Financial market research and analysis

Nikkei (+1.47%) and Topix (+1.01%) rallied after five consecutive session losses. European stock markets inherited a bullish market. US equity futures gained despite worries on controversial tax reforms, now augmented by the repeal of Obamacare’s individual mandate.

DAX (0.61%) and CAC (+0.55%) opened upbeat.

FTSE 100 stocks (+0.01%) lagged despite a positive open elsewhere in Europe. Individual company news was the main responsible for the FTSE’s underperformance. GKN plunged as much as 9%, as the company announced that CEO-designate will leave with immediate effect and the write-off to its US aerospace business, which has been announced to be around 40 million pounds a month ago, could be as much as 80-130 million pounds. Investors sold off the stock aggressively.

Energy stocks (-0.64%) were mixed; BP (+0.84%) gained while Royal Dutch Shell (-1.08%) slid.

The pound traded marginally higher following the better-than-expected retail sales data. The retail sales in October printed 0.1% month-on-month growth compared with 0.6% contraction a month earlier. The headline inflation steadied at 3% over the same month, as wages growth steadied at 2.2% in September. Traders are looking for top-selling opportunities at a period of rising political certainty. Brexit news and rumours are responsible for sudden price volatility. GBPUSD offers are eyed at 1.3210/1.3240 (50-day moving average).


WTI: death cross formation weighing on sentiment

The death cross formation on hourly chart keeps WTI under the pressure of technical shorts. WTI crude sees support at $55/barrel. The key support to October – November rebound is eyed at $54.66 (major 38.2% retrace). Below this level, a short-term bearish reversal could shift bears’ target to $53.60 and $52.60 (major 50% and 61.8% retrace). Solid weekly resistance is eyed at $58.50 (50-week moving average).


Fed rate hike odds rise with core inflation

The US core inflation advanced to 1.8% year-on-year in October after having steadied at 1.7% for five months. The headline inflation decelerated from 2.2% to 2.0% as expected. Meanwhile, advance retail sales slowed less than expected in the same month, from 1.6% to 0.2% month-on-month versus 0.0% predicted by analysts. Odds for December Federal Reserve (Fed) rate hike rose to 97% after the core inflation picked up.

The US dollar gained, the US 10-year yield rebounded to 2.35%.


USD gains curb EUR-appetite

The EURUSD returned below its 100-day moving average (1.1794) after having advanced to 1.1860 on Wednesday. Stronger US dollar curbed the positive momentum, which is needed to attract EUR-longs into a low yielding currency. The EURUSD could slide toward its 50-day moving average (1.1750), if it loses the support of the tactical longs. Eurozone yields are marginally higher today.

The EURGBP hit 0.9013 and could pause before taking a fresh direction.


House tax vote today

The US stocks edged lower on Wednesday as the US tax reforms are now in jeopardy. Republicans’ decision to add the repeal of Obamacare’s individual mandate to their legislation could decrease the chances of approval in the Congress. The Dow Jones (-0.59%), the S&P500 (-0.55%) and Nasdaq (-0.47%) traded down. The S&P500 hit the lower daily Bollinger band (2’555), the VIX index spiked to 13%, last seen three months ago during low summer volumes.

US equity futures hint at a positive open, yet another disappointment could rapidly reverse gains. Event risks prevail.


Gold and Yen steady, Aussie mixed

The USDJPY rebounded past 113.00 in Tokyo after sliding to 112.47 on Wednesday. The pair could stabilize within 112.90/113.20 on improved US yields and better US dollar appetite.

Gold met resistance by the 50-day moving average ($1’288) and consolidated at the tight range of $1’275/1’280 in Asia.

The Aussie traded on mixed sentiment. The AUDUSD extended losses to 0.7569 as Australian economy added only 3’700 jobs in October versus 18’800 expected by analysts. Yet, a closer look at the labour data revealed that the situation was not as bad as it first seemed. Full-time jobs rose by 24’300 and compensated for 20’700 part-time job losses. The unemployment improved to 5.4% compared with 5.5% printed a month earlier. The AUDUSD’s squeeze below 0.7580 (lower Bollinger band on daily chart) attracted buyers, as iron ore futures traded up by 1.30%. However, carry traders aren’t willing to play long-AUD with AU/US 2-year yield spread the its lowest level since beginning of 2001. As such, the 75 cents level is still a plausible mid-term target for macro players. Likewise, the AUDJPY, a popular carry pair, slipped below its 200-day moving average (86.03) for the first time in five months.


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