EQUITIES: Trend Condition in Eurostoxx Futures Bullish, S/T Weakness Corrective
The trend condition in Eurostoxx 50 futures is bullish and S/T weakness appears corrective. Support at 5281.00, the Jul 1 / 4 low, remains intact. A clear break of it would strengthen a bearish threat and expose the reversal trigger at 5194.00, the Jun 23 low. For bulls, a stronger resumption of gains would refocus attention on 5486.00, the May 20 high. It has recently been pierced, a clear breach of it would resume the bull cycle and open 5500.00. The trend set-up in S&P E-Minis remains bullish and short-term weakness is considered corrective. A fresh cycle high this week maintains the price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode position highlighting a clear dominant uptrend. Sights are on 6477.31, a Fibonacci projection. Key support is at the 50-day EMA, at 6189.50. Support at the 20-day EMA is at 6333.64.
- Japan's NIKKEI closed lower by 270.22 pts or -0.66% at 40799.6 and the TOPIX ended 5.58 pts higher or +0.19% at 2948.65.
- Elsewhere, in China the SHANGHAI closed lower by 13.256 pts or -0.37% at 3559.952 and the HANG SENG ended 265.52 pts lower or -1.07% at 24507.81.
- Across Europe, Germany's DAX trades lower by 419.81 pts or -1.74% at 23645.28, FTSE 100 lower by 62.08 pts or -0.68% at 9070.75, CAC 40 down 141.3 pts or -1.82% at 7630.67 and Euro Stoxx 50 down 91.38 pts or -1.72% at 5228.54.
- Dow Jones mini down 408 pts or -0.92% at 43897, S&P 500 mini down 61.25 pts or -0.96% at 6313.75, NASDAQ mini down 259 pts or -1.11% at 23106.75.
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GERMAN AUCTION PREVIEW: 2.60% Aug-35 Bund
This morning, Germany will open its new on-the-run 10-year 2.60% Aug-35 Bund (ISIN: DE000BU2Z056) for E6bln.
- The size of this auction was increased by E1bln from E5bln in the Q3 calendar update. The E6bln auction size is the largest for a non-Schatz German auction since 2011 (and the largest of any German auction since September 2023). This is also the only E6bln German auction scheduled for Q3.
- Demand metrics in German auctions have recovered recently after a phase of weakness towards the beginning of Q2, and that also applies to the 10-year segment. At the last June 11 auction of the (previous on-the-run) 2.50% Feb-35 Bund, the bid-to cover came in at 2.69x and the bid-to-offer at 2.09x - a significant improvement from the 1.38x bid-to-cover / 1.06x bid-to-offer seen at a weak auction in late April. These metrics compare to a 1.38x - 2.84x range for bid-to-covers and a 1.06x - 2.17x range for bid-to-offers seen in German 10y auctions this year.
- At the last two 10y auctions (Jun 11, May 21), the secondary market mid-price has also been below the lowest accepted price again - contrary to the two 10y auctions ahead of that.
- Germany last week announced its 2025 budget details and 2026-29 broad financial plans, with the resulting issuance ramp-up, on balance, being perceived as quicker than expected by analysts previously. For our view on the events, see here.
- The next German auction will be E5bln of the new Oct-30 Bobl (ISIN: DE000BU25059) on June 8, while the 2.60% Aug-35 Bund will be re-opened on July 23, also for E5bln.
- Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.
CROSS ASSET: Long End Treasuries are extending lows
- US Tnotes is making an attempt through that initial support of 111.22 now, and the next support area will come at 111.13+.
- There's been a roll in German Bonds, helps explain why the German 10yr Yield spiked towards 2.65% on the open, printed a 2.644% high so far Today.
- The Heavy Bund supply has kept the pressure on Bund with EGBs also taking their cues from the US Govies.
- US Cash Tsys are trading cheaper and steeper, the US 5/30s if off Yesterday's low, which was its flattest level in 6 sessions.
GILTS: Futures Close Tuesday Gap Before Bouncing
Gilt futures close yesterday’s opening gap higher, basing at 93.10 before recovering to ~93.20.
- Little to add on the headline front, with bulls remaining in technical control.
- Initial support at the 20-day EMA (92.78) remains untouched.
- Yields 1.5-2.5bp higher, curve biased steeper.
- Local focus on this morning’s Mar-28 supply and comments from BoE dovish dissenter Taylor (more on the latter to follow in due course).
