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UK 100 Index called to open -30pts at 6375, in mild retreat from yesterday’s first foray above 6400 since early December. February Uptrend still very much valid with overnight weakness finding support around 6375 thanks to 3-day rising support. After a near 6% rise from April lows, a pullback towards April rising support at 6350 wouldn’t be a worry. Watch levels: Bullish 6395, Bearish 6365.
The negative call for the European open comes despite US gains and a largely positive Asian session overnight, although stocks off their best levels as Crude Oil retreats to $40 (Kuwaiti 3-day strike over) and Chinese equities slump. Success by Donald Trump in the New York Republican primaries has added to political uncertainty while the UK edges closer to its EU referendum.
Japan’s Nikkei and Australia's ASX have eked out small gains thanks to a (buoyant Mining and Energy), even though the former was held back by a stronger Yen and disappointing exports data weighed on corporate outlooks. Note renewed concern about China, with stocks sharply lower on suggestions the PBOC has less stimulus appetite thanks to an improving outlook all the while worries grow about the country's mounting bad debts..
US Bourses were mixed yesterday, echoing a similarly mixed set of corporate earnings and some poor macro data. UnitedHealth, Johnson & Johnson and Goldman Sachs all beat expectations (low expectations remember) to help boost the Dow into positive territory, though it closed off its intraday highs. On the other hand IBM and Netflix led the tech sector lower which impacted the Nasdaq negatively.
Macro-wise, poor US housing data pushed the USD lower which has helped commodities, most notably Gold. Note if the trend of off US data prints continues, that’s rate hike negative which is also conducive to dollar weakness such that Gold may continue to benefit. $1250 and $1225 today’s key levels.
Crude prices are also helped by the weak USD, while we note the Kuwaiti strike has ended, ending in turn the OPEC member’s 60% output cut. Pumps are back at full throttle, yet Brent has found support at $42.75 this morning. The price could well return to $43.5 or indeed 12 Apr falling highs before retreating again, especially with the USD at current levels.
In focus today we have UK Unemployment and Wages which will be looked to for any additional inflationary pressures and any knock-on for monetary policy. Thereafter ECB President Draghi speaks mid-morning. Watch US Existing Home Sales after the weak starts and permits data yesterday and US Oil inventories will be of interest after another big build in API data last night showing we are still swimming in the stuff amid a global supply glut. Results out from American Express and Coca Cola.
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