The European market (Stoxx-600) is currently trading around 351.58 in the pre-US session Friday slips by almost -0.28% on a plunge in oil and the never-ending Italian budget drama. There are some reports that Italy may ban short sell in banks and certain other financial instruments. The market slips from earlier green.
The European market (Stoxx-600) was around 353.40 mid-Friday EU session, edged up by almost +0.25% on higher USD and renewed Italian budget optimism. Techs and banks were helping, while energies dragged as oil plunged almost 6% on supply worries despite the report of some oil field shut down in the North Sea. Miners were also under stress on European as-well-as global growth worries.
EURUSD plunged by almost -0.45% to 1.1353 amid ongoing Italian budget jitters and terrible manufacturing PMI data from Germany and overall composite PMI data from the Eurozone. Although a subdued PMI data is negative for the overall economic prospect, a lower EUR (local currency) is also positive for the export-heavy European market.
GBPUSD also slumped by over -0.40% on renewed worries about a hard Brexit as the revised exit draft is nothing but “old wine in the new bottle” and thus it would be very tough for Theresa May to sell it back home. Also, Gibraltar may be going to be another “Irish” issue for the Brexit and Spain could veto/block the Brexit deal in its Parliament on “unauthorized” change in the Brexit text (draft) regarding Gibraltar without its permission. As a result of stress in EUR and GBP, the US dollar index (DXY) is up by almost +0.10% and helping the export savvy European market to some extent.
Earlier, the European market is also buoyed by a rally in Italian banks on renewed budget optimism amid ongoing drama and hopes & hypes of a budget compromise. In the latest rhetoric, Italy’s Di Maio urged ‘dialogue’ with the EU and not 'war' and reiterated no cuts to key reforms, while wants to stop daily back-and-forth with the EU.
As a part of the daily ritual (jawboning) to keep the Italian/German spread under control (relatively lower), Di Maio assured the market that the Italian government does not want to leave the euro. Di Maio also clarified that “Italy will not change the pillars of 2019 budget, while financial markets will be reassured in the coming days. Italy will show the highest of willingness to negotiate with the EU, but cannot betray Italians”.
Meanwhile, Italy’s Lega economic adviser Siri also clarified that the budget framework cannot be touched, although some budget measures can be improved. Elsewhere, another report suggests that Italy's EU affairs minister Savona may resign in a sign of dissent with the government's strategy to challenge EU budget rules. Although Savona denied the report of his resignation, there “can’t be smoke without fire”. Savona’s resignation is positive for the Italian budget truce; despite he is a known hardline Eurosceptic
On Wednesday, some reports suggest that Savona is strongly in favor of amending the budget law, while Italy’s agriculture minister denies reports about Savona backing budget changes, said Savona never voiced concerns during cabinet meetings. Thus Savona’s reported resignation/dissent may be indicating that all is not well within the Italian “bizarre” coalition government, which is under severe pressure from rising spreads and also from all sides to revise their 2019 budget plan as per permissible EU rules. Moody’s said Italy’s escalating tensions with the EU will likely to keep Italy’s funding costs high and increase risks to the economy.
Also, Italian Prime Minister Conte said his government would ask the EU to delay any infringement procedure as it works to resolve its budget standoff with the EU. However, gains in European stocks were limited on signs of a slowdown in the Eurozone economy after the Eurozone Nov Markit manufacturing PMI dropped to a 2-1/2 year low of 51.5, not very far from the boom/bust line of 50.0. Italy’s FTSE MIB-100 is currently trading around 18620, surged by almost +0.10%, but well-off the earlier high of 18785.50.
Germany 30
Germany’s export-heavy Dax-30 slumped by -0.25% to around 11113 on subdued economic data (GDP/PMI) amid Auto/Car emission issues and Trump trade war (US-China). Dax made a high of 11205.89 earlier in the day on lower EUR.
Pivot: 11300 Support: 11185 11030 10950Resistance: 11405 11475 11605 Scenario 1: STRONG ABOVE 11300 Scenario 2: WEAK BELOW 11250-11200 Comment: NEAR TERM RANGE: 10950-11675
On Friday, most of the Asian stock market closed lower in a holiday-thinned market. Hong Kong slips -0.35%, China plunged -2.49%, Australia surged +0.44%. China's Shanghai Composite fell to a 3-week low on a sell-off in Chinese technology stocks after a report that the US is contacting allies in an attempt to persuade telecommunications companies in their countries to avoid using equipment from China's Huawei Technologies.
