29 June 2016 at 11:28 GMT
European stocks traded higher again this morning as risk appetite returns and markets try to quell their fears in the wake of last week’s momentous Brexit vote.
The despicable Istanbul airport attack has travel companies and airlines like Thomas Cook, TUI and IAG trading 1% to 4% lower.
In FX, cable reached a high of 1.3422 as the pair trades off the Brexit-inspired 31-year low.
- Germany June Prelim.CPI (0.2% exp.) (1200 GMT)
- US May Personal Income; PCE Deflator (1230 GMT)
- US May Pending Home Sales (-1.1% m/m exp.) (1400 GMT)
- US Weekly DOE Crude Inventories (1430 GMT)
EURUSD is again threatening its 200-day moving average today at 1.1096 where it has been rejected once early in today's European session (highs of 1.1103). Technicals from yesterday remain in play with 1.1100 being psychological level (1.1108 38% Fibonacci from the extreme daily move on June 24, 1.1170 50% Fibo from that move). If US PCEdata today disappoints then closing above 1.1100 can make EURSD more comfortable especially if the speculation of no rate hikes in US starts being more the theme. USDJPY is not doing much in a better risk environment. Back in August 2014 the 103.08 level was taken out on interest rate hike speculation in the US, so this could be the first tech resistance level of interest, followed by the 103.85 area which USDJPY rested on between June 16–21. Right now there's little news to take USDJPY higher (without Bank of Japan involvement), as rates in the US are being speculated unchanged and in general a “how low can it go” attitude if things turn sourer globally. The weaker USD across the board today isn't helping much here either. On the downside we watch the following levels of importance: 101.50 weekly 50% Fibo level from rally starting week September 19, 2012, and also the 101.10 area. Closing below the latter would expose to the sub-100 levels. GBP is breaking 1.3400 today, which is the tech resistance we were looking at yesterday (as a 32-year-old level!). The more interesting technical resistance level is 1.3500, which is a more recent technical resistance from the lows of Financial Crisis. Another level of interest is 1.3660 as it closes the gap that happened from the New York close on Friday and the market opening this week. GBP negativity might be shifting slightly with markets not regarding a Brexit as imminent but downside risk remains the theme. Technical supports have been built around 1.3250 since yesterday in the early Asian session, thereafter the 1.3120 area.
FX Options volatilities
Vols are pushing lower again today and RR as well. Liquidity is improving and spreads are coming in. 1-month EURUSD is down at 10.0 vols, still well above the levels in the period mid-March to May. Thursday we have month-end fix, which is also a half year fix and we could see some interesting volatility there on back of UK referendum outcome. This is not a volatility that seems to be captured in the options market looking at Friday expiries.
Bunds are adding further gains and a break of 167 despite the improved risk sentiment. Corporate bonds thus continue to fare better as XOVER dips to 370 bps, which leaves it right in the middle of the pre and post-Brexit range of 320 bps and 420 bps. Although uncertainty will remain very high, we think there’s reason to believe that markets could continue to recover. Read more about our short-term trading outlook in our Weekly Bond Update
segment on TradingFloor.com which has just been published.
Euro lenders rise today as they try and recover from the 20% drop suffered after the UKI vote. UniCredit, SocGen and Intesa Sanpaolo lead the risers in the Eurostoxx and gains of up to 4% are also posted by Barclays, Deutsche Bank, Banco Santander and Italy’s banco Popolare Societa Cooperativa.
Healthcare stocks are benefiting from last week’s vote as the weaker sterling has many UK large-cap healthcare firms trade higher due to significant revenue generated from outside the UK. The likes of GlaxoSmithKline and AstraZeneca are up almost 10% since the Vote.
US equity Index futures continue the recent positivity and scheduled earnings are expected from General Mills, Omnova Solutions and Unifirst Corp.
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.
Trading screens are painted green as risk appetite returns. Pic: iStock
— Edited by Clare MacCarthy