Morning Notes

08/02/2018 Argonaut Morning Note

Market Update & Important Indicators
U.S. stocks continued to swing Wednesday, extending one of their most volatile weeks in years as investors wonder how higher interest rates might affect the nearly nine-year old bull market. A recent rise in bond yields has stoked fears that a pickup in inflation globally could lead central banks to tighten monetary policy more quickly than expected, making stocks less attractive as interest rates rise. Those concerns contributed to the first round of stock selling Friday that preceded the Dow industrials' biggest one-session point decline on record Monday and an uneven session with 29 changes of direction Tuesday. The Dow Jones Industrial Average fell just 19 points, or 0.1%, after earlier rising as much as 381 points. The S&P 500 lost 0.5%, and the Nasdaq Composite fell 0.5%. The yield on the benchmark 10-year U.S. Treasury note rose to 2.832%, according to Tradeweb, from 2.766% Tuesday. Yields rise as bond prices fall and were back near their four-year high hit last Friday. Some traders have said investors are adjusting to a new market backdrop following a historically calm period in the stock market and one of the best-ever starts to a year for global indexes. They added that returns might not reach the lofty levels of recent years but are still positive early in February. The Dow industrials are still up about 1% on the year, though down more than 5% from its Jan. 26 record. The U.S. gold price traded lower overnight, losing 0.4% to finish at 1,318.10 US$/oz.

European shares closed higher as investors hunt for bargains after the global stock sell-off and short-sellers cover their positions. The Stoxx Europe 600 closed up 2%, or 7.34 points at 380.13 while France's CAC-40 rose 1.8% and Germany's DAX gained 1.6%. London’s FTSE gained 1.9% to 7,279.

A strong early performance in Asian equities failed to last Wednesday, as some markets barely finished higher while others skidded. Japan's Nikkei Stock Average, which slumped 4.7% Tuesday to fall into correction territory, posted an early 3.4% rebound but closed up just 0.2%. Hong Kong's Hang Seng Index was down 0.9% after rising as much as 2.9% earlier, while the Shanghai Composite Index lost 1.8%.

Australian stocks rebounded with most others in Asia Pacific, though like those saw early strength fade as gains Down Under were capped by declines in the country's big banks. After slumping a combined 4.7% the last 2 days, the S&P/ASX 200 rose 0.7% today to 5876.8. Energy stocks, which have slumped in recent days, helped drive the advance as oil prices rebounded some in Asia. But the Big 4 banks all dropped, with CBA down 0.8% after its F1H report. Meannwhile, Macquarie bounced 3.9% to reverse much of yesterday's post-earnings slide. Rio Tinto headed gains by the major miners, rising 3.8% ahead of its 2017 results.

The London Metal Exchange’s 3-month copper contract traded lower overnight, finishing 2.7% weaker at $6,880/t. The other base metals also finished lower. Aluminium prices fell 0.5% to $2,162/t, while lead prices slid 4.2% to close at $2,513/t. Zinc prices slipped 2.2% to $3,429/t, while Tin prices slid 0.7% to $21,705/t. Nickel prices closed 1.6% lower at $13,134/t.

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