FTSE +4 points at 7415 DAX +11 points at 13178 CAC +4 points at 5370 IBEX 35 +18 points at 10011
The US stocks rallied to new all-time highs on Tuesday after taking over a bullish market from Europe. The S&P 500 hit 2,600 level for the first time, as the Dow Jones reached 23,617.80, but fell below 23,600 before the close. There is no progress on the US tax reform bill and there will probably not be any surprise before Thanksgiving (November 23). Looking at the cross-assets prices, it appears that the market is leaning toward a positive outcome on the tax deck. The US yield curve is flattening for this same reason. Pension funds are suspected to increase their US sovereign holdings in preparation for a significant tax overhaul. The US 30-year yield fell to 2.75%, as the 10-year yield is stagnating near 2.35%, above the critical 2.30% level, which corresponds to the 200-day moving average.
The flattening yield curve weighs on the USD sentiment. The USD/JPY fell short of a sustained positive momentum and the topside could remain capped by the daily Ichimoku cloud top (112.75). The key support stands at 111.91 (major 38.2% retrace on September – November rise). A slide below this level should pave the way toward the 200-day moving average (111.47).
The pound is in on a good vibe this week, as investors gradually return on hopes that a higher divorce bill could melt the ice between EU/UK officials on Brexit negotiations. The UK budget statement will be in focus today. Chancellor Philip Hammond will likely sound cautious on budget and his statement could have a limited impact on the pound. Cable is consolidating gains above the 50-day moving average (1.3215). Offers are touted at 1.3280/1.3300. The EUR/GBP tested 0.8840 (major 61.8% retrace on November rebound) on the downside, if cleared, could encourage a further slide toward the 200-day moving average (0.8815). The FTSE is set for a flat open.
German political tensions curbed the positive momentum that the euro needs to attract long positions to a low yielding currency. Two opposite forces are in play for determining the euro appetite right now. The Eurozone yields edge lower and low yields are discouraging for taking and sitting on long positions. Yet on the other hand, lower core-periphery spread provides some support. The EUR/USD sees resistance pre-1.1800 (100-day moving average). Support is eyed at 1.1707/1.1670 (50% and 61.8% retrace on November rebound).
Crude oil is better bid. WTI crude (+1.57%) advanced past $57.75 in Asia, after the API data showed 6.36-million-barrel contraction in US crude inventories last week. The more official EIA data is due today, the consensus is a 1.4-million-barrel contraction versus 1.9-million-barrel rise printed a week earlier. Offers are seen at $58/60 area. Given that OPEC’s production extension plans have already been widely priced in, other factors are perhaps behind the price oscillations at the moment. Some wonder what would happen if the Mid-East tensions were to ease. Have the OPEC production cuts been more effective due to supply disruptions in Middle East and could the easing tensions impact the price evolution negatively?