FTSE -16 points at 7232
DAX -40 points at 12607
CAC -29 points at 5343
Euro Stoxx -18 points at 3609
Asian stock indices traded south, as the sell-off in oil, metals and commodities deepened and increased the anxiety across the global financial markets. Japan was closed.
Hang Seng (-1.16%) and Shanghai’s Composite (-0.68%) declined. Energy (-2.60%) and mining stocks (-1.07%) led losses on heavy headwinds in oil and commodity markets this week.
Crude extended losses below $45 for the first time since OPEC announced to cut output on November. Fears that the OPEC’s output reduction plans would not suffice to reduce the global supply glut weigh on the price of a barrel. Dip-buyers are expected to intervene into the $40 level for a minor correction, given that the oil market has stepped into the oversold territory (14-day RSI at 22%). From a technical perspective, the negative trend that started on April 11th will be intact below $47.78 (major 38.2% retracement on April – May sell-off). An intermediate resistance is eyed at $46.30 (minor 23.6$ retrace).
Copper recorded the biggest two-day loss since July 2015, iron ore futures plunged nearly 15% over the last three sessions and the Bloomberg’s industrial metals index traded at the lowest level since January. The slowdown in Chinese manufacturing activity is one of the major catalysts for the sell-off. According to Caixin manufacturing PMI (50.3 versus 51.3 expected & 51.2 previously), the Chinese manufacturing activity unexpectedly slowed in April. A future read below 50 would signal an unpredicted contraction in the world’s biggest emerging market. Barclays’s analysts stated that there is no need for panic, the data does not hint to a recession just yet.
The AUD/USD hit the 0.7384 target. Stronger trend and momentum indicators suggest a further extension of losses. The March-May negative trend should see a minor resistance at 0.7408 (23.6% retracement on March – May decline) and a major resistance at 0.7522 (38.2% retrace).
In the UK, the early local election results suggest a victory for Tories, as Labour loses blood and UKIP collapses. As such, PM Theresa May is set for a greater majority in June snap election, in line with the opinion polls. The GBP/USD held the ground above the 1.2900 mark in the Asian session. The FTSE is expected to open softer on upbeat sterling and heavy headwinds in energy and commodity prices.
IAG (LON:ICAG) 1Q profit rises 9.7%, 1Q revenue EU4.93bn as expected, adjusted operating profit EU170.0mn versus EU163.3nm, confirms 2017 outlook for improvement.
Pearson (LON:PSON) FY adjusted operated profit GBP570mn missed estimates of GBP630mn, adjusted EPS printed at 48.5p versus 55.5p.
In the US, the House Republicans passed the Obamacare repeal and replace bill, yet several key Senate Republicans said that they would overrule the narrowly approved bill and write their own, as a sign that the game is not yet over and the repeal and replace plans will continue to be an headache for Trump and his team.
The US dollar index sits at the bottom of the two-week range, as traders' attention shift to the US labour data.
The most eagerly watched NFP data (nonfarm payrolls) is due today and the expectation is 190’000, a touch superior to the 12-month average of 188’000. A solid read could revive the short-term USD bulls, while a second month of disappointment should dent the USD appetite before the weekly closing bell. We warn that the hawkish Federal Reserve (Fed) expectations may have shattered the upside potential in the greenback and the enthusiasm on an eventually strong read could be short-lived. The pricing in the market factors in 93.9% chances of a June Fed rate hike.
Gold extended losses to $1’225 after stepping in the bearish consolidation zone posterior to the Fed meeting. Negative trend and momentum indicators suggest a potential extension toward $1’220 (100-day moving average). Top sellers are presumed at $1’242 (minor 23.6% retracement on April – May decline) and $1’252 (major 38.2% retrace).
The final round of the French presidential election is the major highlight of the weekend. According to the latest Reuters news, Emmanuel Macron is expected to gather 62% of votes versus 38% for Marine Le Pen. Provided that the Macron-win is fully priced in, the impact on the euro should be limited on Monday. A relief rally in the EUR/USD could trigger stops above the 1.10 and cause a minor rally above this level. However, the knee-jerk enthusiasm could rapidly turn into a buy-the-rumour-sell-the-fact pattern.
Marine Le Pen is given little-to-no chance to succeed on Sunday’s run-off. If however she wins, traders should be ready for a carnage in the euro markets on Monday. A low probability Le Pen victory could easily brush off five figures in the euro-dollar. In term, the euro could extend weakness to the parity on well justified Frexit fears.
Quick glance at technicals on LCG Trader:
EUR/USD intraday: RSI bullish, hints at further advance. Long positions above 1.0950 (pivot) with targets at 1.1000 & 1.1020 in extension. Below 1.0950, downside potential to 1.0920 & 1.0900.
Dow Jones intraday: consolidation. Short positions below 20880.00 (pivot) with targets at 20805.00 & 20775.00 in extension. Above 20880.00, upside potential to 20915.00 & 20945.00.
Copper intraday: short positions below 2.5290 (pivot) with targets at 2.4860 & 2.4770 in extension. Above 2.5290, upside potential to 2.5470 & 2.5690.