EU BASIC INDUSTRIES: Stora Enso: Spinoff Impact

WTI futures traded to a fresh S/T cycle high last Wednesday before finding resistance. The recovery since Apr 9, appears corrective. Key resistance to watch is $62.71, the 50-day EMA. It has been pierced, a clear break of it would highlight a stronger reversal and open $65.82, Apr 4 high. For bears a reversal lower would refocus attention on $54.33, the Apr 9 low and bear trigger. The price pattern on May 21 is a shooting star - a reversal signal. Gold has recovered from its recent lows. The climb signals the end of the corrective phase between Apr 22 - May 15. Medium-term trend signals are unchanged and remain bullish. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend. A continuation higher would open $3435.6 next, the May 7 high. Key support and the bear trigger has been defined at $3121.0, the May 15 low.

• WTI Crude up $0.1 or +0.16% at $61.64
• Natural Gas down $0.07 or -2.1% at $3.264
• Gold spot down $43.41 or -1.3% at $3300.13
• Copper down $7.95 or -1.64% at $475.65
• Silver down $0.48 or -1.42% at $33.0085
• Platinum down $11.51 or -1.06% at $1079.6

A bullish theme in Eurostoxx 50 futures remains intact and the recent pullback appears corrective. Moving average studies are in a bull-mode position, highlighting a clear uptrend and recent gains maintain the sequence of higher highs and higher lows. Sights are on 5516.00, the Mar 3 high and the key bull trigger. Key support to watch lies at 5230.62, the 50-day EMA. Clearance of this average would signal a possible reversal. A bullish trend condition in S&P E-Minis remains intact and the latest pullback is considered corrective. Last Friday’s sell-off resulted in a print below the 20-day EMA, at 5779.53. A key support lies at 5719.58, the 50-day EMA. A clear break of this average is required to highlight a stronger reversal and signal scope for a deeper retracement. Sights are on the bull trigger at 5993.50, the May 20 high.

• Japan's NIKKEI closed higher by 192.58 pts or +0.51% at 37724.11 and the TOPIX ended 17.58 pts higher or +0.64% at 2769.49.
• Elsewhere, in China the SHANGHAI closed lower by 6.152 pts or -0.18% at 3340.687 and the HANG SENG ended 99.66 pts higher or +0.43% at 23381.99.
• Across Europe, Germany's DAX trades higher by 124.65 pts or +0.52% at 24149.55, FTSE 100 higher by 79.72 pts or +0.91% at 8797.59, CAC 40 up 14.36 pts or +0.18% at 7841.82 and Euro Stoxx 50 up 19.65 pts or +0.36% at 5414.45.
• Dow Jones mini up 539 pts or +1.29% at 42210, S&P 500 mini up 87 pts or +1.5% at 5903.5, NASDAQ mini up 352.25 pts or +1.68% at 21325.75.

German exports could fall by up to E60bln or around 3-4% under a 50% US tariff scenario according to IFO calculations. "A significant proportion of German export business in the USA could become unprofitable”, IFO comments.

• Note that US rhetoric on trade matters with the EU has softened since last week's 50% tariff threat by President Trump, with the threatened start date kicked back from Jun 1 to Jul 9.
• For reference, E60bln would be around 1.4% of German 2024 GDP. Initial IFO calculations following the April 2 'Liberation Day' announcements estimated a negative 0.3pp impact on German 2025 GDP (based on the 20% EU tariff rate planned then).
• Net exports added 0.9pp to quarterly GDP growth in Q1 in Germany ('Q1 Final GDP Comparatively Bright, Potential Growth Muted' - MNI, May 23) although it did follow -1.1pp drags in both 3Q24 and 4Q24, driven by a longer-term downtrend of German exports to China (in place since 2022). With a Y/Y net export contribution of -1.4pps as of Q1, the German economy remains vulnerable to a deterioration in external sector conditions.