26 May 2016 at 11:35 GMT
European equity bourses traded mixed into afternoon and energy and materials sectors gained while telecoms and financials shares traded in negative territory.
In data, UK Q1 Preliminary GDP came in as expected at 0.4% q/q and 2.0% vs. 2.1% exp. y/y.
Brent crude traded above $50/barrel – its best level in 7 months – helped by supply disruption in Nigeria.
The G7 Leaders’ summit has started in Japan.
And as Brexit day (June 23) draws ever closer, we introduce a new overview (below) of the latest developments and their immediate impact on markets.
- US Initial Jobless Claims (275k exp.)(1230 GMT)
- US April Preliminary Durable Goods Orders (05% exp.) (1230 GMT)
- US April Pending Home Sales (0.7% m/m; 0.1% y/y exp.) (1400 GMT)
- Fed’s Powell to speak (1600 GMT)
EURUSD: John Hardy looking for the sell side in EURUSD. The pair is higher on the day so far, but still contained in the range and the downward channel established since May 4, where the topside of the channel is estimated at 1.1215/25 area for today, which also is 10-day moving average and lows of around April 22 and 25). Tech supports around 100 day moving average at 1.1165 area and then we have more decent and important tech support at 1.1100 area ( around 200-day moving average)
: It's again interesting how USDJPY fails to close above the 110.17 yesterday's 55-day moving average. Today this average down at 110.11 area, and again we keep an eye on a close of day above this level as potential for USDJPY trigger higher. G7 meeting might need to be cleared before any attempts to weaken JPY. Tech supports at 109.64 (1- day moving average)
: took a dive on Preliminary GDP from UK being slightly less than expected Year-on-Year. please refer to the new Brexit section below for latest on Brexit news.
USDCAD: Crude is higher, with WTI a whisker below $50/barrel. USDCAD broke the level we have been watching on the support side at 1.3015/20 and took a dive in the early Asian session. Some interesting tech support levels in USDCAD, most notably the 1.2910 area, which is a Fibonacci level and disrupts the rally that started early May if broken as it opens way to the 50% Fibo at 1.2823 area. Before that we have 55 day moving average at 1.2939. Tech resistances at 1.3015 (Fibo level as well)
FX Options volatilities
Actual vols continued to underperform implied vols and frontend vols are therefore also under pressure again today. 1 Month expiry rolled to UK referendum, which is the reason 1month vol is higher today. Also 1w expiry rolled to ECB. EURCHF vol curve has particularly sold off today, with 6month ATM at 6.0%, lowest since the break of the 1.20 floor last year.
Strong sentiment in fixed income markets continues, led by energy companies on the oil price rally and in anticipation of the European Central Bank commencing its corporate bond buying operations next week. High Yield credit spreads are testing the 300 bps index level yet again, completing a 35 bps contraction move for the week so far. Government bonds are slipping though, as bunds once again failed to break the 163–164 trading range to the upside this morning.
European stocks wobbled Thursday. Germany’s Dax 30 picked up 0.3% at 10,233, and France’s Cac 40 rose 0.1% to 4,484.35. Italy’s FTSE MIB fell 0.5% to 18,108.45, while the UK’s FTSE 100 edged up 1 point to 6,263.95.
Spanish banks are under pressure this morning as Banco Popular Español SA plunged 20%. The move came as the Spanish lender said it’s planning a 2.5 billion euro ($2.8 billion) share sale, an effort to ease investor concerns about the company’s capital ratio and batch of bad property loans. Also in Madrid trade, shares of Banco de Sabadell dropped 6.2%, CaixaBank lost 3.8%, and Bankia SA moved down 3.9%. Banco Santander gave up 2.3%. On a brighter news from the country, Spanish growth in gross domestic product was confirmed at 0.8% in the first quarter, and 3.4% year-over-year.
While financial and telecom shares pulled lower, oil and gas and basic materials shares were among the advancers as Brent crude recaptured the $50-a-barrel level. That gain came after US data showed a larger-than-estimated decline in weekly oil stockpiles. Oil producer Tullow Oil PLC rose 2%, and France’s Total SA added 0.6%. Oilfield services firm Technip SA gained 1.4% but Subsea 7 SA fell 4.4%. Elsewhere, Daily Mail & General Trust PLC shares fell 7.7% after the publisher cut its operating-margin target for its DMG Media unit.
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
Brent crude oil races past $50/barrel. Pic: iStock
— Edited by Clare MacCarthy