OUTLOOK: Price Signal Summary - Support In Gilts Intact For Now
Dec-11 12:16
- In the FI space, Bund futures remain in a bear-mode cycle following a recent impulsive sell-off and this week’s initial downward acceleration. Scope is seen for an extension towards the 127.00 handle. Key short-term resistance is 128.75, the Dec 3 high. Note that the contract has entered oversold territory. A stronger corrective bounce would allow this oversold condition to unwind. Yesterday’s price pattern is a doji candle - a short-term reversal signal.
- Support to watch in Gilt futures is 90.53, the Nov 25 and 26 low. A breach of this level would undermine a bull theme and instead signal scope for a deeper retracement towards 89.86, the Nov 19 low and a bear trigger. For bulls, a stronger resumption of gains would instead signal scope for a climb towards resistance at 92.55, the Nov 11 high. Initial firm resistance to watch is 91.93, the Nov 27 high.
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EQUITY OPTIONS: EU Bank Call Spread
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SX7E (19th dec) 250/260cs, bought for 2.35 in 3k.
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EU-UK: BBG-UK Rejects EU Demand For EUR6.75bln To Join SAFE Procurement Program
Nov-11 12:03
Bloomberg News reports that the UK is set to reject a demand of up to EUR6.75bln from the European Commission to join the EU's Security Action for Europe (SAFE) military procurement program. The report claims the Commission wants EUR4-6.75bln from the UK, in addition to a EUR150-250mln administration fee to join the programme. The UK gov't said in a statement that, “We will only agree deals that provide value to the UK and UK industry. Nothing has been agreed, and we will not give a running commentary on ongoing talks.”
- UK defence contractors stand to benefit from entry into SAFE, as member states would be allowed to borrow from a EUR150bln pot backed by the EU's budget to invest in defence capabilities. At present, only components from the EU, Ukraine, or EFTA states qualify for SAFE funds, but there have been efforts to bring non-EU NATO states such as the UK, Canada and Turkey into the program.
- There is a notable split among EU members. Many Russia hawks, notably on the EU's eastern flank, advocate allowing the UK to join as soon as possible with few conditions, claiming that the UK's sizeable defence industry would facilitate a faster military buildup, crucial in the face of continued Russian hybrid attacks and aerial incursions.
- Others, led by France (which has its own large defence industry) argue that SAFE must favour EU firms to boost the Union's strategic autonomy and reduce reliance on other actors such as the US and UK.
