EQUITIES: Eurostoxx 50 Futures Below Key Support at 50-Day EMA
A medium-term bull trend in Eurostoxx 50 futures remains intact, however, the past week’s sell-off highlights a stronger corrective cycle. The contract has breached two key support points; 5600.89, the 50-day EMA, and 5621.00, the base of a bull channel drawn from the Aug 1 low. The breach signals scope for a deeper pullback and opens 5427.01, a Fibonacci retracement. Initial firm resistance to watch is 5645.61, the 20-day EMA. S&P E-Minis remain in a short-term bear-mode condition and a steep sell-off yesterday reinforces current conditions. The breach of 6655.70, the Nov 7 low cancels recent bullish signals and signals scope for an extension of the corrective cycle. Sights are on 6540.25 (pierced), the Oct 10 low and a key support. A break would open 6476.62, a Fibonacci retracement point. Initial firm resistance to watch is 6747.78, the 20-day EMA.
- Japan's NIKKEI closed lower by 1198.06 pts or -2.4% at 48625.88 and the TOPIX ended 1.84 pts lower or -0.06% at 3297.73.
- Elsewhere, in China the SHANGHAI closed lower by 96.16 pts or -2.45% at 3834.891 and the HANG SENG ended 615.55 pts lower or -2.38% at 25220.02.
- Across Europe, Germany's DAX trades lower by 244.09 pts or -1.05% at 23033.99, FTSE 100 lower by 53.09 pts or -0.56% at 9474.53, CAC 40 down 53.12 pts or -0.67% at 7927.95 and Euro Stoxx 50 down 70.82 pts or -1.27% at 5499.1.
- Dow Jones mini up 147 pts or +0.32% at 45973, S&P 500 mini up 1.75 pts or +0.03% at 6559.5, NASDAQ mini down 48 pts or -0.2% at 24085.5.
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UK FISCAL: Reeves looking to tax limited liability partners: Implications
- Stories out just after the close yesterday suggested that Chancellor Rachel Reeves was looking to impose a charge on limited liability partners in the Budget as she sees these as ways to easily avoid tax.
- Limited liability partnerships are used in particular by legal firms, GPs and accountancies. Because they are taxed as partnerships (similar to the self employed) they do not need to pay employers National Insurance Contributions (NICs) on the partners' earnings. As a reminder employers NICs were increased to 15% in April.
- The proposed plans could raise up to GBP2bln and would likely be popular with Labour's core voter base (taxing the wealthy).
- However, there could be adverse side effects. If this leads to GPs closing down or more senior GPs cutting back hours or retiring then access to front-line healthcare could be more restriced. This could lead to more pressure on A&E departments and one of UK's issue's is trying to reduce the proportion of those inactive in the labour market due to long-term sickness. This may be exacerbated if it makes it harder for people to get doctors appointments.
SNB: Schlegel Speaking On Economic Situation, SNB Monetary Policy
Little monetary policy signal in Schlegel's speech on the "Economic situation and monetary policy of the SNB" ahead of tomorrow's minutes.
- Paragraph potentially of note regarding tariff impact: "The announced but currently suspended US tariffs on certain pharmaceutical products could increase the downside risks somewhat."
- Full slides here (in German).
GERMAN AUCTION RESULTS: Weak 7-year Bund Auction
Weak demand again on that 2.50% Nov-32 Bund auction despite it being the only re-opening of the line in Q4.
- Bid-to-offer at 0.93x, below last month’s 1.13x.
- Lowest accepted price of 101.05 below the 101.062 pre-auction mid.
- The secondary price has fallen 3 points since the auction results were published, now at 101.034.
- Very little spillover to Bund futures however (5 ticks of downside)
