EGBS: German Curve Bear Flattens, Middle East Headlines Generate Vol
The German curve has bear flattened today, with developments in the Middle East still dominating intraday price action. 2-year yields are up 5.5bps to 2.18%, with oil/gas benchmarks broadly consolidating this week's surges. Meanwhile, 10-year yields are up 4bps to 2.79%. That leaves 2s10s at 60bps, a little above Tuesday’s 59.5bp multi-month low.
- ECB officials continue to push back on the need for an immediate policy reaction to the energy price moves, but stress that it is the length and severity of the conflict that will be key to monitor. EUR 5y5y inflation expectations remain broadly well anchored for now, currently at 2.12%.
- Bund futures are -45 ticks at 127.79 on very heavy cumulative volumes of over 600k. The largest burst of activity came amid a Sky News Arabia post suggesting “Iran is ready to abandon its nuclear program on condition that the United States presents a satisfactory alternative offer”. There remains little clarity on the timing and context of the comments, and Bunds have since pared knee-jerk gains.
- Spain and France have sold bonds today. The 3.50% Nov-35 OAT saw poor results, attracting a 2.19x bid-to-cover ratio for the E6.455bln issued (vs 2.43x prior cover). The lowest accepted price of 100.81 was also below the 100.858 pre-auction mid-price. The secondary price of the OAT has weakened following publication of the results.
- In data, Eurozone January retail sales were weaker than expected at -0.1% M/M (vs 0.3% cons), though December sales were revised up to 0.1% (vs -0.5% initial). French January IP was broadly in line (0.5% M/M vs 0.4% cons), while Spain was weaker than expected (-0.4% M/M vs 0.5% cons).
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COMMODITIES: Gold Extends Recovery From Monday's Low to Over 10%
A bull cycle in WTI futures remains intact. However, Monday’s impulsive sell-off highlights the beginning of a corrective phase. Attention is on support at the 20-day EMA, at $61.01. The 50-day EMA lies at $59.74. A clear breach of the 50-day average would highlight a stronger reversal and open $58.53, the Jan 20 low. Key resistance and the bull trigger has been defined at $66.48, the Jan 30 high. Gold has recovered from Monday’s low. However, the sharp sell-off from last week’s high still highlights a potential top in the L/T trend and from a S/T perspective, marks an unwinding of the recent extreme overbought condition. The metal has pierced the 50-day EMA, at $4551.2. A clear break of this average would signal scope for a deeper retracement and open $4274.7, the Dec 31 ‘25 low. Initial resistance is 4999.2, a Fibonacci retracement.
- WTI Crude down $0.07 or -0.11% at $62.07
- Natural Gas up $0 or +0.12% at $3.241
- Gold spot up $256.39 or +5.5% at $4916.96
- Copper up $20.5 or +3.52% at $603
- Silver up $7.25 or +9.15% at $86.5477
- Platinum up $111.39 or +5.22% at $2242.23
EQUITIES: This Week's Gains Reinforce Bullish E-Mini S&P Theme
A bull cycle in Eurostoxx 50 futures remains intact and Monday’s rally reinforces this theme. Key support to monitor lies at the 50-day EMA at 5857.60. A clear breach of this average would signal scope for a deeper retracement. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on the key resistance and bull trigger at 6072.00, the Jan 14 / 15 high. The trend in S&P E-Minis is bullish and Monday’s strong gains reinforce this theme. The move higher also suggests that the recent bear threat merely resulted in a short lived correction. Attention is on key resistance and the bull trigger at 7043.00, the Jan 28 high. A break of this level would confirm a resumption of the primary uptrend and open 7080.92, a Fibonacci projection. Key support and a bear trigger has been defined at 6814.50, the Jan 21 low.
- Japan's NIKKEI closed higher by 2065.48 pts or +3.92% at 54720.66 and the TOPIX ended 109.71 pts higher or +3.1% at 3645.84.
- Elsewhere, in China the SHANGHAI closed higher by 51.992 pts or +1.29% at 4067.738 and the HANG SENG ended 59.2 pts higher or +0.22% at 26834.77.
- Across Europe, Germany's DAX trades higher by 142.95 pts or +0.58% at 24940.47, FTSE 100 lower by 2.02 pts or -0.02% at 10339.36, CAC 40 up 26.28 pts or +0.32% at 8207.45 and Euro Stoxx 50 up 37.08 pts or +0.62% at 6044.59.
- Dow Jones mini up 1 pts or +0% at 49524, S&P 500 mini up 14.25 pts or +0.2% at 7016.75, NASDAQ mini up 132.25 pts or +0.51% at 25982.25.
EGB OPTIONS: RX weekly 127.50/127.00 Put Spread Sold
RX weekly 127.50/127.00 put spread 8K given at 9 (expire Friday).
