The quiet overnight market had been focused on the upcoming comments by Stanley Fischer, who is set to give a Bloomberg TV interview at 6:30am ET, where he was expected to expand on his recent hawkish comments. Heading into Fischer's appearance, the dollar strengthened, global stocks rose, oil hovered around $47, while US index futures were largely flat and Treasuries fell.
WTI Crude is now down 6% from last week's highs, back below $47 as supply concerns (Abu Dhabi production rise and ConocoPhilips' CEO comments) and OPEC freeze talks doubts have combined with the biggest collapse in speculative short positions in history (following the Saudi statement) - removing the last 'short-squeeze' leg of support from this dead-cat-bounce.
The dollar index rose to a two-week high on Monday, while bond yields jumped to their highest since June and global stocks sold off after senior Federal Reserve officials indicated a U.S. interest rate increase was on the cards in the near term. The Fed effect - and the stronger dollar - reverberated through markets, pressuring stocks in Europe and emerging markets, pushing oil below $47 and the commodity complex lower.
With Yellen's much anticipated speech just hours away, the already comatose market flatlined overnight in another directionless session, with European stocks and US equity futures practically unchanged, while Asian shares to a two-week low, led by Japan, as investors showed a reluctance to take on risk before Yellen’s speech. The dollar was a tad lower, along with oil which is set for its first weekly drop in a month.
"I know that when we look at the overall U.S. population, it seems like things are getting better. But when you start breaking it down and you look at that core consumer that we serve on the lower economic scale that's out there, things have not gotten any better for her, and arguably, they're worse because rents are accelerating, healthcare is accelerating." - Dollar General CEO, Todd Vasos
In a rerun of yesterday's overnight session, European indexes trade higher while US index futures were modestly in the green, set to propel the S&P 500 to new all time highs. Emerging Market dropped the most in three weeks alongside commodities, as today the market was predisposed hawkishly on a US rate hike ahead of Yellen's Friday speech, pushing the US dollar higher and oil resumed its pre "anonymous sources" headlines slide.
"the most important tell on sentiment will be the U.S. Treasury auctions. Especially as they involve the two-year and belly. Yesterday morphed from “uh, oh they’re hawkish” to “I knew I should’ve bought the damn dip.” Buy every dip when facing the possibility of a third big NFP in a row? Sure, if you believe in the status quo"
European, Asian stocks and S&P futures all fell in another quiet, low-volume early session. With oil entering a bull market yesterday, and set for its longest run of gains in 4 years after, overnight crude stumbled, and reversed early gains, falling for the first time in seven days driven by rebound in the dollar which gained versus all G-10 currencies with commodity currencies underperforming.
Here are the key things the market will look for in today's FOMC minutes, made more interesting following yesterday's unscheduled, and substantially hawkish comments from Ny Fed's Bill Dudley. Also, for those looking to trade the minutes, here are some ideas on how the market may respond.
European stocks are down led by tech, chemicals, alongside EM stocks which retreated from near a one-year high and oil fell for the first time in a week after hawkish comments from Federal Reserve officials revived bets on U.S. interest rate rises this year, and pushed the dollar higher from 7 week lows ahead of today's Fed Minutes. S&P 500 futures were little changed following yesterday's drop from record highs
European shares advanced, with gains in automakers helping Germany’s benchmark DAX Index turn positive for the year for the first time. Stocks rose around the world, led by emerging-markets, as oil climbed further after its best week since April and traders pushed back bets on higher U.S. interest rates. S&P futures advance and Asian stocks little changed as rising oil prices bolstered investor sentiment.