Newsquawk EU Mid Session: Dollar extends Empire State recovery gains, debt vice-versa, while EU stocks and US index futures diverge - 16th September 2021

To download the report, please click here If you would like to subscribe to receive the research sheets directly in your inbox, you can now do so under the Research Suite section of the portal. To subscribe simply check the box next to "Email these reports" under the desired category.

Analysis details (11:19)

EQUITIES

Stocks in Europe have conformed to a more constructive risk mood (Euro Stoxx 50 +0.7%; Stoxx 600 +0.6%) after experiencing a mixed open, which followed on from a varied APAC session that saw Mainland China and Hong Kong under pressure. US equity futures, meanwhile, have seen a divergence from Europe and trade modestly softer ahead of US retail sales. Back to Europe, bourses experience broad-based gains with marginal underperformance in the FTSE 100 (+0.5%) – weighed on by the underperforming Basic Resources sector (the only sector in the red) as base metals remain pressured. On the flip side, Travel & Leisure stands as the outperformer amid tailwinds from a Ryanair (+6.3%) traffic growth guidance update, alongside reports that UK ministers are to announce that vaccinated travellers will no longer be required to take a COVID test before entering England under new proposals – also supporting the likes of easyJet (+3.3%) and IAG (+2.7%). Banks are bolstered by the higher yield environment whilst Oil & Gas continue to cheer oil prices north of USD 70/bbl. Overall, the sectors do portray somewhat of an anti-defensive bias. In terms of individual movers, Continental (-11%) listed its drive division, Vitesco Technologies, on the Dax 30 today. Vitesco will be listed as an additional value on the Dax for today only, after which it will not be eligible for a regular place in the bourse and will be demoted accordingly. Elsewhere, Thales (+1.3%) and Safran (+2.6%) have shrugged reports that Australia terminated its submarine programme with France.

FX

EUR/DXY - Bears have been prowling and knocking hard on the door for a while in Eur/Usd following a couple of dead cat bounces, but no material recovery rallies beyond 1.1850 and the pressure has finally told as underlying bids around 1.1800 are filled or pulled. Moreover, the headline pair has breached technical support just shy of the round number in the form of 21 and 50 DMAs that align at 1.1798 today and is now probing new post-ECB lows around 1.1766 amidst almost all round Euro weakness that has pushed Eur/Gbp down towards a double bottom around 0.8510 and Eur/Jpy through 129.00. Conversely, the Buck has regrouped and recharged after another retreat below 92.500 in the index, albeit shallower in wake of Wednesday’s strong NY Fed manufacturing survey that helped to erase post-CPI losses and more. Indeed, the DXY has rebounded further towards Monday’s current w-t-d peak (92.887) to 92.794 and cleared a couple of chart hurdles along the way, including its 50 and 21 DMAs, at 92.635 and 92.694 respectively. Ahead, jobless claims, retail sales and the Philly Fed.

CHF - The major casualty or loser in the face of the Greenback revival, as Usd/Chf retests recent 0.9240+ highs, but the Franc is not benefiting from Euro weakness given that the Eur/Chf cross is holding firmly above 1.0850, and this could be a sign of official intervention or simply caution ahead of next Thursday’s Quarterly SNB policy review.

AUD/GBP/CAD - All unable to evade the clutches of their US counterpart, and the Aussie also labouring within a 0.7347-09 range in wake of a disappointing jobs report that only beat consensus in unemployment rate terms due to a fall in labour market participation caused by COVID-19 lockdowns. Meanwhile, Sterling is back under the 200 DMA and hovering near 1.3800 irrespective of the aforementioned outperformance against the Euro and another bank revising its BoE rate outlook to forecast an earlier hike on the back of yesterday’s hot UK inflation data (GS now seeing tightening in May 2022). Elsewhere, the Loonie has stalled on approach to 1.2600 alongside a pull-back in crude and now eyeing Canadian housing starts before wholesale trade following similarly frothy CPI prints on Wednesday.

NZD/JPY - The Kiwi is bucking the overall trend and still clinging to the 0.7100 handle, while consolidating gains vs its Antipodean peer around 1.0300 with bullish impetus from NZ Q2 GDP surpassing expectations significantly to ensure the domestic economy entered pandemic restrictions on a very solid footing. Conversely, the Yen has broadly overlooked a much wider than anticipated Japanese trade deficit impacted by exports missing the mark by some distance, as Usd/Jpy meanders between 109.46-21 parameters, albeit off midweek lows closer to 109.00.

SCANDI/EM/PM - The Sek and Nok remain firm with assistance from Eur frailty, but EM currencies are depreciating vs the Usd and Gold has reversed beneath more DMAs and a cluster of lows to trip some stops said to be sitting around Usd 1780/oz.

FIXED INCOME

Gilts managed to carve out a marginal new recovery high at 127.68 vs Wednesday’s 127.83 Liffe settlement price, but the bounce and bout of consolidation was short-lived given the more recent retreat to a fresh intraday low of 127.42 (-41 ticks) in wake of GS joining others with an earlier call for the BoE to raise rates, and pile further pressure on the already underperforming Short Sterling strip. However, selling upticks remains the trend and profitable strategy elsewhere, as Bunds remain underwater and the 10 year T-note near its 133-08+ overnight base awaiting a raft of top-tier US data and the Philly Fed to see if the Empire State was a flash in the pan.

COMMODITIES

WTI and Brent front month futures are choppy and essentially flat intraday at the time of writing, with the former around USD 72.50/bbl (72.34-99 range) and the latter around USD 75.50/bbl (75.21-87). News flow for the sector has been relatively light, but prices remain elevated near recent highs. The morning saw constructive commentary from Ryanair, which feeds into jet fuel demand. On the flip side, Libya's NOC announced the resumption of crude exports from the Sidra and Ras Lanuf ports following protests. It's also worth being cognizant of potential Chinese intervention at these levels via the release of state reserves, as Chinese PPI last month remained elevated partially on crude prices – and Beijing also pledged continued efforts to stabilise prices if needed. On that note, China announced the release of another batch of copper, aluminium and zinc from state reserves to guide prices gradually lower to a reasonable range. As such, LME metals are mostly lower but off worst levels, although copper remains under USD 9,500/t. Turning to precious metals, spot gold and silver are on the backfoot as they fall victim to the firmer Dollar, with the former losing further ground under USD 1,800/oz (1,796-81 range) and the latter back to levels around USD 23.50/oz (23.96-54 range).

16 Sep 2021 - 11:19- Research Sheet- Source: Newsquawk

Subscribe Now to Newsquawk

Click here for a 1 week free trial

Newsquawk provides audio news and commentary for over 15,000professional traders and brokers worldwide. Services include: