Financial market research and analysis

The FTSE slipped below the 7300p level at the open. Mining stocks (-0.50%) lead gains as copper and iron ore traded 0.93% and 1.87% lower respectively. Financials (+0.16%) were slightly better bid. 

Barclays traded 2% higher at the open, although its 4Q profit missed analyst estimates. The bank’s fixed-income trading revenues rebounded less than its US competitors, which have better profited from the Trump-based reflation volatility. Combined to higher costs for deferred bonuses, Barclays printed £284 million pre-tax profit versus £646 million forecasted. On the other hand, Barclays announced to wane its African business that shelters its unwanted assets six months earlier than anticipated and announced 2p/share dividend.

Despite a challenging year for the UK banks, Barclays outperformed its domestic competitors as its share price recovered past 80% after bottoming at 127.20p posterior to the Brexit vote. In comparison, RBS recovered up to 74%, HSBC up to 67%, Standard Chartered up to 55% and Lloyds up to 48%. 

Glencore (0.29%) opened softer despite announcing 48% jump in its annual profits due to the rise in commodity prices and strong trading performance. As such, the commodity trading and mining company beat the analyst estimates by printing a solid $1.99billion FY adjusted income versus $1.59bn estimated. The company announced to pay $1 billion in dividend amid the upswing in commodity prices boosted its business’ performance. 

The negative sentiment in the mining sector kept the Glencore shares subdued following solid results.

The GBPUSD remains rangebound. Buyers are touted at 1.2420/1.2390 (area including 50 and 100-day moving averages), meanwhile the pound sees little long interest past $1.25. The key mid-term resistance stands at 1.2575 (minor 23-6% retracement on post-Brexit decline).


US dollar wanes along with March Fed expectations

The Federal Reserve (Fed) meeting minutes triggered a ‘sell-the-fact’ wave in the US dollar, as Treasury yields declined. The minutes showed that the FOMC members were keen on raising the US interest rates ‘fairly soon’, without however voicing concerns about accelerating inflation which would encourage them to accelerate along the path towards a steeper policy normalisation. As a result, the March rate hike expectations retreated to 34%, suggesting that the Fed will certainly wait for June to raise rates (77.5% probability). We remind that May meeting is still live with 61.8% chances of action, yet FOMC Chair Janet Yellen appeared inclined toward June at her semi-annual testimony a week ago.

The S&P500 traded lower from record highs for the first time in ten straight sessions. Oil and energy stocks failed to build on gains as the underlying oil market rejected to buy the positive breakout after Secretary General of OPEC Mohammed Barkindo said that the compliance with production cuts and reducing the supply glut has been strong. Although the joint OPEC action has been keeping the prices on the upper range of the market, Barkindo’s recent commentaries failed to gather a sufficient momentum to trigger a positive price breakout. Instead, traders preferred selling the top of the range. Given the deeply overbought conditions, we could expect a further downside correction in the price of Brent crude toward $55.30/55.00 per barrel.

US crude (+0.82%) advanced to $54 in Asia, on hints of the first inventory drop of 2017 in the US. Solid offers trail above $55, as investors are not fully convinced on the possibility of a sustained recovery above this level.


German 2-year bund yields at lowest on record 

In the Eurozone, the German two-year Bund yield dropped to the lowest level on record on French election worries; the premium on two-year Bunds hit the highest since 2000. The rising appetite in German assets could bring forward the core-periphery divergence risks as the European Central Bank (ECB) committed to extend its asset purchases program until the end of 2017.

The EURUSD shortly traded below the 1.05 mark on Wednesday. Selling pressures remain solid, as the negative momentum gains pace for an eventual extension of losses toward the 1.0400/1.0380 zone.


USDJPY: mid-term reversal risks

The USDJPY weakened to 113.08 in Tokyo, as the US dollar depreciated across the board. Nikkei (-0.27%) and Topix (-0.24%) softened on stronger yen. The pair is testing the 100-day moving average (112.90), which has acted as a solid support along the Trump-rally. Below the 100-DMA stands the critical 112.50 support (major 38.2% retracement on Trump rally), if broken, should suggest a mid-term bearish reversal for a deeper sell-off to 110.60 (50% level) before the 110.00 mark.