EGBS: European Yields Reverse Lower; Supply Digested Smoothly
European yields have reversed lower over the last 90 minutes, with 10-year maturities generally leading the rally. That sees the German 2s10s curve turn 2bps flatter on the session at 70.5bps. The 70bp handle has contained downside in the spread since the start of April. German 10s30s is 0.5bps steeper at 47bps.
- There hasn’t been an obvious headline trigger for the reversal in yields, which likely accounts for the smooth passing of Spanish/French supply and possible pre-positioning ahead of this afternoon’s ECB decision.
- A 25bp ECB cut is unanimously expected and fully priced. The market reaction will likely hinge on the balance of risks and updated economic forecasts, with the few clear signals expected in the policy statement.
- Short-end Spanish supply saw decent results, while LT OAT supply was also digested smoothly. There was still some evidence of softening long-end demand though, with the 3.75% May-56 OAT bid-to-cover ratio quite a bit below the April re-opening (2.29x vs 2.82x prior), despite a smaller amount being sold.
- Bund futures are +39 ticks at 131.28, up from an earlier session low of 130.79 and testing resistance at the June 3 high. The next topside target is 131.50 (May 7 high).
- BTPs outperform Bunds, with futures up +45 ticks at 121.20. The 10-year BTP/Bund spread has tightened another 1bp to a new multi-year low of 95bps.
- German April factory orders were stronger-than-expected at 0.6% M/M (vs -1.5% prior), while April PPI was soft.
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EQUITIES: Large Longer Dated Commerzbank Option trade
CBKE (18/12/26) 18c, bought for 8.15 in 35k.
COMMODITIES: Short-Term Gains for WTI Futures Considered Technically Corrective
A medium-term bearish trend in WTI futures remains intact and short-term gains are considered corrective. The move down that started Apr 23 signals the end of the correction between Apr 9 - 23. That cycle higher allowed an oversold condition to unwind. Attention is on $54.67, the Apr 9 low and a bear trigger. Clearance of this level would resume the downtrend and open $53.72, a Fibonacci projection. Resistance to watch is $64.32, the 50-day EMA. Gold has recovered from its recent lows and this suggests the correction between Apr 22 - May 1, is over. A continuation higher would refocus attention on key resistance and the bull trigger at $3500.1, the Apr 22 high. Clearance of this level would confirm a resumption of the primary uptrend. Key short-term support has been defined at $3202.0, the May 1 low. A break of this level is required to signal scope for a deeper retracement.
- WTI Crude up $1.46 or +2.56% at $58.49
- Natural Gas up $0.08 or +2.37% at $3.632
- Gold spot up $43.23 or +1.3% at $3377.06
- Copper down $1.15 or -0.24% at $468.85
- Silver up $0.56 or +1.73% at $33.0628
- Platinum up $14.78 or +1.53% at $979.36
EQUITIES: Eurostoxx 50 Futures Holding Onto Latest Gains
Eurostoxx 50 futures maintain a positive tone and the contract is holding on to its latest gains. Price has recently cleared both the 20- and 50-day EMAs, and attention is on 5263.01, 76.4% of the Mar 3 - Apr 7 bear leg. It has been pierced, a clear break of it would pave the way for a climb towards 5341.00, the Mar 27 high. Initial support to watch lies at 5067.15, the 20-day EMA. Clearance of this level would signal a possible reversal. The latest recovery in the e-mini S&P reinforces current bullish conditions.The contract has breached the 50-day EMA, at 5622.87. A continuation of the bull phase would expose 5837.25 next, the Mar 25 high and a bull trigger. It is still possible that the entire rally since Apr 7 is a correction. A reversal lower would signal the end of this corrective phase and expose initially, support at 5127.25, the Apr 21 low.
- In China the SHANGHAI closed higher by 37.083 pts or +1.13% at 3316.114 and the HANG SENG ended 158.03 pts higher or +0.7% at 22662.71.
- Across Europe, Germany's DAX trades lower by 260.12 pts or -1.11% at 23085.01, FTSE 100 higher by 3.66 pts or +0.04% at 8600.28, CAC 40 down 40.58 pts or -0.53% at 7687.35 and Euro Stoxx 50 down 34.91 pts or -0.66% at 5248.14.
- Dow Jones mini down 224 pts or -0.54% at 41093, S&P 500 mini down 37.25 pts or -0.66% at 5634.5, NASDAQ mini down 181.5 pts or -0.91% at 19874.
