U.S. stock futures indicate a significant gap up on Monday as Wall Street attempts to recover from last week’s steep losses. According to Adam Crisafulli of Vital Knowledge, the rally isn’t driven by any specific news since Friday’s close but rather by modest dip buying, largely due to oversold conditions and anticipation of monetary support. Investors are also looking ahead to the release of August’s consumer and producer price reports, scheduled for Wednesday and Thursday mornings, respectively.

European stocks saw an uptick on Monday, managing to rise despite the negative sentiment from Wall Street and Asia-Pacific markets. Most sectors and all major bourses were trading positively. Technology stocks led the gains with a 1.32% increase, closely followed by travel and leisure stocks, which were up by 1.30%. However, Burberry shares fell by 5.19%, dragging down the luxury sector due to declining fortunes in that market segment.

Asia-Pacific markets experienced a downturn on Monday, with Hong Kong’s Hang Seng Index (HSI) leading the losses. The HSI dropped by 1.77% in the final hour of trading, driven by China’s inflation rate, which grew by only 0.6% year-on-year, falling short of the 0.7% expected by economists polled by Reuters. Mainland China’s CSI 300 also saw a decline, falling 1.19% to 3,192.95, marking a seven-month low. Additionally, Japan’s second-quarter GDP growth was reported at 2.9% on an annualized basis, below the anticipated 3.2%.

Economic Calendar

Earnings Calendar

Notable reports for Monday have no reports before the bell but after the bell include CVGW, AVO, ORCL, & RBRK.

News & Technicals’

The unwinding of the yen carry trade is anticipated to persist in September, posing a risk of another substantial sell-off, according to Kathy Lien, managing director of forex strategy at BK Asset Management. Yen traders are expected to closely monitor equity prices and take cues from them, as September is typically a volatile month for stocks. Lien suggests that the unwind could be more aggressive, like what was observed in August, if there is a significant sell-off in stocks. She also notes that the yen remains significantly undervalued, which could impact valuations over the next one to two years.

Huawei has garnered significant attention with over 2.7 million pre-orders for its new tri-fold smartphone, the Mate XT, as revealed on its website on Monday. The Chinese tech giant began accepting pre-orders at midday on Saturday, strategically positioning the launch more than two days ahead of Apple’s anticipated iPhone 16 release, scheduled for early Tuesday morning Beijing time. This early interest highlights the competitive landscape in the smartphone market, with Huawei aiming to capture consumer interest before Apple’s latest offering hits the shelves.

The European Union needs radical reforms through a new industrial strategy to maintain its competitiveness, enhance social equality, and achieve climate targets, according to a highly anticipated report by economist and politician Mario Draghi. The report outlines proposals that would necessitate an additional annual investment of 750 billion to 800 billion euros, as estimated by the European Commission. It also highlights other critical areas, such as supply chain security and defense spending, underscoring the comprehensive approach required to address these multifaceted challenges.

Norfolk Southern’s board is investigating allegations that CEO Alan Shaw engaged in an inappropriate workplace relationship, according to sources familiar with the situation. Shaw, who has been CEO since 2022, has already navigated significant challenges, including a toxic rail derailment and a contentious proxy fight. The company has enlisted outside legal advisors to assist with the probe, which is still in its early stages and may not reveal any misconduct.

With a big overnight buy the dip gap up open as the market attempts to recover watch for the potential of whipsaws after the open.  Keeping in mind that we face a CPI reading on Wednesday and a PPI report on Thursday, it is also possible we could chop sideways with considerable volatility as we wait.  That said be very careful with the fear of missing out and chasing this morning big gap remembering that SPY, QQQ, and IWM are under their 50-day averages.

Trade Wisely,

Doug