EQUITIES: Trend Cycle in Eurostoxx 50 Futures Unchanged and Bullish
The trend cycle in Eurostoxx 50 futures is unchanged, it remains bullish and a recent pullback appears corrective. Moving average studies are in a bull-mode position, highlighting a clear dominant uptrend. Sights are on 5516.00, the Mar 3 high and the key bull trigger. Clearance of this level would strengthen a bull theme. Key support to watch lies at 5268.58, the 50-day EMA. A clear break of this average is required to signal a possible reversal. The trend condition in S&P E-Minis is unchanged, it remains bullish and the contract is trading just ahead of its recent high. A print above 5993.50 last week, the May 20 high and a bull trigger, highlights a resumption of the uptrend and maintains a price sequence of higher highs and higher lows. An extension would open 6057.00 next, the Mar 3 high. Key support lies at 5774.07, the 50-day EMA.
- Japan's NIKKEI closed lower by 192.96 pts or -0.51% at 37554.49 and the TOPIX ended 28.66 pts lower or -1.03% at 2756.47.
- Elsewhere, in China the SHANGHAI closed higher by 7.895 pts or +0.23% at 3384.098 and the HANG SENG ended 252.94 pts higher or +1.07% at 23906.97.
- Across Europe, Germany's DAX trades higher by 97.12 pts or +0.4% at 24373.43, FTSE 100 higher by 7.56 pts or +0.09% at 8808.85, CAC 40 up 25.43 pts or +0.33% at 7830.1 and Euro Stoxx 50 up 20.37 pts or +0.38% at 5425.52.
- Dow Jones mini up 90 pts or +0.21% at 42590, S&P 500 mini up 11 pts or +0.18% at 5992, NASDAQ mini up 52.25 pts or +0.24% at 21818.75.
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FOREX: FX OPTION EXPIRY
Of note:
EURUSD 1.08bn at 1.1325.
USDCNY 1.46bn at 7.3000.
EURUSD 3bn at 1.1390/1.1400 (thu).
USDJPY 1.56bn at 143.00 (thu).
EURUSD 1.33bn at 1.1300 (fri).
- EURUSD: 1.1275 (538mln), 1.1325 (1.08bn), 1.1350 (372mln), 1.1400 (632mln).
- GBPUSD: 1.3350 (284mln).
- EURGBP: 0.8500 (489mln).
- USDJPY: 143.00 (398mln).
- USDCAD: 1.3815 (301mln), 1.3830 (543mln), 1.3845 (305mln), 1.3850 (356mln).
- AUDUSD: 0.6500 (709mln).
- AUDNZD: 1.0800 (405mln).
- USDCNY: 7.3000 (1.46bn).
- EURSEK: 10.9600 (542mln).
GERMANY: FAZ-No Second Round Of Chancellor Voting Today
FAZ reports that there will not be a second round of voting for a new chancellor today following centre-right Christian Democatic Union (CDU) leader Friedrich Merz's unexpected defeat in the first round of voting in the Bundestag a short time ago (see 'GERMANY: Merz Falls Short In First Round Of Chancellor Voting', 0925BST). The next vote has to take place within two weeks, once again with an absolute majority (316 votes) required. Merz won just 310 in the first ballot. Taggespiegel: "... according to an SPD parliamentary group spokesperson, the [second round] election could not take place until Friday at the earliest."
- As Jessica Parker at the BBC notes, "This is so embarrassing for Friedrich Merz. His whole pitch - of being an antidote to the weakness & division of the last govt - has crumbled on day one."
- The election of the chancellor is a secret ballot, meaning it is impossible to know which CDU/CSU or centre-left Social Democrat (SPD) lawmakers voted against Merz. What is clear is that at least five did so. The total seats held by the opposition Greens, Alternative for Germany and Die Linke is 302, while 307 MPs voted against Merz. A total of 620 valid ballots were cast, with one ruled invalid. This means nine lawmakers did not vote.
- Spiegel: "We are assuming full support among us," a [SPD] source says. No one was missing. One member of parliament blames the CDU/CSU: He suspects the dissenters in the CDU and CSU are trying to make the SPD look bad."
BUNDS: /SWAPS: Bonds & ASWs Rally As Merz Fails At First Vote, DAX Lower
Bunds have moved away from session lows in the wake of CDU leader Merz’s failure to be approved as the next Chancellor in the first round of voting (see our political risk team’s recent bullet for greater colour and details on what comes next).
- The move is relatively shallow, with yields now 1bp lower to 1bp higher on the day across the curve. 2-3bp lower than levels that prevailed into the headlines.
- Similarly, ASWs have more than reversed their early tightening, with spreads vs. 3-month Euribor now 0.4-1.1bp wider on the day.
- The bond curve holds steeper ahead of the pricing of today’s 30-Year syndication (also leading to underperformance for the long end on the ASW curve), while there is a modest dovish repricing further forward on the bond curve/STIR strip.
- The moves only reflect a modest reduction in the odds of meaningful fiscal easing being deployed in Germany at this stage.
- More sizeable moves have been seen in equities, with the DAX down over 1% on the day.
