy de Galhausays in BFM TV interview
  • A third Covid vaccination shot appeared to significantly curb a delta-led surge in cases and prevent severe illness, according to a study in Israel, the first country to offer boosters to seniors
  • Base metals in Shanghai extended last week’s gains after comments from the Federal Reserve chair soothed concerns about an imminent tapering of stimulus in the U.S. Aluminum rallied to the highest close since 2006 amid intensified curbs in China that may crimp output
  • China Huarong Asset Management Co.’s long-delayed 2020 results showed a record loss, with leverage hitting 1,333 times and capital buffers far short of the regulatory minimum, emphasizing the difficult task ahead for the bad-debt manager that recently secured a government bailout

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks were mostly positive with the region mildly taking impetus from last Friday's gains on Wall St where the S&P 500 and Nasdaq extended on record highs as all focus centred on Fed Chair Powell's Jackson Hole speech. However, the gains across Asian bourses were only mild as participants in Asia also digested a slew of earnings and with US equity futures contained heading into month-end and this week’s risk events including Friday’s US jobs numbers. ASX 200 (+0.2%) was kept afloat by strength in mining names which benefitted from early advances in underlying commodity prices and with shares in Fortescue Metals boosted after it announced record profits and dividends, although the tailwinds for the index were offset by the losses in tech and the largest-weighted financials sector, as well as cautiousness from another record increase in daily COVID-19 cases impacting New South Wales. Nikkei 225 (+0.5%) traded with a slightly positive bias after better-than-expected Retail Sales data from Japan but with price action capped by an indecisive currency. Hang Seng (+0.5%) and Shanghai Comp. (+0.2) were choppy amid an overload of earnings releases including China’s largest banks ICBC and CCB which failed to benefit despite printing improved full year results, while regulatory concerns lingered with planning to propose new rules banning companies with large amounts of sensitive consumer data from undertaking US IPOs and after China began a two-month campaign to crack down on commercial platforms and social media accounts that post finance-related information deemed harmful to its economy. Finally, 10yr JGBs were higher as they tracked the continued upside in T-note futures which approached just shy of the 134.00 level in the aftermath of the dovishly-perceived commentary from Fed Chair Powell, while the BoJ were also present in the market today for just over JPY 1tln of JGBs mostly concentrated in 3yr-10yr maturities.

Top Asian News

  • China Limits Teenagers Online Game Play to 3 Hours Most Weeks
  • China Misses Target on BioNTech-Pfizer Shot, Raising Questions
  • Alibaba Fires 10 for Leaking Sexual Assault Accusations
  • Top China Diplomat Rips Blinken on Afghanistan, Virus Probe

European equities (Stoxx 600 +0.1%) are predominantly posting marginal gains in what has been a slow start to the week in the absence of UK participants. The Asia-Pac handover was mostly firmer with the region benefiting via some of the tailwinds from Wall Street on Friday which saw the S&P 500 and Nasdaq extend on record highs post-Powell. In China, bourses were able to overlook further crackdowns in the nation with regulators commencing a two-month campaign to pressure commercial platforms and social media accounts that post finance-related information deemed harmful to its economy. During early European hours, China unveiled new gaming restrictions for younger players and triggered some downside Ubisoft (-1.6%) shares alongside Activision Blizzard (-2% pre-market). Futures stateside are a touch firmer (ES Unch) with marginal outperformance in the RTY (+0.2%). Given the slew of Fed speak last week placing the emphasis on labour market conditions when assessing the tapering decision/timeline, it’s hard to see how much conviction markets will place into the equity space as markets await Friday’s NFP print. As it stands, the street looks for 728k nonfarm payrolls to be added to the US economy in August; that would be cooler than the previous three-month average pace (currently 832k/month), but above the six-month average pace (currently 681k/month). Back to Europe, sectors trade mostly firmer but with little in the way of breadth across the market. Chemicals, Technology and Retail outperform peers, whilst Insurance, Banks and Health Care lag. The latter saw some modest pressure at the open amid losses in Roche (-0.3%) after announcing it would voluntarily withdraw its US accelerated approval for Tecentriq. However, losses have been trimmed as the session progressed with individual movers in the region few and far between.

