After stocks closed on Friday at their 52nd record high of the year, when Powell's unexpecteldy dovish Jackson Hole sparked a meltup in risk assets and a meltdown in the dollar, on Monday all indications are that we will get the 53rd record high with 2021 set to have a record number of all time highs. At 7:30 a.m. ET, Dow e-minis were up 10 points, or 0.03%, S&P 500 e-minis were up 3.50 points, or 0.07%, and Nasdaq 100 e-minis were up 16.25 points, or 0.11%. Oil dropped then gain, the dollar rebounded from Friday's mauling and precious metals continued their ramp higher.
The S&P 500 closed at its 52nd all-time high of the year after Powell said the U.S. central bank could begin slowing asset purchases this year, but won’t be in a hurry to raise interest rates. Stocks globally traded higher on Monday amid continued optimism.
“The fact that the Fed did not give a definitive timetable for tapering on Friday gives stock and bond ‘bulls’ a needed boost of confidence,” Bankhaus Metzler analyst Sebastian Sachs wrote in a note. “As long as accommodative monetary policy remains in place, investors’ fear of missing out is greater than their fear of losing money.”
In the aftermath of Hurricane Ida, oil prices fluctuated and energy giants such as Chevron, Exxon and Halliburton rose between 0.3% and 0.8% after leading sectoral gains last week. Schlumberger and Occidental Petroleum, however, slipped between 0.1% and 0.3% on lost output in the Gulf. U.S.-listed shares of Chinese gaming firm NetEase Inc slumped 7.8% as Chinese regulators slashed the amount of time players under the age of 18 can spend on online games to an hour on Fridays, weekends and holidays. Shares of satellite transporter startup. Here are some of the biggest U.S. movers today:
- Astra Space (ASTR) slumps 21% in premarket trading after the company’s rocket failed to reach orbit while carrying a test payload for the U.S. Space Force.
- Globalstar (GSAT) soars 22% in premarket trading after AppleInsider cited a TF International Securities analyst as saying the iPhone 13 will be able to use satellite communications.
- NetEase (NTES) drops 6.9% after China limited teenagers to three hours a week playing online games.
- Support.com (SPRT), a little-known software company that’s attracted a following among day traders after it became the target of Wall Street short bets, rallies 35% in premarket trading, adding to a 199% rally last week.
- Shares of U.S. insurance companies, energy firms, utilities and refiners may be active when trading starts Monday after Hurricane Ida slammed ashore, hitting the Louisiana coast with winds more powerful than Hurricane Katrina.
Investors had been waiting to see whether Powell would give a clear indication of his views on timing of the central bank's tapering of asset purchases or hiking interest rates to start removing monetary stimulus. However, in his prepared remarks, he offered no indication on cutting asset purchases beyond saying it could be "this year", causing stocks to close at all time highs. And after Friday's Powell J-Hole speech turned out to be a nothing burger, now all eyes will be on the Labor Department's monthly jobs report, which could set the stage for the Fed's Sept. 21-22 policy meeting, when a majority now believe the Fed will announce a November taper.
"A strong payrolls print could instigate a debate for a September tapering start," Rodrigo Catril, senior FX strategist at NAB, said in a note.
Similar to the US, European stocks rose in a muted session where the UK was closed for holiday. Here are some of the biggest European movers today:
- John Mattson gains as much as 13%, most since June 2019, after newspaper Dagens Industri recommends readers to buy the stock.
- Atlantic Sapphire gains as much as 8.6% after the company said it has been able to source additional LOX deliveries, and said it has restarted feeding of fish across its fresh- and salt-water systems. By midday however, the shares had erased the gains, following rating downgrades by Kepler Cheuvreux, Arctic Securities and Pareto Securities. The stock plunged 31% last week.
- Encavis shares decline as much as 4.7% after the German renewables firm announced on Saturday that it would convert EU149.5m worth of bonds to ordinary bearer shares early.
- Green Landscaping falls as much as 7.5%. Analysts at Pareto say in note they were surprised by the margin decline in the Swedish company’s 2Q report, published Friday.
- Collector shares decline 2.4% as the Swedish bank allegedly leaked personal customer data to Facebook in the first half of this year, Swedish Radio’s Ekot reports.
- Gaming stocks including Evolution and Ubisoft fell after news that China’s regulators are setting a new set of tighter regulations over the country’s games industry, including limiting the number of hours that minors can play.
