EQUITIES: Eurostoxx Futures Bull Cycle Intact, Key Resistance at 5825.00
A bull cycle in Eurostoxx 50 futures remains intact and short-term weakness is considered corrective - for now. Price is trading above the 20- and 50-day EMAs, and sights are on 5742.40 next (pierced), 76.4% of the Nov 13 - 21 bear leg. A clear breach of this price point would pave the way for an extension towards 5825.00, the Nov 13 high and a key resistance. First key support to watch lies at 5632.90, the 50-day EMA. A bull cycle in S&P E-Minis remains intact and today’s pullback appears corrective - for now. Note that recent gains signal the likely end of the corrective cycle between Oct 30 and Nov 21. A resumption of gains would highlight potential for a move towards the key resistance and bull trigger at 6953.75, the Oct 30 high. Key support lies at 6525.00, the Nov 21 low. First support to watch is at 6815.09, the 20-day EMA.
- Japan's NIKKEI closed lower by 453.98 pts or -0.9% at 50148.82 and the TOPIX ended 31.78 pts lower or -0.94% at 3357.24.
- Elsewhere, in China the SHANGHAI closed lower by 27.178 pts or -0.7% at 3873.318 and the HANG SENG ended 10.27 pts lower or -0.04% at 25530.51.
- Across Europe, Germany's DAX trades lower by 19.88 pts or -0.08% at 24111.48, FTSE 100 higher by 9.64 pts or +0.1% at 9666.03, CAC 40 up 37.31 pts or +0.47% at 8060 and Euro Stoxx 50 up 6.88 pts or +0.12% at 5715.
- Dow Jones mini down 111 pts or -0.23% at 47995, S&P 500 mini down 39 pts or -0.57% at 6852.75, NASDAQ mini down 201.75 pts or -0.78% at 25596.25.
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GILTS: 2-Year Yields Hit Lowest Since '23 After Soft Labour Market Data
Dovish price action in the wake of this morning’s soft labour market data leaves 2-Year gilt yields at the lowest level seen since August ’24.
- The benchmark trades as low as 3.732%.
- Fresh extension lower would target the 22 August low (3.653%).
- Note that the market now prices over 80% odds of a BoE rate cut in December.
- Meaningful extension lower for 2s in the immediate future would likely require the market to price a December cut with near certainty.
- We get two CPI releases ahead of the Bank’s December meeting (the first coming next week).
- The recent adjustments to the BoE’s forecasts mean that downside surprises to headline CPI are going to be harder to achieve when compared to the previous forecasts.
- If the soft details in today's labour data are not revised away in the next release, we assume that in line CPI readings would be enough to tilt the balance towards Governor Bailey joining the dovish camp, cementing a December cut.
- The 2s10s curve is ~6bp off its October low, last 66.5bp. Uptrend support drawn off the August ’23 lows remained intact during October/early November. We detailed steepening risks for that curve in the early part of last week.
Fig. 1: UK 2-Year Gilt Yields (%)
Source: MNI - Market News/Bloomberg Finance L.P.
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