FTSE +25 points at 7368
DAX +27 points at 12176
CAC +19 points at 5065
Euro Stoxx +10 points at 3475
Donald Trump signed an executive order to wind down Obama’s clean climate policies in order to facilitate coal and oil production, create jobs and minimize the U.S. dependency on external energy sources. He called his step the ‘new energy revolution’.
News wet investors’ appetite in the U.S. mining (+1.56%) and energy stocks (+0.84%). Financials (+1.20%) rallied as well, although the sentiment vis-à-vis the Trump’s reflation scenario took a hit after the globally monitored health-care replacement plan was left unapproved on Friday.
The Dow Jones and S&P 500 indices gained 0.73%, yet the U.S. equity futures saw little demand in Asia.
The U.S. dollar pared losses, as the U.S. 10-year yields climbed back above the 2.40% level.
Gold gave back gains as the capital flew into stock markets, particularly into the energy related businesses. The yellow metal traded between $1247-1252. Further recovery in the U.S. yields, combined to the gold’s recent failure to clear the 200-day moving average resistance ($1260) could encourage a deeper downside correction toward $1230 (minor 23.6% retracement on December – February rise). The key support to the current bullish development stands at $1210 (major 38.2% retracement).
Improved risk sentiment pulled the Australian stocks (+0.90%) to their highest level since April 2015. The AUD/USD is climbing in harmony with its 50-day moving average (0.7610), also assisted by the second day of gains in iron ore futures (+2.63%). The positive bias could further lift the pair toward 0.7680/0.7700 area. Support is eyed at 0.7610 (minor 23.6% retracement), before 0.7550 (200-day moving average).
In Japan, the improved appetite has not been the sole driver in the stock markets. Japanese stocks traded under pressure as more than 1500 companies traded ex-dividend today. Nikkei (+0.05) and Topix (-0.16%) barely reflected the global market mood.
The USD/JPY is left without momentum as well, despite a better bid USD and the recovery in the U.S. yields. The quarter and fiscal year-end inflows to the yen are expected to keep the upside limited until the end of March.
Cable gave back more than two figures in two consecutive sessions as the broad-based demand in U.S. dollar, combined to Brexit worries drove short-term swing traders out of the market. The UK triggers the Brexit today. The completion is aimed for March 2019 and the negotiations with the EU are expected to be hostile. Sentiment in the pound is heavy, as investors wonder whether the UK will display a divorce-only approach, or include clauses for the future of the EU-UK relations.
The cherry on top, Scotland announced to pursue a second independence vote from the UK. The vote is expected to take place after there is enough clarity on the UK’s Brexit journey.
The sell-off in GBP/USD could extend to 1.2360-1.2300 (the 50% and the major 61.8% retracement on March rally) on growing uncertainties. Yet, the long-term impacts being already fully priced in, the Brexit-related headwinds are expected to remain short-lived, in the absence of new information regarding the EU negotiations.
Meanwhile, the sentiment in the FTSE is mixed. Firmer oil and commodity prices, combined to cheaper pound hint at a slightly positive open in London; nevertheless the Brexit worries could rapidly attract top-sellers and prevent the index from diverging positively from the 200-day moving average (7360p). Financials are expected to trade under pressure on uncertainties regarding the UK’s place as one of the world’s leading financial centers.
Across the Channel, similar concerns occupy the headlines. The EUR/GBP took a euro-positive turn. The cross cleared offers by 0.8695 (23.6% retracement on February – March rise) and traded at 0.8735. The positive breakout could encourage further gains toward 0.8786 (March high) and 0.8850 (2017 resistance).