FTSE +30 points at 7380
DAX +66 points at 12454
CAC +21 points at 5166
Euro Stoxx +15 points at 3478
Asian equities started the week on a positive note. Copper (+0.13%), zinc (+0.63%) and steel (+2.18%) traded higher, as the cooler Chinese inflation eased expectations of a further credit tightening in the world’s biggest commodity consuming economy. China’s consumer inflation eased to 1.5% on year to June from 1.6%, while the producer prices remained unchanged at 5.5% year-on-year. The Hang Seng index gained more than 1%, as the Shanghai's Composite (-0.40%) remained on the back foot due to the sell-off in the IT stocks (-0.85%).
The US dollar pared gains accumulated amid the solid non-farm payroll data (NFP) released on Friday. The US economy added 222,000 non-farm jobs in June versus 178,000 expected. The May figure has been revised up from 138,000 to 152,000. On the flip side, the unemployment rate increased to 4.4% from 4.3%, while the average hourly earnings improved less than expected
The better-than-expected NFP figure sent the U.S. 10-Year yields near 2.40% for the first time in two months.
The sentiment in gold deteriorated. The ounce of gold traded at $1,207 on Friday. Higher yields in the US and across the globe drain liquidity in precious metals. As a result, gold is gaining a decent negative traction to confront the $1,200/$1,195 support (2017 low). The 100-week moving average ($1,219) is expected to provide a strong resistance before the Federal Reserve (Fed) Chair Janet Yellen’s semiannual testimony due on Wednesday and Thursday. In her testimony, Janet Yellen is expected to reiterate the possibility of another Fed rate hike before the end of the year and could eventually provide a hint regarding the Fed’s balance sheet normalisation plans. The lack of further details should keep the US dollar loose.
In Japan, the machine orders contracted by 3.6% month-on-month in May. The current account surplus declined from 1,951.9 billion yen to 1,653.9 billion yen over the same month. The USD/JPY extended gains to 114.20 in Tokyo. Improved US yields, combined to soft Japanese data is supportive of a further yen depreciation against the US dollar; the 115.00 level is the next natural target for the USD/JPY-bulls. Intermediate support is eyed at 114.36 (June double top).
Nikkei (+0.68%) and Topix (+0.48%) were bid on the back of a softer yen.
The EUR/USD took over the 1.14 level soon after the weekly opening bell. The euro-bulls are eyeballing the 1.15 level. The intraday support is eyed at 1.1385 / 1.1380 (200-hour moving average / 23.6% retracement on June 26-30 rise).
The GBP/USD reinforced support at 1.2860 (38.2% retrace on June 20-20 rise and 50-day moving average) following the Friday's fall. The trend and momentum indicators are marginally positive, yet there is a clear lack of conviction prior to the $1.30 level. The Bank of England’s (BoE) chief economist Andy Haldane is due to speak on Tuesday. Haldane has recently voiced his preference for higher UK rates to cool down the inflationary pressures. His speech could give a boost to the pound-bulls, yet may not suffice to gain over the critical 1.3045 resistance (major 38.2% retracement on post-Brexit sell-off).
The FTSE is set for a positive open on the back of firmer oil and commodity prices in Asia. The pound appreciation and limited upside potential in energy prices could discourage buyers approaching the 7400p.
OPEC’s Secretary General Barkindo said that it is too early to talk about additional production cuts and added that he was not aware of Kuwait’s proposal to limit the Nigerian and Libyan production. Meanwhile the US continues pumping at historical high levels and Iraq is stepping up the production to meet its year-end target of 5 million barrels per day. The WTI crude (+0.90%) made a solid start to the week, though is given a limited potential for a sustainable recovery above the $45/47 per barrel.