RENEWABLES: UK Morning Wind Forecast

Friday’s rating actions help drive moves in EGB spreads early today, with Spanish (S&P upgraded Spain to A+; Outlook Stable) & Portuguese (Fitch upgraded Portugal to A; Outlook Stable) 10s flat vs. Bunds, while French paper is ~1.5bp wider (Fitch downgraded France to A+; Outlook Stable).

• Friday’s moves underscored the idea of rating convergence between France & the Iberians, given the political and fiscal risk evident in the former.
• The 10-Year Spain/France/Portugal fly is on track for a fresh cycle closing low, trading through -23bp.
• We highlighted the likelihood of the moves for both France and Portugal last week.
• Commerzbank suggests that the fallout for OATS is “likely to be limited, given that OATs are already trading markedly cheaper than double-A or single-A rated peers. While some investors may start to reduce single-A OAT exposure, others may use average ratings, adjust the rating thresholds in their EGB benchmarks, or utilise more attractive spread levels. We close our tactical OAT-Bund spread tightening view and turn neutral for the time being”.

Fig. 1: 10-Year Spain/France/Portugal Butterfly (bp)

• RES 4: $43.000 - Round number resistance
• RES 3: $42.974 - 2.382 proj of the Jul 31 - Aug 14 - 20 price swing
• RES 2: $42.606 - 2.236 proj of the Jul 31 - Aug 14 - 20 price swing 
• RES 1: $42.464 - HIgh Sep 12       
• PRICE: $42.160 @ 08:13 BST Sep 15
• SUP 1: $40.195 - 20-day EMA 
• SUP 2: $38.745 - 50-day EMA
• SUP 3: $36.216 - Low Jul 31 and a key support   
• SUP 4: $35.285 - Low Jun 24

Trend signals in Silver remain bullish. The metal traded higher Friday and this delivered  a fresh cycle high. The extension confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Moving average studies are in a bull-mode position, reinforcing current trend conditions. Sights are on $42.606 next, a Fibonacci projection. Initial support to watch is $40.195, the 20-day EMA.

• European Equity futures are extending gains, the Estoxx (VGU5) leads, up 0.60%, and is through the September high printed last Week.
• Next immediate resistance comes at 5438.00.
• In terms of sector, the Banks are the second best performer with the SX7E now up 0.62%.
• The initial resistance will be seen a little further out, up to 242.85, the 2009 high.
• SX7E did manage a 237.32 high back in late August.

(Chart source: MNI/Bloomberg finance LP).