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“You don’t reason with intellectuals. You shoot them.” – Napoleon Bonaparte

Morning stock market summary

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For all the talk about how the discourse has become so much more violent in recent years, we have nothing on Napoleon.  Shooting people you disagree with??? The only duels these days happen on Twitter.

After a brief scare last week from a stronger-than-expected ADP report, the bull market came back from July 4th vacation this week, and futures are poised for a flat to modestly higher open to close out what has been a very positive week.  The only economic reports on the calendar this week are Import Prices at 8:30 (weaker than expected) and Michigan Sentiment at 10 AM.  It’s been a busy morning for earnings, and so far, the reports have been positive as all seven of the companies reporting as we write this have reported better-than-expected earnings and five out of seven have topped sales forecasts.  So far so good.

European markets are mixed so far this morning with the STOXX 600 essentially flat while France leads the way higher with a gain of 0.3% and Germany lag (-0.2%).

They say a dollar isn’t what it used to be, but it can still have a big impact on equity market performance.  Take the recent performance of European stocks.  The chart below shows the performance of Europe’s benchmark STOXX 600 index over the last year.  After an extended period of sideways trading, the STOXX 600 sold off in late May and ever since has been making a series of lower highs and lower lows.  A recent test of the 200-DMA held, but the index is currently bumping up against its downtrend and trying to reclaim its 50-DMA as we close out the week. From a technical perspective, it’s not the greatest picture for European stocks.

If you’re an investor in the US and looking at the performance of European stocks through the lens of the US dollar, you’re seeing an entirely different picture. Instead of lower highs and lower lows, it looks more like higher highs and higher lows as the STOXX just this morning broke above resistance from earlier this year and is now trading at 52-week highs. Technically speaking, the STOXX 600 in dollar-adjusted terms looks a whole lot better. What a difference the dollar makes!

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