Financial Market Research and Analysis

Our analysts have their fingers on the pulse of the world's financial market news.

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FTSE gains momentum, NFPs in focus
The FTSE is gathering positive momentum after having broken the 200-hour moving average on the upside at the open.
All FTSE sectors started the day in the green in London. Basic materials and energy companies are leading gains, with a decent rally in BP’s stock price as the company announced to pay $175 million to stakeholders who have been miscommunicated the severity of 2010 oil spill in the Gulf of Mexico.
 
The GBPUSD is a better bid above the 1.44 mark today. Yet, the market remains comfortably short on GBP given the itchy feeling in the wake of the UK EU referendum. The spot pound market gives 40% probability for a Brexit event, although mixed polls are set to cause decent price volatility in the run up to the June 23rd referendum. The 3-month risk reversals are at record lows as investors are increasingly buying puts to hedge against the risks of depreciation in the pound in a hypothetical event of Brexit.
 
S&P500 hits 7-month high before NFP
 
The S&P500 hit a 7-month high in New York ahead of the US jobs data due out today. The consensus for May nonfarm payrolls (NFP) is 160’000, that’s significantly below the 12-month average of 215’000. The US dollar is mixed across the board with the US dollar index hovering around the 95 level. Expectations of a June Fed hike is fading, while the probability of an action in July is about 50% as of today. A soft NFP read will certainly push Fed hawks aside and further weigh on the US dollar. Only a print above the 200’000 level could bring the possibility of a June hike seriously back on the table. 
 
OPEC not ready to run up the white flag
 
The OPEC has again failed to reach an agreement in its latest meeting in Vienna yesterday.
 
Although the appetite for a bigger market share is becoming pricey, major producers are not ready to run up the white flag. Rising financial pressures bring the world’s most cost-efficient producers to raise debt to cope with the cost of extending their market share at current market prices. Abu Dhabi sold $5 billion worth of government bonds in April as Saudi Arabia is preparing to issue $15 billion worth of bonds by early July. That being said, it is an opportune time to sell debt as it gives a good alternative to investors looking for returns in this low rate environment, while avoiding highly volatile stock markets. Saudi Arabia is apparently ready to exploit this opportunity, which broadens its financial scope to remain ahead of the curve.
 
In this context, WTI will likely see resistance pre-$50 as fundamentals haven’t changed. The global oil glut could continue to pressure oil prices towards the $47.40, May 23rd low, if cleared this could gather enough momentum to retrace towards $45.

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