EQUITIES: Bull Cycle in Eurostoxx Futures Intact, Contract Close to Cycle Highs
A bull cycle in Eurostoxx 50 futures remains intact. The first key support to watch lies at 5691.88, the 50-day EMA. A clear break of the EMA would highlight a potential short-term reversal. This would open 5622.00, the Nov 26 low. For bulls, sights are on key resistance at 5847.00, the Nov 13 high. The price pattern on Dec 18 is a bullish engulfing candle - a reversal signal. Short-term weakness in S&P E-Minis appears corrective. A key short-term support has been defined at 6771.50, the Dec 18 low. A break of this level is required to signal scope for a deeper retracement and would highlight a possible short-term reversal. For bulls, sights are on key resistance at 7014.00, the Oct 30 high. Clearance of this hurdle would confirm a resumption of the primary uptrend.
- Across Europe, Germany's DAX trades higher by 121.47 pts or +0.5% at 24611.34, FTSE 100 higher by 61.57 pts or +0.62% at 9992.51, CAC 40 up 44.71 pts or +0.55% at 8195.05 and Euro Stoxx 50 up 45.71 pts or +0.79% at 5838.03.
- Dow Jones mini up 182 pts or +0.38% at 48518, S&P 500 mini up 44.5 pts or +0.65% at 6937, NASDAQ mini up 276 pts or +1.08% at 25731.75.
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EGBS: BTPs Outperform After PMIs, OATs Consolidate Tuesday Widening
EGB spreads vs. Bunds little changed to 1bp tighter this morning, with BTPs outperforming.
- The 10-Year BTP/Bund spread threatens to break below 70bp, a level that has not been closed below since January ’10.
- Firmer than-expected Italian PMI data has factored into BTP outperformance.
- OATs consolidate yesterday’s widening (trading out to 74bp vs. Bunds). A reminder that yesterday’s underperformance in French paper was largely driven by local media reports suggesting that the centre-right Horizons, which sits as part of the governing coalition, will not back the draft Social Security Finance Bill (PLFSS) in the 9 December vote. That vote will prove crucial for the future of PM Sebastien Lecornu's administration.
GBP: EURGBP Firmly Rejects 0.88 on Flattering PMI
GBP edges to a new high and through yesterday's 1.3275 on the better-than-expected PMI print; futures markets see some interest on the move, prompting the best volumes of the day. Prices are now meeting an uptrendline drawn off the Nov13 high on the 15min candle chart - meaning further strength here could trigger more on the followthrough.
- Mirroring the move, EURGBP has firmly rejected the test of 0.88 overnight, erasing the majority of Monday's rally. This works against the bullish trend set-up in the cross - and this spell of weakness appears corrective until a close below the 50-day EMA, currently at 0.8755.
GILTS: Front End & Belly Holds Lower Ahead Of Supply, No Reaction To PMI
Yields 1.5bp higher to 0.5bp lower, curve flatter, with little reaction to the firmer-than-expected final services PMI data. Presence of the impending GBP4.75bln 4.00% May-29 gilt auction likely weighing on the front end/belly.
