FTSE -23 points at 7316
DAX -26 points at 11940
CAC -5 points at 4950
Euro Stoxx -3 points at 3382
The strong dollar remains the major macro story as the Federal Reserve (Fed) prepares to increase the Fed funds rate by 25 basis points at its monetary policy meeting next week.
The yen has hard time finding sellers against the broadly strong U.S. dollar; the USD/JPY continues facing offers above the 114.00 mark. Solid 115.00 barriers are presumed as the positive momentum is losing steam.
Gold extended losses to $1213 in Asia, as improved U.S. yields continue pushing investors toward yield bearing products rather than non-interest bearing gold. The key mid-term resistance is eyed at $1210 (major 38.2% retracement on December – February recovery). The 50 and 100-day moving averages stand at $1212 and could give a hand to the Fibonacci support. Clearing $1210 should signal a mid-term bearish reversal and could encourage a further sell-off to $1200, before $1180 (January 27 support).
The U.S. stocks extended their downside correction on Tuesday, after the trade data pointed that the U.S. trade deficit jumped to a five-year high in January. The S&P 500 stocks retreated for the third consecutive session to $2365.51; the Dow Jones retraced to $20901.26. Investors are losing conviction due to a severe lack of details regarding the Trump policies, while facing a tighter U.S. rate policy at the same time.
The VIX index (11.45%) remains at acceptable levels despite the possibility of deeper downside correction in the U.S. stock markets.
Asia inherited a risk-off market from the U.S. and remained offered throughout the overnight trading session. Nikkei (-0.55%) and Topix (-0.41%) traded in the red, mostly due to the lack of appetite on North Korean threat but also the yen’s reluctance to lose ground against a widely bought U.S. dollar.
Hang Seng (+0.28%) stocks diverged positively, led by Geely Auto (+6%) after the sales rose by 167% on year; energy stocks (+0.52%) and financials (+0.22%) reinforced gains. Shanghai’s Composite (-0.25%) saw little demand after China’s trade balance turned unexpectedly negative in February (-60.36 billion yuan versus 172.50 billion expected & 354.50 billion yuan printed a month earlier). Imports surged 44.7% in yuan terms, meaning that the jump in data is partially due to a softer yuan; exports in yuan terms fell to 4.2% year-on-year from 15.9% a month earlier and significantly below 14.6% anticipated by analysts.
Copper and aluminum softened, as the barrel of WTI traded between $52.75 and $52.92.
FTSE futures (-0.14%) traded lower as well, despite the falling sterling.
The GBP/USD plunged to 1.2169 on Tuesday, amid UK PM Theresa May’s second defeat on Brexit before the House of Lords. Investors will keep an eye on the pound as Chancellor Hammond will reveal the UK budget at 12:30 London time. Hammond is expected to announce higher social spending, combined to higher taxes and limited government debt issuance, to reveal improved public finances and to revise the 2017 GDP target higher. Pound offers against the U.S. dollar are touted at 1.2400/1.2426 (50 and 100-day moving averages respectively). On the downside, breaking the 1.2155 support (minor 76.4% retracement on January recovery), the way will be cleared for a further slide toward the 1.20 mark. Against the euro, sellers fight back pre-0.87.
Cheaper pound couldn’t prevent the FTSE rolling index from shortly trading below the 7300p overnight. The UK stocks are expected to open on the downside in London. Whether the cheap pound could benefit to UK’s stock prices will depend on the budget announcement and the market’s reaction to a potentially upbeat economic outlook for Britain, though preparing for a bumpy Brexit journey.
Drugmakers are expected to open the session under pressure following Trump's call for significantly lower drug prices.