EQUITIES: Sell-Off in E-Mini S&P This Week Reinforces Short-Term Downtrend
The trend in the Eurostoxx 50 futures contract remains bullish with price trading closer to its recent trend highs. Key short-term support has been defined at 5373.00, the Mar 4 low. A reversal lower and a break of this level would signal scope for a deeper retracement and expose the 50-day EMA at 5299.82. For bulls, a continuation higher would open the 5600.00 handle next. A bear threat in S&P E-Minis remains present and a sharp sell-off this week reinforces a short-term downtrend. The contract traded to a fresh short-term cycle low again, Thursday, marking an extension of the current bear leg. This reinforces a stronger reversal and a double top pattern on the daily scale. The focus is on 5698.25, a Fibonacci retracement. Initial firm resistance to watch is 6002.65, the 50-day EMA.
- Japan's NIKKEI closed lower by 817.76 pts or -2.17% at 36887.17 and the TOPIX ended 42.82 pts lower or -1.56% at 2708.59.
- Elsewhere, in China the SHANGHAI closed lower by 8.552 pts or -0.25% at 3372.546 and the HANG SENG ended 138.41 pts lower or -0.57% at 24231.3.
- Across Europe, Germany's DAX trades lower by 286.12 pts or -1.22% at 23115.55, FTSE 100 lower by 19.66 pts or -0.23% at 8664.47, CAC 40 down 51.78 pts or -0.63% at 8129.93 and Euro Stoxx 50 down 31.75 pts or -0.58% at 5481.35.
- Dow Jones mini up 97 pts or +0.23% at 42694, S&P 500 mini up 20.5 pts or +0.36% at 5766.5, NASDAQ mini up 102 pts or +0.51% at 20199.25.
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EGBS: OATs Continue To Benefit From Reduction In Short-Term French Risks
The reduction in short-term French political risk premium continues to filter into the 10-Year SPGB/OAT/PGB fly after the French Socialist Party indicated that it would not support a censure motion against PM Bayrou (vote scheduled for later today).
- The structure is testing the November 21 closing level at -37.1bp, ~19bp off cycle/’25 closing lows.
- While the short-term risks have clearly lessened on that development, medium-term fiscal and political headwinds remain intact, with difficult discussions surrounding pensions and further fiscal tightening needing to be addressed on the coming months.
- As such, Commerzbank continue to suggest that “an ongoing OAT recovery should be used to add to structural shorts in the semi-core complex vs. Iberia.”
Fig. 1: 10-Year SPGB/OAT/PGB Fly (bp)
Source: MNI - Market News/Bloomberg
STIR: SFRH6/U6/H7 Fly Lifted
SFRH6/U6/H7 fly paper paid -3.5 on ~4.1K. ~6.4K lots traded at that price in total on the session.
FOREX: FX OPTION EXPIRY
Of note:
USDJPY 2.07bn at 153.15/153.25.
USDCAD ~1bn at 1.4240.
EURUSD 5.37bn at 1.0400/1.0450 (thu).
GBPUSD 1.01bn at 1.2550 (thu).
USDCAD 1.01bn at 1.4310 (fri).
EURUSD 3.5bn at 1.0450/1.0455 (mon).
EURUSD 2.04bn at 1.0450 (tue).
- EURUSD: 1.0375 (230mln), 1.0400 (720mln), 1.0430 (473mln), 1.0475 (326mln), 1.0500 (1.35bn).
- USDJPY: 153.15 (965mln), 153.25 (1.11bn).
- USDCAD: 1.4240 (954mln).
- AUDUSD: 0.6260 (364mln).
- NZDUSD: 0.5700 (379mln).
