Financial market research and analysis

The FTSE slipped below the 6100 mark. All sectors are in the red except healthcare and pharmaceuticals trying to swim against the stream in London.

Miners were higher this morning on the back of some buy ratings from the likes of UBS and Goldman Sachs. The boost in metal prices owing to the Chinese halting some smelters also gave an early lift to miners yet gains remained short-lived. Copper futures gained up to 2% on some chatter that the plunge in copper prices might open the way for some acquisitions from certain producers. While on the flip side, the companies see their collateral melting with the cheapening copper, and have little incentive to top up before the global business conditions improve. Banks may well be left with extra copper to give away and keep the pressure to the downside for some more months.

Zooming into the miner sector, Anglo American having another nightmare of a day (-2%). Moody’s downgraded the company down to Baa3, while a further cut to junk is well possible as a result of the unprecedented fall in commodity prices. Anglo American shares lost more than 80% of their value since mid-2014 and there is still no light at the end of the tunnel with news that the global economic recovery is all but granted. The annual sales estimate has been revised down by another 36.27% over the past four weeks; Anglo American is expected to take a 60% hit on its 2015 sales, which translates in a significant 55.6% drop in its net adjusted income. Investors prefer staying away from this time bomb as no one is able to tell where and when the bottom in commodities will be hit. According to estimates, the earnings are set to weaken until 2017.

The oil market continues plummeting. WTI slid to a fresh low of $36.40, the failure in attempts for recovery refrain buyers from gaining momentum. Japanese Finance minister Amari said ‘continued crude oil price falls could affect BoJ’s inflation target, excluding effect of oil an option.’ Nikkei and Topix gained 0.97% and 0.59% respectively, while in China, Hang Seng and Shanghai’s Composite traded in the red as yuan hit its lower level in four years. The Canadian dollar extend losses to 73.16 cent. The oversold conditions deepen, yet the Fed hawks may not let the Loonie breath before next week’s FOMC verdict.

Euro-bulls show sign of fatigue

The euro-bulls started feeling the pinch near its 200-day moving average (1.1032). The positive trend loses momentum. The macro traders let the short-run traders surfing the rise in the euro, yet have not moved an inch away from their bearish view. In contrary, the downside risks in the euro are fuelled by cheapening energy prices. Should the slide in oil prices persist, and there is little conviction on the alternative scenario, Mr. Draghi will need to show more muscle to achieve the 2% inflation target We all know what this means for the ECB: more QE and even deeper negative rates. Therefore the macro players are still assembling in the dovish camp and are expected to gain field as soon as the temporary euro-bulls start showing signs of an exhaustion.

Technically, there is a formation of a bearish belt hold line, warning of the exhaustion of the uptrend suggesting a setback to 1.0845, the major 38.2% retrace on post-ECB rally. If the  200-day moving average is surpassed, the EURUSD could well stretch higher toward the key mid-term resistance eyed at 1.1268 (major Fib 38.2% retrace on Dec’14 – Mar’15 decline). The mid/long-term view remains bearish.