Top European News

  • Scholz Steals From Merkel’s Playbook to Shake Up German Election; German SPD’s Scholz Wins Election Debate in Blow to Merkel Heir; Scholz’s Chances of Succeeding Merkel Rise to 51%: Bookmakers
  • ECB’s Villeroy Hints at Looming Slowdown in Pandemic Bond-Buying
  • UBS Chairman Calls on Europe to Create Green Capital Market

In FX, the non-US Dollars initially experienced some mild underperformance, albeit antipodeans have since clambered off lows, and the Loonie has gained some composure after the APAC session. The Aussie and Kiwi are subdued as their domestic COVID situations remain dire, with the former reporting record cases and the latter extending its Auckland lockdown. AUD/USD trades on either side of its 21 DMA, which overlaps with the 0.7300 psychological mark. NZD/USD found support at its 50 DMA (0.6984) and probes 0.7000 at the time of writing. CAD sees mild gains despite unfavourable crude prices, with USD/CAD finding support around Friday’s 1.2600 low ahead of its 21 DMA at 1.2595, and the 200 and 100 DMAs further below around 1.2539, and 1.2525 respectively.

  • DXY, EUR, GBP – The Dollar index has nursed its overnight losses but remains within a tight 92.595-724 intraday band thus far. Fresh fundamentals have remained light post-Powell, although month-end flows could dictate in the absence of concrete catalysts and heading into Friday’s jobs report. From a technical perspective, the DXY is sandwiched between its 50 DMA (92.548) and 21 DMA (92.805). Looking ahead, the State-side docket remains light. Meanwhile, the EUR and GBP have remained quiet since the resumption of trade with little to report from a performance standpoint. Although, in the run-up to the German elections later this month – the SPD continues to make further gains in the latest polling data, with Scholz coming out on top in the latest debate. Desks also highlight the numerous coalition configurations possible from the rise of the SPD and the fall of the CDU/CSU. However, coalition negotiations will likely be prolonged, and Chancellor Merkel will still hold her spot until a coalition is made. EUR/USD eased off its 50 DMA (1.1811) after an overnight test of the level and resides on either side of 1.1800 at the time of writing (vs 1.1792 at worst). GBP/USD remains flat on the day in a narrow 1.3752-75 range – with UK participants observing Bank Holiday.
  • CHF, JPY – The traditional safe havens vary with USD/JPY caged but still north of its 100 DMA (109.65) and sub-110.00. Meanwhile, the CHF experiences some weakness despite a lack of fresh catalysts, and as the weekly Swiss Sight Deposits printed yet another uptick. EUR/CHF has mounted its 21 DMA (1.0758) and looks for resistance at Friday’s 1.0797 high ahead of the round number.
  • NOK, SEK – The Scandis see a divergence as with the NOK the clear G10 outperformer – despite tailwinds from oil. Fundamental catalysts for the NOK remain light, but there could be technical factors at play. EUR/NOK declined from its 10.3000 high, and losses were exacerbated after a dip below the 100 DMA (10.2786) to a low sub-1.2500 ahead of its 100 DMA at 10.2259. The SEK is weighed on by the NOK/SEK cross reclaiming 0.99-status and climbing above 100 DMA (0.9921) on its way to parity.

In commodities, WTI and Brent front month futures are softer on the day following the aftermath of the landfall of Hurricane Ida, which hit as a Category 4 in Louisiana, although has since weakened to a Tropical Storm and is poised to devolve into a Tropical Depression later this evening. In terms of price action, futures popped higher at the re-open of electronic trade as some 95% of GoM production was shuttered, but prices have since waned. The contracts also experienced somewhat of divergence since the APAC session, and despite overall global supply being hit, the pause in economic activity in the region alongside the inactivity of Gulf of Mexico refiners has weighed on the demand for US crude. Moving on, OPEC+ will be the next major catalyst for crude markets as participants tackle the demand dent from Delta alongside US pressure to ramp up output. Further, the impact from Hurricane Ida provides OPEC+ with more room for manoeuvre, at least in September. Subsequently, sources suggested that producers are likely to maintain the current plan to increase output by 400k BPD, although the Kuwaiti oil minister floated the idea of deferring the planned hike – no discussions have yet taken place – further source reports are expected to drip down in the run-up to the main event. WTI Oct resides just north of USD 68/bbl (vs high USD 69.64/bbl) while its Brent counterpart meanders around of USD 72.50/bbl (vs high 73.69/bbl). Elsewhere, spot gold and silver trade flat around USD 1,815/oz and USD 24/oz as catalysts remain light and risk evens loom as the week goes on. As a reminder, LME markets are closed today due to the UK bank holiday. Meanwhile, Chinese steel rebar and hot-rolled coils rose overnight with traders citing a decline in inventory and a pickup in downstream demand.

US Event Calendar

  • 10am: July Pending Home Sales YoY, est. -8.5%, prior -3.3%
  • 10am: July Pending Home Sales (MoM), est. 0.3%, prior -1.9%
  • 10:30am: Aug. Dallas Fed Manf. Activity, est. 23.0, prior 27.3

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