EQUITIES: S&P Formally Enters Correction Territory
The trend condition in S&P E-Minis remains bearish and fresh cycle lows this week have reinforced current conditions. MA studies are in a bear-mode set-up highlighting a dominant downtrend Sights are on the next important support at 5499.25. The medium-term trend direction in the Eurostoxx 50 futures contract remains up and the latest pullback appears corrective - for now. However, support at the 50-day EMA, at 5311.55, has been pierced. A clear break of this average would highlight a strong short-term bear threat.
- Japan's NIKKEI closed higher by 263.07 pts or +0.72% at 37053.1 and the TOPIX ended 17.49 pts higher or +0.65% at 2715.85.
- Elsewhere, in China the SHANGHAI closed higher by 60.833 pts or +1.81% at 3419.562 and the HANG SENG ended 497.33 pts higher or +2.12% at 23959.98.
- Across Europe, Germany's DAX trades higher by 50.53 pts or +0.22% at 22616.03, FTSE 100 higher by 24.97 pts or +0.29% at 8567.69, CAC 40 up 35.51 pts or +0.45% at 7974.22 and Euro Stoxx 50 up 19.22 pts or +0.36% at 5347.35.
- Dow Jones mini up 206 pts or +0.5% at 41065, S&P 500 mini up 38.25 pts or +0.69% at 5565.75, NASDAQ mini up 175.75 pts or +0.91% at 19425.
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US-EU: EU Trade Mins To Hold Emergency Meeting To Discuss Trump Metals Tariffs
The Polish presidency of the Council of the European Union has called an emergency meeting of EU trade ministers for this afternoon following the announcement of the imposition of tariffs on EU steel and aluminium exports to the US. Ministers will meet virtually from 1600CET (1000ET, 1500GMT).
- As Politico reports, there remain divisions between EU members on whether the Union should respond forcefully with its own tariffs or other measures, or attempt to placate US President Donald Trump in order to avoid more potentially damaging tariffs on sectors like the autos industry.
EGBS: /SWAPS: Commerzbank Reiterate Long End Swap Spread Shorts
Commerzbank believe that “converging duration free-float of Bunds with that of U.S. Treasuries and gilts suggests that global ASW-curves will have to align further. We hence reiterate our structural shorts in (ultra-)long Bund-spreads, also vs. Schatz, and in 30y OATs vs. swaps.”
GILTS: Softer Start As Global Supply & Equity Bid Weighs
Supply-related pressure and a bid in European equities weighs on core global FI markets, biasing gilts lower at the open.
- Futures pierce yesterday’s base, printing as low as 92.83.
- First support at the 20-day EMA (91.63), with the short-term bullish cycle still intact but losing some momentum.
- Yields 1-2bp higher across the curve.
- 10-Year spread to Bunds 1bp tighter at ~207bp, sticking within the multi-week 203.8-213.3bp closing range.
- Local media outlets dominated by the latest fiscal warnings, with the NIESR noting that the UK’s fiscal headroom will have been fully eroded when the new OBR forecasts are released next month. This increases the risk of further tax hikes and spending cuts, although isn’t a new line of thought.
- Hawkish drift in GBP STIRs as gilts soften. BoE-dated OIS showing 58bp of cuts through December vs. ~60bp early today. SONIA futures flat to -2.5.
- Looking forwards, comments from BoE MPC member Greene are due later today (15:00 GMT).
- On the supply front the DMO will come to market with GBP1bln of 0.625% Mar-45 I/L supply.
