FTSE flat at 7340
DAX +2 points at 12042
CAC -8 points at 5025
Euro Stoxx 50 -4 points at 3448
The US dollar pared losses against the G10 currencies as the critical health-care vote has been delayed in the US yesterday. President Donald Trump expects the deal to be validated on Friday. A validation would also grant Trump the credibility on his ability to pass through his fiscal policies, including tax reforms and large infrastructure spending.
An eventual failure could letdown investors, yet it is worth noting that the major market focus is still on the US’ fiscal plans and the Trump administration could carry on with its expansive fiscal plans regardless of a disappointment on the health-care bill.
The US stocks closed the day slightly negative: S&P 500 (-0.11%), Dow Jones (-0.02%) and NASDAQ (-0.07%).
The US 10-year yields held the ground above 2.40%. Trump-positive news would be supportive of the US dollar, the US yields and also the banking stocks across the global markets, given that a large fiscal spending in the US would mean a faster rate tightening from the Federal Reserve (Fed) and could restore a smile on Fed hawks’ faces.
Gold traded down in Asia, after extending gains to $1253 yesterday. The momentum remains marginally positive, yet is clearly losing strength suggesting an eventual pullback to $1230/1224 (minor 23.6 % retracement on December – February rise / 50-day moving average). Improvement in the US yields could hinder the positive trend toward the 200-day moving average ($1260).
The yen is softer on weaker risk aversion. The USD/JPY rebounded just above the critical support of 110.55 (50% level on post-Trump rally) on Thursday and consolidated gains above the 50-hour moving average (111.20) in Tokyo. Nikkei (+0.93%) and Topix (+0.88%) recorded their biggest rally in two weeks on softer yen.
Else, Asian stock markets portrayed a mixed session. Shanghai Composite (+0.59%) and Hang Seng Index (-0.25%) remained on the back foot before the US vote, while the Australia’s ASX 200 closed 0.80% higher on falling Aussie. Financials (+1.11%) and energy stocks (+1.28%) lead gains in Sydney.
Australian dollar extended losses to 0.7610 against the US dollar, as iron ore delivered to Qingdao (China) tanked to lowest levels since February. The AUD/USD slipped below the 50-day moving average (0.7630) and tested 0.7609 (minor 23.6% retracement on December – March recovery). Breaking this level could encourage a further slide to 0.7550 (200-day moving average).
In the Eurozone, the banks took 233.5 billion euro worth of free long-term loan from the European Central Bank (ECB) versus Bloomberg’s 110 billion medium estimate. This has been the largest take-up since the ECB launched the TLTRO (Targeted Long-term Refinancing Operation). The final TLTRO owed its success to growing anticipations that the ECB would start unwinding its ultra-expansive monetary policy at the end of 2017.
The EUR/USD pared gains for the third consecutive day. The pair traded at 1.0760. The positive trend is fading and the pullback could extend to 1.0707 / 1.0660 (major 61.8% retracement on post-Trump decline / 50-day moving average).
Across the Channel, the GBP/USD rallied to 1.2530 on the back of solid retail sales data released yesterday. Higher inflation, solid retail sales, combined to several Bank of England (BoE) members’ concerns about keeping the bank rate at the current historical low level for a longer period of time should continue supporting the pound recovery. The GBPUSD could extend gains to 1.2565 (minor 76.4% retracement on February – March rise), before 1.2605 (200-day moving average).
The FTSE 100 stocks stood strong against the pound appreciation. The FTSE index held the ground above the 7300p level on Thursday’s session and is set for a flat open on Friday. Improved global risk appetite could encourage a recovery toward 7360p, the 200-day moving average, before the weekly closing bell. Support is eyed at 7300p (weekly support).