EQUITIES: Eurostoxx 50 Futures Recovery Places Contract Back Above 50-Day EMA
A medium-term bull trend in Eurostoxx 50 futures remains intact, however, recent weakness highlights a stronger corrective cycle. The contract has breached two key support points; 5601.75, the 50-day EMA, and 5615.50, the base of a bull channel drawn from the Aug 1 low. The breach signals scope for a deeper pullback and opens 5503.00, a Fibonacci retracement. Initial firm resistance to watch is 5652.52, the 20-day EMA. S&P E-Minis maintain a softer S/T tone - for now - despite the recovery from Tuesday’s low. The recent breach of 6655.70, the Nov 7 low cancels recent bullish signals and signals scope for an extension of the current corrective cycle. Note that price has also traded through support at the 50-day EMA. A resumption of weakness would open 6540.25, the Oct 10 low and the next key support. Initial firm resistance to watch is 6767.81, the 20-day EMA.
- Japan's NIKKEI closed higher by 1286.24 pts or +2.65% at 49823.94 and the TOPIX ended 53.99 pts higher or +1.66% at 3299.57.
- Elsewhere, in China the SHANGHAI closed lower by 15.691 pts or -0.4% at 3931.051 and the HANG SENG ended 4.92 pts higher or +0.02% at 25835.57.
- Across Europe, Germany's DAX trades higher by 196.37 pts or +0.85% at 23358.91, FTSE 100 higher by 57.21 pts or +0.6% at 9564.24, CAC 40 up 59.7 pts or +0.75% at 8012.65 and Euro Stoxx 50 up 49.41 pts or +0.89% at 5591.15.
- Dow Jones mini up 185 pts or +0.4% at 46395, S&P 500 mini up 66.75 pts or +1% at 6728.5, NASDAQ mini up 338.5 pts or +1.37% at 25060.25.
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EQUITY OPTIONS: Estoxx OTM Put Spread
SX5E (19th Dec) 5200/4300ps, bought for 27.1 in 4.25k.
BOE: CORRECT: ILTR takeup GBP3.829bln; net increase of GBP3.189bln
- The ILTR take was GBP3.829bln - below last week's GBP6.344bln.
- This means a net increase of GBP3.189bln to a record GBP47.163bln (GBP5.004bln net addition last week - the highest level since the week of the first Covid lockdown).
- All bids were accepted by the BOE with no increase in clearing spreads above the minimum levels.
- STR usage saw a relatively small pickup of GBP1.375bln to GBP81.837bln on Thursday. This followed two weeks of reducing usage (falls in 3/4 of the past weeks) and remains below the record take up seen three weeks ago of GBP87.149bln.
- Overall, BOE repo balances with last week's two programmes were at a new record high for the week of GBP125.8bln (previous high was GBP121.508bln 3 weeks ago).
BONDS: 30-year Gilt/Bund Spread Down 1bp Following UK Fiscal Data
The 10-year Gilt/Bund spread is 0.5bps tighter at ~192bps, approaching the September 2024 closing low of 191.9bps. Gilts see slightly more outperformance further out the curve though, with the 30-year Gilt/Bund spread 1bp narrower at 213bps. Both the UK and German curves have bull flattened on the session.
- This morning’s UK September public sector finance data was better than expected (PSNB at GBP20.2bln vs 20.8bln cons), contributing to today's moves in Gilt yields. However, September PSNBex was still GBP0.1bln higher than the OBR’s forecast. The current YTD tracking error with the OBR has fallen, but remains at GBP7.2bln.
- Today’s 1.50% Jul-53 Green Gilt auction was soft, with another 0.8bp tail and the lowest accepted price below the pre-auction mid.
- The impact on Gilt futures was limited though. Futures are currently +18 ticks at 92.85, off opening highs of 92.92. A bull cycle remains intact, with initial resistance at last Friday's 93.17 high. This shields the 1.236 proj of the Sep 3 - 11 - 26 price swing at 93.30.
- Bund futures are +14 ticks at 130.07. Small resistance remains at 130.18, with better seen at Friday’s 130.59 high.
- Germany sold Green Bobl/Bunds this morning.
- 10-year EGB spreads to Bunds are biased up to 1bp wider, with European equity futures down 0.2%. Finland will sell 7/10-year RFGBs at 1100BST, while Estonia is holding a E500mln syndicated tap today.
- Eurozone Q2 fiscal data wasn’t a market mover. We’ll provide more commentary on that in due course.
- We don’t expect much from today’s ECB/BOE speakers, with regional focus on tomorrow’s UK CPI report.