Asian stocks extended gains after their best weekly advance since early February as technology shares climbed and investors took comfort in Federal Reserve Chairman Jerome Powell’s remarks at an annual policy forum in Jackson Hole. The MSCI Asia Pacific Index climbed as much as 1% on Monday, adding to last week’s 3.3% gain. Alibaba Group Holding and Taiwan Semiconductor Manufacturing were among tech giants providing the biggest boosts to the gauge. Fortescue Metals Group and some industry peers rose after the world’s No. 4 iron-ore exporter said annual profit more than doubled to a historic high.
“The faux pre-taper tantrum, sell-offs across various asset classes have been unceremoniously reversed in their entirety,” Jeffrey Halley, senior market analyst for Asia Pacific at Oanda Asia Pacific Pte., wrote in a note. Yet, “Asian markets are still retaining COVID-19 nerves, and more importantly, China clampdown nerves, with each day delivering something new on that front.”
The regional equity benchmark staged a strong comeback last week, after two straight weeks of losses, backed by a rebound in Chinese technology stocks. A rally in emerging-market equity benchmarks including Indonesia’s Jakarta composite and Thailand’s SET helped sustain the positive mood on Monday amid easing worries about the virus outbreak. Thailand reported 15,972 new COVID-19 infections, the lowest level since July 27. Still, investors in Asia Pacific were looking to the U.S. central bank as much as activities in the region for guidance. “The most notable feature of the speech was that Chair Powell managed to delink tapering and liftoff by noting that the Fed has ‘articulated a different and substantially more stringent test’ for liftoff,” Nomura strategists including Chetan Seth wrote in a note. “This was possibly, in our view, the reason behind stronger U.S. stocks (particularly cyclicals) post Powell’s comments despite him confirming an inevitable tapering.”
Japanese equities rose, following U.S. peers higher. Electronics makers and trading houses were the biggest boosts to the Topix, which advanced 1.1%, with all industry groups in the green. Tokyo Electron and Daikin were the largest contributors to a 0.5% gain in the Nikkei 225. Speaking at the Fed’s annual Jackson Hole policy forum on Friday, Powell said the Fed may begin slowing down asset purchases this year as the U.S. economy recovers from the pandemic, but it won’t be in a hurry.
Australian stocks edged higher, supported by mining shares. The S&P/ASX 200 index rose 0.2% to close at 7,504.50, led by the materials sector. Fortescue was among the top performers after its annual profit more than doubled on the back of surging iron ore prices. Altium was the worst performer after its earnings guidance missed expectations. In New Zealand, the S&P/NZX 50 index rose 0.9% to 13,180.58.
The absence of a timetable for tapering caused U.S. benchmark Treasuries and the dollar to slip, and both trends continued on Monday morning in Asia. The yield on benchmark 10-year Treasury notes was 1.3087% slightly richer on the day while spreads are steady and within a basis point of Friday close compared with its U.S. close of 1.312%, and the dollar index which measures the greenback against a basket of currencies was around a two week low. Treasury futures were steady toward top of Friday’s range, holding a narrow band with low volumes amid U.K. bank holiday. Upon cash reopen, yields sit slightly richer vs. last week’s close. Full slate of data this week is headed by Friday’s jobs report, while U.S. auctions are set to resume on Sept. 7.
In FX, the Bloomberg Dollar Spot Index was steady and the dollar was mixed against its Group-of-10 peers. Norway’s krone led gains even as oil prices reversed an earlier advance. The Swiss franc dropped after a leading indicator of economic growth fell to 113.5 in August, missing the lowest estimate in a survey by a margin. The Australian dollar retreated from a near two-week high as the nation posted record daily COVID cases.
Purchasing manager surveys for manufacturing and services are both due this week, with traders waiting to see whether a trend towards slowing growth will continue, a shift that has not been helped by recent localized movement restrictions to cope with an increase in cases of the Delta variant of the new coronavirus.
"We expect both the manufacturing and services PMIs to moderate in August, given the widespread Delta variant and strict lockdown," said Barclays analysts in a note. "With slowing growth momentum and dovish signals from the (People's Bank of China) meeting this week, we expect more easing, but still at a measured pace."
In commodities, oil was also in focus after energy firms suspended 1.74 million barrels per day of oil production in the U.S. Gulf of Mexico as Hurricane Ida slammed into the Louisiana coast as a Category 4 storm. U.S. crude rose 0.86% to $69.34 a barrel. Brent crude rose 1.25% to $73.38 per barrel. Gold was slightly higher, with the spot price gold was traded at $1,817.7863 per ounce, up 0.07%.
The next big event on traders' calendars is U.S. nonfarm payroll figures for August due to be published Friday, as Powell has suggested an improvement in the labor market is one major remining prerequisite for action.
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