FTSE +7 points at 7244
DAX -5 points at 12438
CAC +4 points at 5275
Euro Stoxx -3 points at 3560
The UK and the European stocks are set for a mixed and mainly flat open. Investors could refrain from directional positions before the Brexit summit in Brussels due on Saturday. The 27 EU countries are expected to act as one and PM Theresa May is prepared to have them 'lined up to oppose'.
As suspected, the European Central Bank didn’t show any enthusiasm regarding the outcome of the first round of the French elections as the markets did over this week.
The EUR/USD advanced to 1.0932 as President Mario Draghi started speaking at his press conference yesterday. The pair rapidly sold off to 1.0851, as traders understood that there would be no fireworks this week. The ECB reiterated that the policy rates will be maintained at the current, historically low levels for an extended period of time and said to remain committed to the Quantitative Easing (QE) until the end of 2017 and beyond.
Mario Draghi slightly ‘tweaked’ his language as he repeated that the ‘risks surrounding the euro area are still tilted to the downside and relate predominantly to global factors’, but added ‘while moving towards a more balanced configuration’. Of course, it was much less than expected.
Given that the ECB meeting failed to reinforce the post-French election optimism, we could expect a period of consolidation and even correction. If 1.0850 broken, the EUR/USD could further fall to 1.0805 (major 38.2% retrace on April rise), which should distinguish between the current positive trend and a mid-term bearish reversal for an eventual re-test of the 200-day moving average (1.0777).
Zooming into France, political games continue at full-speed. On today’s headlines, fresh fraud allegations against Marine Le Pen. Apparently, the slight gain in Le Pen popularity in the latest opinion polls, from 39% to 41% according to Bloomberg’s aggregated poll, was already a too big danger for her opponents. Still, OpinionWay Poll gave 36% chance for Le Pen win at best, while Harris Poll printed 61% to 39% result in favour of Emmanuel Macron in the final round of the election on May 7th. Given that Macron-win is already fully priced in, the latest news are expected to have a limited impact on the euro prices this Friday.
What will matter before the closing bell are the GDP data from the UK, the US and Canada. Expectations are soft.
In the US, the durable goods orders may have grown softer than expected according to March preliminary figures. The core durable orders, excluding transportation, contracted by 0.2% month-on-month.
Weak economic data combined with the halfway completed tax reform announcement from the White House on Wednesday have resulted in a confused US dollar market over the week. A soft US GDP read could weigh on the US dollar before the weekly closing bell.
Since Monday, the US dollar gained the most against the antipodeans, the kiwi and the Aussie lost 2.07% and 1.32% respectively. Against the euro (-0.01%), the greenback displayed a flat performance. The leading G10 winner of the week has been the pound. Cable will start the Friday’s session 0.89% firmer against the greenback since the weekly opening bell.
GBP/USD extended gains to a nearly seven-month high. The UK’s GDP data, expected to have eased to 0.4 quarter-on-quarter from 0.7% printed earlier, could momentarily overshadow enthusiasm. Still, the 1.30 level stands as an appetizing target for the GBP-bulls, especially on the back of an almost sure majority for Tories at the upcoming snap election. Key short-term supports to the current positive trend stand at 1.2725 (minor 23.6% retracement on March – April rise) and 1.2607 (major 38.2% retrace).
The deterioration in the global risk appetite after a renewed Trump disappointment, combined to a stronger pound and cheaper oil justify the decent selling pressures in the FTSE 100 stocks. On top, threat from the pharmaceutical giants to leave the UK, unless an extra 20 billion pounds are invested in the NHS each year add to the anxiety. Offers are touted above the 200-day moving average (7250p) for an eventual slide to 7222p (50% retracement on the weekly rise), before 7203p (major 38.2% retracement)
Looking at the corporate world, Barclays (LON:BARC) 1Q pretax profit beat estimates (GBP1.68bn vs. GBP792mn in Q1). CET1 ratio rose to 12.5% from 12.4%. UBS (NASDAQ:UBSI) reported 79% increase in its Q1 income. HSBC (NYSE:HSBC), RBS (LON:RBS), Caixabank (LON:0ILK) and Banco Sabadell report earnings today as well.
Selling pressures on WTI remain solid, as the markets remain comfortably short on oil prices. UK’s energy stocks closed the Thursday's session 2.04% softer. To our surprise, even good news – better-than-expected Total results and 3.5 million barrel weekly contraction in US inventories - couldn’t cheer the markets up. Offers are touted above 200-dma ($49.40); the $47 level (March low) could be a reasonable target for the sellers in the continuation of the actual negative trend formation.
In Japan, the inflation ex-fresh food came in at 0.2% year-on-year as expected. The USD/JPY traded in the tight range of 111.07 and 111.36 in Tokyo. Nikkei (-0.35%) and Topix (-0.35%) retreated on the back of the deterioration in the global risk sentiment.
Finally, Chinese banks’ first quarter results are in focus. Following a series of earlier measures, many think that the Chinese banks’ performances are set to improve in 2017 due to better net interest margin and fewer bad loans. China Banking Regulatory Commission announced that domestic assets rose by 14.1% on year to March.
China Construction Bank announced higher profits in the Q1, although its shares remained flat in Hong Kong. Agricultural Bank of China, Industrial & Commercial Bank of China and Bank of China are due to release results today.
Quick glance at technicals on LCG Trader:
DAX intraday: consolidation. Short positions below 12520.00 (pivot) with targets at 12440.00 and 12335.00 in extension. Above 12520.00, upside potential to 12590.00 and 12655.00.
GBP/JPY intraday: Long positions above 143.00 with targets at 143.90 and 144.40 in extension. Below 143.00, downside potential to 142.45 and 141.70.
EUR/GBP intraday: downside prevails. Short positions below 0.8455 (pivot) with targets at 0.8385 and 0.8350 in extension. Above 0.8455, upside potential to 0.8475 and 0.8495.