AUTOMOTIVE: Volkswagen (VW Baa1/BBB+/A-[N]): 1Q25 Prelims

The 10-Year gilt/Bund spread is on track for its first sub-180bp close since September, with German fiscal expectations continuing to drive cross-market moves after the Greens raised hopes of an accord being struck this week.

• Next support of note in the spread located at 175bp, which protects the 76.4% retracement of the July ’24 to December ’24 widening (174.5bp).
• The speed of delivery (expected to be skewed into H225), size and maturity mix of any fiscal loosening-driven issuance out of Germany will be key for the spread over a multi-month horizon, as will the evolution of UK fiscal policy, given the erosion of already limited fiscal headroom.

Fig. 1: 10-Year Gilt/Bund Spread (bp)

Source: MNI - Market News/Bloomberg

• Nearly a 100 pips range for the EURUSD as it extends and gather momentum above 1.0900, and as already mentioned, next immediate resistance comes at 1.0937 High Nov 5 / 6 2024.
• Cable on the follow targets Yesterday's high of 1.2947 High Mar 10.
• Although the Yen is steady against the Dollar, the Japanese Yen extends some losses versus the EUR, GBP and AUD.
• Gold firms above $2900.00, now $2909.00, with the next area of interest coming at $2930.3, the 7th March high.

A bearish trend condition in WTI futures remains intact and last week’s fresh short-term cycle lows reinforce current conditions. Recent weakness has resulted in a clear breach of support at $70.20, the Feb 6 low. This confirmed a resumption of the downtrend that started Jan 15 and has paved the way for an extension towards $63.61 next, the Oct 10 ‘24 low. Key short-term pivot resistance is seen at $70.36, the 50-day EMA. Gold is in consolidation mode. The trend condition remains bullish and the recent pullback appears to have been a correction. A stronger rally would refocus attention on $2962.2, a Fibonacci projection. This would also open the $3000.0 handle. On the downside, a resumption of weakness would instead suggest scope for a deeper correction and expose support around the 50-day EMA, at $2826.3. The 50-day average marks a key support.

• WTI Crude up $0.21 or +0.32% at $66.24
• Natural Gas down $0.02 or -0.49% at $4.475
• Gold spot up $21.08 or +0.73% at $2909.91
• Copper up $1.15 or +0.25% at $467.7
• Silver up $0.3 or +0.93% at $32.4075
• Platinum up $5.5 or +0.57% at $968.07