FTSE -18 points at 7316
DAX -12 points at 11955
CAC -2 points at 4958
Euro Stoxx -3 points at 3386
The U.S. dollar extended gains against the G10 majors on the back of a solid ADP read on Wednesday. The U.S. economy added 289K new private jobs in February, versus 187K expected and 246K printed a month earlier. The U.S. 10-year yields advanced past 2.57% on hawkish Federal Reserve (Fed) expectations at next week’s FOMC meeting.
Gold tested $1200 support, if broken, could suggest a further slide toward $1180.
The U.S. stocks extended losses for a third consecutive day amid oil prices dropped aggressively in the New York session.
The barrel of WTI tanked to $50.33 after the weekly EIA report revealed that the U.S. crude inventories rose by 8.2 million barrels last week, to the highest since 1982. Given the rising oil inventories, how effective could the OPEC cuts be? From a technical perspective, the WTI slipped into the bearish consolidation zone after breaking the $50.72 (major 38.2% retracement on post-Trump rally). The bearish reversal could weigh on the $50 level. The next critical support is eyed at $40.20 (Fibonacci 50% level).
The S&P500’s energy stocks closed the day 3% lower; utilities and real estate remained under pressure.
In China, producer prices accelerated at the fastest pace since eight and half years due to the significant yuan depreciation and higher oil and commodity prices. As such, higher Chinese PPI contributes to the global reflation in basic metals and commodity markets. In opposition, consumer prices heavily dropped to 0.8% year-on-year in February, versus 1.7% expected by analysts and down from 2.5% printed a month earlier. The sharp deceleration in consumer prices is certainly due to a significantly lower economic activity during the Chinese Lunar Year holidays. Still, the fast deceleration in consumer prices could encourage the People’s Bank of China (PBoC) to tighten the monetary conditions in softer than previously anticipated fashion. The USD/CNY advanced to 6.9203 on dovish PBoC expectations.
Asian markets traded mostly risk-off. Energy stocks (-2.65%) lead losses in Hong Kong.
Antipodeans, AUD (-0.41%) and NZD (-0.22%), were among the biggest losers in Asia. The AUD/USD tested the 0.75 mark. The bearish trend reversal hints at a further sell-off toward the 0.7450 (Fibonacci’s 50% on December – February rise) and 0.7382 (major 61.8% retracement). Meanwhile, the sell-off in Australian bonds accelerated; AU 10-year yields advanced to the highest since 2015. Still, carry traders are skeptical due to up-trending yields on the funding U.S. dollar leg.
The FTSE Futures (-0.46%) traded south on the back of softer oil and commodity prices. The UK stocks are set for a softer open, despite the weakening sterling. Energy and mining stocks will certainly start the session downbeat.
The GBP/USD failed to reverse losses, although Chancellor of Exchequer Hammond delivered an upbeat outlook for Britain’s economy. The solid U.S. dollar purchases weigh on cable. Offers are touted at 1.2200.
Across the Channel, the focus is on the European Central Bank (ECB) monetary policy decision. The ECB is expected to maintain the status quo at today’s meeting. The bank has already announced to reduce its monthly asset purchases from 80 billion to 60 billion euros starting from next month. The ECB will continue buying assets at least until the end of 2017. At his press conference, President Mario Draghi could hint at improved growth dynamics and rising inflation in the Eurozone economy, yet will likely remain supportive of loose monetary conditions due to rising French, Dutch and German election risks.
The EUR/USD extended losses to 1.0528 on the back of broad USD appreciation. Trend and momentum indicators are comfortably bearish and could encourage sellers to test the 1.0500/1.0495 support zone. On the upside, offers are sheltered pre-1.0605 (100-day moving average).
Against the pound, the 0.87 offers continue fighting back the euro bulls. A positive breakout could wet buyers’ appetite for a further rise toward 0.8850/0.8900 area. Failure to clear the 0.87 resistance should trigger a downside correction to 0.8590 (200-day moving average).
The DAX and the CAC stocks are expected to open on a softer note. The cheaper euro could encourage investors to jump on the bullish stock markets. While the 5K resistance on the CAC could be dissuasive in Paris on the back of presidential election risks, the DAX could gather sufficient momentum to take out the 12K offers.