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U.S. Opening Bell: Stocks Waver As Volatile Month Winds Down; U.S. Dollar Slips

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January’s worst sector performer, technology, recovers
But markets still set for a dismal monthly performance
Bitcoin slides again

Key Events

US futures on the Dow Jones, S&P 500, NASDAQ and Russell 2000 were mixed ahead of Monday’s open on Wall Street. European shares were trading in the green as markets recovered slightly from the steepest selloff this past month since the March 2020 bottom. However, despite the modest rally markets are still heading for their worst January since 2016. 

Oil continues to move higher

Global Financial Affairs

The technology sector, which was the biggest loser during the global selloff in January is leading this rally. 

In Europe, the STOXX 600 Index is advancing for the fourth out of five days.

Among the significant European gauges, Italy’s FTSE MIB was up 0.8%, having pared a 1.6% rally, after the country avoided political turmoil by re-electing outgoing President Mattarella. Local investors bid up risk assets, with Financials leading the gains, as the country’s borrowing costs fell.

Former ECB boss, Mario Draghi—who is considered to be a driver of structural reforms in government administration, the judiciary and the tax system—has remained as Italy’s Prime Minister. 

In Asia, markets in China, Hong Kong, and South Korea are all closed for holidays. But regional benchmarks picked up where Wall Street left off last Friday, advancing with technology stocks. Australia’s ASX 200 was the only Asia/Pacific market trading in the red, less than 0.25% deep. Banks, miners and financials—sensitive to the economic cycle— offset gains in the tech sector ahead of a central bank policy meeting.

Still, JP Morgan considers the recent Australian selloff, after the Fed’s hawkish shift that spooked traders and sent the benchmark down just under 9.9% to the brink of correction territory, a buying opportunity.

ASX 200 Daily

The Aussie index topped out, but it also achieved its implied target. So, we’re not averse to JP Morgan’s forecast, as we’ll monitor whether peaks and troughs will be rising or falling.

Yields on US 10-year Treasuries declined but found support by a previous peak.

10-year Treasuries Daily

Rates are trading within a small symmetrical triangle after completing either an H&S continuation pattern or a sizeable symmetrical triangle. The difference is academic, as both point to higher rise which the market is clearly expecting. Higher yields support the view for more interest rate hikes—possibly as many as five this year—which would make stocks more expensive and means Treasuries provide a safer, more attractive investment avenue than equities for some investors.

The dollar retreated from its June highs.

Dollar Index Daily

Technically, the greenback found resistance by the top of its rising channel, which could push it down to its bottom, probably around 96.50

The weaker dollar boosted gold, but the commodity also had another ally, albeit one that’s technical.

Gold Daily

The yellow metal found support by the bottom of a triangle.

Bitcoin declined for the second day, testing the bottom of a rising flag, bearish after the preceding sharp drop that followed a previous bearish flag, itself the breakout of a large H&S top.

Bitcoin Daily

If the implied target of that top is realised, it will mean that a much larger double top will be completed. That target means the cryptocurrency is returning to its lowest level in years. After years of outperformance the cryptocurrency seems to have fallen out of favour.  

Oil rose, extending the month’s sharp advance, with big banks and oil companies talking up to a price target of $100 as traders remain concerned about Ukraine ahead of this week’s OPEC meeting.

Oil Daily

We want to warn that the price has been unable to break the resistance of the Island Reversal over the past two weeks, which was formed at the top of a pattern that could prove bearish. A healthy uptrend is enabled by bulls remaining happy, with both lows and highs rising equally. However, we can see that the price has been falling drastically despite the peaks’ strides.

Up Ahead

On Tuesday, the ISM Manufacturing PMI is published.
Earnings season continues with Advanced Micro Devices (NASDAQ:AMD) due to report on Tuesday.
US JOLTs job openings are reported on Tuesday. 

Market Moves

Stocks

The FTSE 100 was little changed
The STOXX 600 rose 1.1%
Futures on the S&P 500 rose 0.2%
Futures on the NASDAQ 100 rose 0.6%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.7%
The MSCI Emerging Markets Index rose 1%

Currencies

The British pound rose 0.25% to $1.3437
The Dollar Index fell 0.2%
The euro rose 0.2% to $1.1170
The Japanese yen rose 0.2% to 115.46 per dollar
The offshore yuan rose 0.2% to 6.3791 per dollar

Bonds

Britain’s 10-year rose 2% to 1.27%
The yield on 10-year Treasuries advanced one basis point to 1.78%
Germany’s 10-year yield jumped to -0.0115%

Commodities

WTI crude rose 0.53% to $87.28 a barrel
Brent crude rose 1.1% to $91.03 a barrel
Spot gold advanced 0.17% to $1,788

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