Pre-Market Analysis and Chartbook: Stocks Resume Slide as Yields Rise Again

Wednesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,879 -0.29%
DAX 30 11,858 -0.99%
WTI Crude Oil 74,56 -0.16%
GOLD 1,191 -0.18%
Bitcoin 6,514 -1.16%
EUR/USD 1.1519 0.25%

Risk of sentiment continues to dominate financial markets, with all eyes still on Treasuries, China, and emerging markets. Although the swift rise in US yields paused before the week’s most important, inflation-related economic releases, helping yesterday’s bounce in risk assets, rates are still near their multi-year highs.

The most yield-sensitive assets, such as emerging markets, small-caps, high-yield bonds, and housing-related stocks already under pressure, and the broader US market is just starting to feel the pain, so barring a meaningful slowdown in the US economy, rates should be still be closely monitored by investors.

Nikkei 225 Futures, 4-Hour Chart Analysis

The main Asian markets were stable after the bearish start to the week, and both the Nikkei and the Shanghai Composite finished the session flat following a hectic US trading day. While the main Chinese onshore benchmark is trading close to its bear market lows, the Nikkei has been relatively strong in recent weeks thanks to the decline in the value of the Yen.

Now the Japanese Index dipped back below its January high, while also breaking the rising short-term trendline. That said, the benchmark is still looking good in an international comparison and it found support yesterday, possibly setting up a rally attempt in the coming days.

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

The major European indices are still severely lagging their US peers and despite yesterday’s undercut low, they are still trading near their August and September lows, with the declining trends clearly being intact.

With the more important lows set back during the spring also being in danger, a key long-term breakdown could be ahead for European equities, especially given the weakness in emerging markets, which have been leading the way lower in recent months.

Dollar and Pound in Focus Amid Data Dump

Dow 30 Futures, 4-Hour Chart Analysis

The most-watched US benchmarks are all set to open in the red too, and the most volatile Nasdaq is once again sporting the largest losses following yesterday’s bounce. The Dow, which has been the strongest index in recent weeks is on the verge of testing the lower boundary of its rising trend channel that’s still intact despite the broad correction on Wall Street.

The US-Canadian-Mexican trade deal is still helping the industrial benchmark, although the market is much more focused on yields, which will likely get volatile again in the second half of the week. The PPI index came in as expected at 0.2% for the month of September, and although under-the-the hood, the report is far from being disastrous form an inflationary standpoint, Treasuries fell to session lows after the release with the Dollar dipping lslighty lower.

EUR/GBP, 4-Hour Chart Analysis

The Pound, which has been relatively strong recently showed considerable resilience today amid a string of negative economic releases from the UK. The British GDP and Manufacturing PMI all came in worse than expected, while the Goods Trade Balance was also a tad wider than expected.

Not everything was gloomy, with industrial production beating the consensus estimate and with all measures revised upwards for the previous month. The EUR/GBP pair, which is deeply oversold from a technical perspective, stayed near its multi-month lows, with the two European currencies both suffering from the Brexit-worries and the Italian crisis.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.