Markets lower ahead of Central Bankers – FTSE taking out key support
Global stocks dipped for a third day in a row with drops in technology and Consumer Non-Cyclicals outweighing gains in Energy and Consumer cyclicals. There was no macro data of importance on Monday, so market players were positioning themselves for the FOMC on Wednesday as well as being alert to any news concerning the BREXIT referendum. Volatility is on the rise with the VIX hitting 3 ½ months highs.
Major benchmarks in the US traded 0.7-0.9% lower with the S&P testing the 50-Day SMA, while the Dow Jones closed below. In FX markets, the US Dollar fell overall, but we think most of the move was related to a short rebound after two days of significant gains. EURUSD is caught in between the 50- and 100-day SMA and USDJPY is eyeing 2016 lows at 105.55. In New Zealand, the Kiwi fell overnight on weaker than expected FPI for May, causing a slight drop in NZDUSD but not enough to do anything to the current overall uptrend.
Fixed income benchmark yields in developed markets fell across the board – special attention should be given the US curve this week in light of the FOMC. Commodities saw drop in oil prices, which has continued this morning and in precious metals, gold took home gains for the fourth day in a row, getting closer to key resistance around 1305.
This morning, we have seen Spanish and Italian CPIs coming out in line with expectations and at 1030CET, the UK May CPI and PPI will be released. Consensus for the UK data is for a slightly higher print than in April on back of the Inflation report as well as BoE forecasts. Cable has been wild and volatile with many spikes recently in light of polls related to the Brexit referendum. The FTSE has been more calm, but also cautious. This morning, the index has sustained below the 100-day SMA and taken out key support at 6005 with next support at 5960. We expect the theme will still be that Brexit has the main focus while macro data currently is secondary.
From the Euro zone, Industrial Production at 11CET will be interesting and a rebound is expected in April to 0.8% from a drop of -0.8% in March. Across the Atlantic, US Retail Sales and Import Prices will be interesting. Headline Retail Sales are expected to increase 0.3% while the Core figure is expected to come out at 0.4%. EURUSD has been probing lower overnight with support coming in at the 100-day SMA coinciding with 23.6% fibo in recent wave around the 1.1220-area. Should we see a close below, this opens for a test of May lows just below the 1.11-figure.
Have a nice day
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