EQUITIES: Medium-Term Trend Condition in EuroStoxx 50 Futures Remains Bullish
The medium-term trend condition in Eurostoxx 50 futures remains bullish and for now, the latest pullback appears corrective. Key support lies at the 50-day EMA at 5870.81. It has been pierced, a clear break of this average would undermine the bull theme and signal scope for a deeper retracement. The bull trigger at 6072.00, the Jan 14 / 15 high, has been pierced. A move through this hurdle would resume the primary uptrend. A short-term bearish theme in S&P E-Minis has resulted in a break of 6814.50, the Jan 21 low and a recent bear trigger. Note too that the contract is trading below both the 20- and 50-day EMAs. This highlights a stronger short-term reversal and signals scope for a deeper retracement. A continuation lower would open 6691.56, a Fibonacci retracement point. Initial firm resistance is seen at 6917.97, the 50-day EMA.
- Japan's NIKKEI closed higher by 435.64 pts or +0.81% at 54253.68 and the TOPIX ended 46.59 pts higher or +1.28% at 3699.
- Elsewhere, in China the SHANGHAI closed lower by 10.334 pts or -0.25% at 4065.583 and the HANG SENG ended 325.29 pts lower or -1.21% at 26559.95.
- Across Europe, Germany's DAX trades higher by 46.41 pts or +0.19% at 24539.4, FTSE 100 lower by 1.55 pts or -0.02% at 10307.77, CAC 40 down 16.63 pts or -0.2% at 8221.54 and Euro Stoxx 50 up 15.64 pts or +0.26% at 5941.34.
- Dow Jones mini up 93 pts or +0.19% at 49088, S&P 500 mini up 22.75 pts or +0.33% at 6843.5, NASDAQ mini up 99.75 pts or +0.4% at 24749.5.
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GILTS: Resistance Broken In Futures, Trend Support Broken In 10s, Curve Flattens
The rally stemming from yesterday’s German CPI data and ongoing geopolitical risks extends further.
- Futures have broken resistance at the November 27 top (91.93), trading as high as 92.05. Next level of upside interest noted at the November 12 high (92.31).
- Yields 2.5-7.5bp lower.
- 2-Year yields have registered the lowest level seen since August ’24.
- 10-Year yields have broken uptrend support drawn off the late ’21 lows (admittedly after several adjustments being made for similar breaches during ’25), which switches focus to the cluster of October and November lows (basing at 4.369%).
- The GBP4.25bln auction of the 4.125% Mar-31 gilt passed smoothly.
- BoE-dated OIS moves to price 43bp of easing through year-end vs. 40.5bp late yesterday.
- SONIA futures 0.5-5.5 firmer, strip flattens. SFIH6/Z6 moves to fresh cycle lows, nearing the May ’24 base (-27.5).
- The latest BoE DMP survey will be released tomorrow.
- As a reminder, we think that progress on headline CPI and official labour market data will not be sufficient to justify the next BoE rate cut, at least not in isolation. It is likely that the Bank will also need to see progress on inflation expectations data as well as further DMP prints and a non-adverse result from the Agents' Pay Survey.
Fig. 1: 10-Year Gilt Yield (%)
Source: MNI - Market News/Bloomberg Finance L.P.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Feb-26 | 3.712 | -1.3 |
Mar-26 | 3.619 | -10.6 |
Apr-26 | 3.509 | -21.6 |
Jun-26 | 3.441 | -28.5 |
Jul-26 | 3.368 | -35.8 |
Sep-26 | 3.335 | -39.1 |
Nov-26 | 3.300 | -42.5 |
Dec-26 | 3.293 | -43.2 |
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Jan08 $1.1800(E1.8bln); Jan09 $1.1500(E5.3bln), $1.1800(E2.3bln); Jan12 $1.1300(E1.5bln), $1.1800(E1.3bln)
- USD/JPY: Jan08 Y156.15($2.1bln), Y157.00($2.9bln)
- AUD/USD: Jan08 $0.6500(A$1.3bln), $0.6730(A$1.1bln)
- USD/CNY: Jan08 Cny7.0469($1.2bln)
SECURITY: Risks Abound As US Tracks Russian-Flagged Tanker In North Atlantic
A standoff could be developing in the North Atlantic, with at least one Russian naval vessel having been dispatched to guard an empty oil tanker that may be a target for US military interception, according to NYT and WSJ reports. The tanker was formerly known as the Bella 1. Having failed to dock in Venezuela to load oil, it evaded the US blockade of sanctioned vessels and steamed into the Atlantic in December, with its crew repelling US attempts to seize it. Reports suggest the tanker's crew changed the vessel's designation to 'Marinera' and painted a Russian flag on its hull in an effort to claim Moscow's protection.
- Newsweek reports the ship is currently between Iceland and the UK, traversing part of the GIUK gap, a key two-channel naval chokepoint in the North Atlantic.
- The UK Defence Journal reports, "The movement comes as evidence mounts that the United States is preparing a maritime interdiction operation to prevent the tanker reaching a safe haven [...] As Marinera progresses northward, open-source observers have identified a corresponding increase in Western intelligence, surveillance and reconnaissance activity across the North Atlantic.[...] the pattern and timing of these movements closely match known requirements for a compliant or non-compliant maritime boarding operation."
- The seizure of the Skipper tanker off the coast of Venezuela in December passed off relatively smoothly (albeit as an early indicator of US intentions towards Venezuela). However, a potential boarding operation in the North Atlantic on a nominally Russian-flagged tanker, with the reported close proximity of Russian naval vessel/vessels, presents a much higher risk of conflict escalation.
