FTSE +10 points at 7284
DAX +33 points at 12000
CAC +12 points at 4900
Euro Stoxx +5 points at 3344
The US stocks have started the week by reaching new record highs, oil and energy stocks lead gains as the barrel of WTI advanced to $54.60. The S&P 500 traded at $2366, as the Dow Jones climbed to $20757 for the first time, somewhat helped by the 3% rally in Wal-Mart (NYSE:WMT) shares after the world’s largest retailer posted solid fourth quarter results to back up the reflation enthusiasm in the US. Financials lagged on the back of a lack of appetite following disappointing results from HSBC on Tuesday.
Kraft Heinz (NASDAQ:KHC) gave back 1.84% of its Friday gains as Warren Buffett walked away from the Unilever (NYSE:UN) deal, which could’ve turned out to be an unfriendly deal. The billionaire is known for his reluctance for hostile takeovers. In a joint statement, Kraft Heinz announced to have ‘amicably agreed to withdraw its proposal for a combination of the two companies.’ Unilever shares recovered 1.09% after retreating more than 6% on Monday. For now, rumours appear to have brought both stock prices higher, which suggests that further downside correction/price normalisation is possible.
In the UK, the Bank of England (BoE) Governor Mark Carney delivered a balanced testimony before the lawmakers as expected. Carney refrained from giving any guidance on interest rates and said to be ‘neutral’ despite being pressured for more clarity on his monetary policy outlook. The lack of details revived the BoE hawks, which increased their bet for an earlier than expected policy tightening due to the rising inflationary pressures. The GBP/USD advanced above the 1.25 mark as anticipated.
It is noteworthy remembering that Carney expects a cool down in inflationary pressures, as the pressure on wages would ease with the UK’s job market approaching a full-employment status. As the pound gathers upside momentum, the key GBP/USD resistance is presumed at 1.2575 (minor 23.6% retracement on post-Brexit decline).The UK’s fourth quarter preliminary GDP read will be the focus today. The consensus is a steady 0.6% quarter-on-quarter and 2.2% year-on-year print.
The FTSE 100 stocks retreated to 7267p on Tuesday dragged lower by HSBC (NYSE:HSBC) shares, which closed the day 6.54% lower, but also the stronger pound.
Lloyds (NYSE:LYG) printed a better-than-expected income in Q4, although the statutory pre-tax profit came in at £973 million versus £1.38 billion estimated. The bank increased ordinary dividend and recommended the payment of special dividend of 0.5p/share following its agreement to buy MBNA. The 2017 net interest margins are expected greater than 2.70%.
Barclays' (NYSE:BCS) results are due on Thursday; Royal Bank of Scotland (NYSE:RBS) results are due on Friday.
The FTSE 100 is set for a positive open in London.
The US dollar rally slowed in Asia, after escorting the EUR/USD down to 1.0526 on Tuesday. François Fillon’s 3% recovery in the latest French election polls decreased odds that Front National’s anti-European, anti-euro candidate Marine le Pen would win the presidential election this year and certainly helped easing temporarily the anti-European worries that have been weighing on the single currency nowadays.
As reminder, a scandal claiming that Fillon’s wife received some half a million euros over the last eight years as Parliamentary attaché without ever being seen in Parliament had shaken the polls weeks ago. The independent candidate Emmanuel Macron retreated by 5%.
The EUR/USD remains under solid selling pressure. First wave of offers are eyed at 1.0566, the minor 23.6% retracement on post-Trump decline broken for the second time in two consecutive weeks. Solid 100-day moving average resistance is sliding lower (currently at 1.0662). As the negative trend gathers momentum, sellers are set to test the 1.05 handle, if cleared could encourage a further sell-off to 1.0400/1.0380.
The FOMC meeting minutes, due later in the session, are expected to back up the recent optimism regarding the improved retail sales, rising inflation and encouraging expectations in the US’ corporate activities. The minutes will likely reveal no surprise vis-à-vis the Federal Reserve’s (Fed) orthodox monetary policy outlook, yet should keep the Fed hawks in charge of the market. The pullbacks in the US dollar are expected to remain capped
Finally, the Nikkei (-0.01%) and the Topix (+0.10%) remained flat on a stronger yen against the US dollar, as Bank of Japan’s (BoJ) Governor Kuroda said that the chances of deepening negative rates are low for the moment, although the BoJ stands ready to ease more if needed. The USD/JPY traded in the tight range of 113.33/113.73.