Opening Bell: Oil Bounces After Sharp Selloff; USD Weighs On EM FX

Oil rebounds from its sharpest selloff in a year

Global equity recovery looses some steam in Europe after strong Asian rally

EM currencies remain under pressure from dollar strength and trade war risk

Key Events

Global stocks showed signs of a rebound on Thursday, following reports that US and Chinese officials may resume high-level talks on trade issues. Investors have begun rotating out of safety trades including the , which gave back just a small amount of yesterday’s outsized gains. Treasury yields trimmed most of yesterday’s drop as investors moved to riskier assets.

European shares, along with futures for the , and , are all flashing green, reversing Wednesday’s sharp global selloff which saw sliding the most in two years and US energy and material producer shares tumbling at least 2 percent—pushing the into its heaviest decline in two weeks.

Where are equities headed next? While pundits warn there are no winners in a trade war, US shares stand out as the outperformers. While Asian benchmarks (except for Australia’s ) are in a downtrend and European indices are drifting, US majors remain in a clear uptrend.

We believe this will almost certainly create a virtuous cycle for US assets, prompting international investors to shed foreign holdings, sending them yet further down, even as these same investors ramp up their US exposures—driving up returns on US markets.

STOXX 600 Daily Chart

The opened 0.25 percent higher—posting a more modest gain than Asian counterparts—but was pressured lower in early trade. Media companies and car manufacturers outperformed, helping the pan-European index move higher—to about 0.4 up at the time of writing. Technically, yesterday’s plunge extended the medium-term downtrend within a falling channel since the May peak, while potentially developing a massive H&S top since

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