Monday August 14th

14-08-2017

Stocks set for big rebound with Dow futures jumping 100 points

U.S. stock index futures pointed to a strong open on Monday boosted by a solid performance seen from international markets as geopolitical tensions ease. Dow Jones industrial average futures rose 88 points, while S&P 500 futures jumped 12.75 points. Nasdaq 100 futures advanced 28.50 points as shares of Amazon, Tesla and Alphabet all rose in premarket trading. Meanwhile, investors dumped safe-haven asset gold, as futures for December delivery fell 0.6 percent to 1,286.30 per ounce after hitting a two-month high last week. "In our experience, geopolitical shocks tend to provide a buying opportunity, unless there is: an underlying economic slowdown (as was the case prior to Iraq invasion of Kuwait); clear cut overvaluation; or a monetary tightening," wrote Andrew Garthwaite, Credit Suisse global equity strategist, in a note to clients. "Even if the main proponents' behaviour may appear aggressive, their advisors and sponsors are likely to act as an ameliorating force." The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.2, down more than 15 percent. The index posted its largest weekly gain since December 2015 last week as the North Korea situation escalated with strong warnings from President Trump. U.S. Secretary of State Rex Tillerson and U.S. Secretary of Defense Jim Mattis stated that the current U.S. administration would continue to pursue diplomatic resolutions with Pyongyang. On Sunday, the two U.S. officials wrote in a commentary piece published in the Wall Street Journal that "the U.S. has no interest in regime change or accelerated reunification of Korea." Stocks were also helped by signs global growth is chugging along. The Japanese economy posted better-than-expected economic growth for the second quarter, growing at an annualized rate of 4 percent. Meanwhile, no major data is set to come out on Monday. Looking to commodities, oil prices edged lower on Monday as a slowdown in refining activity growth from China weighed on sentiment, according to Reuters. At 7:45 a.m. ET, U.S. crude hovered around $48.58 per barrel, while Brent stood around $51.76. In Europe, stocks were trading in the black in morning trade, while Asia markets finished trade on a mostly positive note on Monday, after investors digested another batch of data. Japan's benchmark Nikkei 225 index fell 0.98 percent, or 192.64 points, to close at 19,537.10, as markets re-opened after a public holiday last week. Markets appeared to shrug off headlines that the Japanese economy grew at an annualized rate of 4 percent in the second quarter of the year ending in June compared to the previous year. Meanwhile, South Korea's Kospi rose 0.63 percent, or 14.51 points, to end at 2,334.22, after being pressured by geopolitical tensions for most of the last week. Greater China markets trended higher even though a raft of data released Monday missed expectations. Hong Kong's Hang Seng Index gained 1.28 percent by 3:15 p.m. HK/SIN. On the mainland, the Shanghai Composite advanced 0.88 percent, or 28.3887 points, to close at 3,236.930 while the Shenzhen Composite jumped 2.017 percent, or 37.1677 points, to end at 1,879.7658. Gold dropped by half a percentage point on Monday, retreating from two-month highs under pressure from a strengthening dollar and a slight easing of tensions between the United States and North Korea. Spot gold fell 0.6 percent to $1,280.45 an ounce, having reached its highest since June 7 at $1,291.86 in the previous session. U.S. gold futures for December delivery fell 0.6 percent to $1,286.90.