U.S. equity futures pointed to a firmer open as Netflix becomes the first large technology company to report results after today’s close, while Goldman and Morgan Stanley wrap up earnings for the big banks.
In Asia, Japan’s equities outperformed, with Hong Kong and Chinese shares retreating again.
"A key concern has been the combined sell-off in equities and bonds, which has weighed on multi-asset portfolios, similar to February," Goldman strategists wrote in a late Monday note. “At one point the initial sell-off in equities and bonds led to one of the worst periods for simple risk parity strategies since the GFC (Great Financial Crisis). Also the shift in momentum that occurred on Wednesday last week was the largest daily shift in U.S. equity momentum since 2011 by some measures.”
The timid bounce we experienced yesterday which faded all gains into the close has failed to convince traders that markets are ready to break out of the 2750-2800 "gamma gravitation" for the S&P. Volumes were low with the market needing more conviction and traction to take out important resistance levels. Additionally, credit markets have shown little signs of reassurance so far, with Europe's Itraxx Europe still trading near the highs of the past three days.
The yen declined, while the dollar edged up from close to a two-week low ahead of a U.S. Treasury currency-manipulation report expected this week.
The Stoxx Europe 600 Index rallied, and pulled away from Monday’s 22-month lows led by Italian shares which rallied after the government reached an agreement on a budget accord, even though EU President Jean-Claude Juncker said the Eurozone would revolt if the EU gives an OK to Italy's budget. Gains in Italy’s bond and stock markets after Italian Economy Minister Giovanni Tria defended the country’s expansionary budget helped lift sentiment. The euro also firmed. Stock market sentiment in Europe also got a boost from expectations that earnings season will deliver double-digit earnings growth for the third quarter.
“If you look at what’s happening here and now, it is an improvement from what was happening a week ago,” Alexandrovich said. “How long the stability lasts is anyone’s guess.”
Overall sentiment in Europe remains downbeat, however, with 42% of the Stoxx Europe 600 members in oversold territory, while more than a third have been oversold for three days, which Bloomberg notes should have triggered a stronger bounce...
- Source, Zero Hedge, read more here
