Futures Rise Alongside Bonds and Oil Prices

US equities are set for a modestly higher open while global equities are mixed to start the new week. The focus for equity traders will be on a meeting between Trump and Xi that takes place later this week.
Bharat Gohri
Wall Street Bull

The US Futures are Pointing to a Slightly Higher Open on Monday

US equities rallied along with the global markets late last week when the Fed announced a dovish policy shift. This led to a rally in the S&P 500 to record highs. The index is facing some resistance from prior highs and has not made a sustained break as of yet. The last two times the index traded near this resistance area, it led to a notable correction. The first for about 20% while the second saw the index decline just over 7%.

The Fed’s monetary policy stance will tend to underpin US equities, however, market participants are still looking for a de-escalation in trade wars. Trump and Xi will be meeting at the G20 summit in Japan this week. Ahead of the meeting, the markets may fall in a bit of a lull as investors await the outcome.

US Treasuries rallied in early day trading with the 10-year yield creeping closer to 2%. The yield has declined for seven consecutive weeks as the markets outlook of the economy is much bleaker than US policymakers. At the time of writing, the 10-year yield was down one and a half percent.

After a sharp recovery last week, oil prices are off to a good start. Light crude oil futures caught a strong bid at the European open and are about half a percent higher on the day. The greenback edged lower in the first half of European trading. The trade-weighted dollar index (DXY) fell 1.5% last week on rate cut expectations and trades at a three-month low.

European Equities Pared Recent Gains Ahead of the US open

European equity indices were mostly lower at Midday with the German Dax posting the largest loss. The German index shed half a percent after the last IFO data showed business morale declining to a five-year low.

The IFO institute reported a decline in its business climate index to 97.4 in June from 97.9 in the prior month. It was the third consecutive month that the index declined, although analysts had been looking for a slightly larger drop. Manufacturing and services sectors are getting hit the hardest.

Asian Markets Extended a Bit Higher

Asian equities edged higher with the Nikkei 225 adding just over a tenth of a percent on Monday. The Japanese index has not been participating in the global rally as a result of last week’s Fed meeting and has mostly traded sideways for the past three weeks.

The Hang Seng index rose 4.55% last week and briefly rose to a fresh six week high today prior to settling near its opening price. New Zealand’s NZX 50 index broke to a fresh record high once again. The Reserve Bank of New Zealand is scheduled to meet later this week. While some analysts think that policymakers will cut rates yet again, the consensus is for the bank to stand pat.

The article was written by Bharat Gohri, Director of Sales and Retention at easyMarkets

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