After 6 consecutive declines in the Dow Jones, the longest stretch since March 2017, and erasing all of 2018’s gains, the cash index is finally set for a rebound, trading some 130 points higher in the premarket, as trade war panic fades for now (even if the list of what can go wrong next is long). As a result, the market snapshot this morning is a sea of green...
... with S&P futures trading near session highs.
More Dow strength was assured after yesterday's decision to replace Dow Jones stalwart General Electric with Walgreens, even if the expulsion of the "last true industrial" stock was not that surprising in light of its collapsing performance...
... and 51% drop in EPS over the past year.
Source: @Schuldensuehner
With lack of new trade war rumblings, traders were quick to add to risk around the globe, and European stocks also rose adding to momentum from Asia, as the panic surrounding a potential global trade war showed signs of easing. The European rally was broad-based with every sector advancing in the Stoxx Europe 600 Index, which jumped following three days of losses.
Earlier in Asia, shares in Japan and China both reversed declines, even though the Shanghai Composite Index was unable to rebound above the 3,000 level it fell through on Tuesday. The Shanghai Composite gained 0.5%, the most since June 12, after falling as much as 1.2% in morning; Shenzhen Composite Index likewise advanced 1.4% higher, while Hong Kong’s Hang Seng Index added 1.4%, and the Hang Seng China Enterprises Index +0.9%. Consumer staples and health-care stocks lead gains in both markets; firms’ reliance on domestic market makes them largely immune to a China-U.S. trade war.
China's 10-year treasury futures dived near 0.5%, the biggest drop this month, due to profit-taking amid improving risk sentiment. It surged 0.4% on Tuesday as China’s stock market crashed.
Source: @YuanTalks
There were some fireworks in FX trading, where the euro whipsawed as the market’s knee-jerk reaction to comments by ECB policymakers came amid otherwise muted flows. Ahead of the ECB's Sintra conference conclusion later today, the EUR briefly erased an early loss after Bank of France Governor Francois Villeroy de Galhau said in a letter released Wednesday that the first ECB interest-rate rise “could come as of the summer of 2019.” Villeroy later specified that his comments were in line with the Governing Council’s rate guidance issued after its June 14 meeting.
The Euro then sharply tumbled to a 1.1537 day low after Governing Council member Ewald Nowotny highlighted that monetary policy divergence is helping to weaken the currency against the dollar, and that the ECB's slow policy normalization is fueling the common currency’s weakness against the dollar, suggesting that it was the ECB's purpose to weaken the EUR. This is what Nowotny said:
"What we also...