Dow future is now down by over -150 points, while SPX-500 slumped by almost -0.75% to 2629 on lower oil (energies), higher USD and renewed concern about US-China trade truce in a holiday-thinned market amid a report of US attempt to block using equipment from China's Huawei Technologies in other countries (allies).
On Thursday, Trump said: “China wants to make a deal on trade very badly because of tariffs and if we can make a deal, we will”. Trump is clearly pressurizing China for a deal ahead of his meeting with Xi, but this hard negotiation tactic could backfire, resulting in no trade deal and more protracted “war of attrition”.
Retailers are also under stress on the concern of earnings and operating margin amid a record of discounted black Friday sales and shopping seasons. But the overall market could also get support on signs of a strong start to the holiday shopping season (consumer spending) after Adobe (NASDAQ:ADBE) Analytics said the US consumers spent about $2 billion online till now Thursday, up almost 30% from a year ago. Also, researcher Consumer Growth estimated Black Friday sales my produce $24 billion in sales.
Pivot: 2685 Support: 2660 2625 2590Resistance: 2705 2730 2785 Scenario 1: STRONG ABOVE 2685 Scenario 2: WEAK BELOW 2675-2660 Comment: NEAR TERM RANGE 2590-2785
Meanwhile, oil (WTI) seems to be also under black Friday discount sales as it plummeted by over 6% to a low of 51.28 amid oversupply worries despite the report of some oil field shut down in the North Sea. On Thursday, Saudi Energy Minister Khalid said Saudi Arabia is producing in excess of 10.7 mbpd, which would be a new record.
Khalid said: “The production in November is above October level as there is no slowdown in production. But demand for foreign oil in January will be lower and that Saudi Arabia will respond”. Saudi Arabia may be now more inclined to keep Trump happy in the Thanksgiving Day holiday driving season (by lower gasoline prices) as Trump is playing with the “Khashoggi murder Trump card” in this game of oil & geopolitics.
On Thursday, Trump tweeted, praising Saudi Arabia: “It’s a mean & nasty world out there, the Middle East in particular. This is a long and historic commitment, & one that is absolutely vital to America’s national security.” @SecPompeo I agree 100%. In addition, many Billions of Dollars of purchases made in U.S., big Jobs & Oil!”
Trump is supporting Saudi Arabia Crown Prince for this “oil and jobs” despite the thriller story of “Khashoggi” killing and the Saudi Crown Prince is also “rewarding” Trump by pumping more oil. Trump contradicts CIA on the killing of Khashoggi, says agency ‘had feelings’ but did not firmly place blame on Saudi crown prince Salman.
On the Thanksgiving Day holiday, speaking to reporters at his Florida resort, Trump said the CIA had not come to the conclusion that Saudi Crown Prince Mohammed bin Salman ordered the killing of Khashoggi. Trump basically brushed aside the intelligence community's assessment that the crown prince had ordered the killing and reiterated that Saudi Arabia was too valuable an ally to lose over the incident. "I hate the crime...I hate the cover-up. I will tell you this - The crown prince hates it more than I do”.
As a reminder, Trump tweeted on Wednesday, before going for the Thanksgiving Day holiday: “Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!”
And oil plunged to almost $50, thanks to Trump.
Pivot: 50.5 Support: 49 48.5 46.5Resistance: 52.85 54.85 55.9 Scenario 1: STRONG ABOVE 50.50 Scenario 2: WEAK BELOW 50.00 Comment: NEAR TERM RANGE: 46.50-55.90
GBPUSD also slumped by over -0.40% on renewed worries about a hard Brexit as the revised exit draft is nothing but “old wine in the new bottle” and thus it would be very tough for Theresa May to sell it back home. Also, Gibraltar may be going to be another “Irish” issue for the Brexit and Spain could veto/block the Brexit deal in its Parliament on “unauthorized” change in the Brexit text (draft) regarding Gibraltar without its permission. GBPUSD is currently trading around 1.2830. 
Pivot: 1.293 Support: 1.283 1.272 1.26595 Resistance: 1.298 1.303 1.316 Scenario 1: STRONG ABOVE 1.29300 Scenario 2: WEAK BELOW 1.29250-1.29150/1.28800 Comment: NEAR TERM RANGE: 1.26595-1.33000