FTSE +23 points at 7266 (topside fragile)
DAX +16 points at 11820
CAC +12 points at 4857
Euro Stoxx +8 points at 3312
Speculations that Scotland could call for another independence vote hammered the mood in the pound market at the start of the week. The GBP/USD tanked to 1.2392 at the early hours of the Asian session, as the Times of London reported that Scotland could ask for a second vote of independency as PM Theresa May triggers the Article 50 in March.
In addition, news that the LSE – Deutsche Börse merger may not go through hit the headlines on Monday, as London Stock Exchange’s board wouldn’t pledge to divest MTS, a trading platform for European government bonds, as requested by the EU.
Although there is no need for additional panic at this point in time, the week started with Brexit related concerns and the current deterioration in the sentiment could dent the appetite in the pound and encourage more bears to join the sell-off at the start of the trading week. A daily close below the 50-day moving average (1.2402) should send the MACD into the negative territory and indicate the possibility of a faster pound depreciation against the greenback. The next support is eyed at 1.2344 (50% level on January 14 to February 1 recovery), before 1.2259 (major 61.8% retracement). The EUR/GBP is taking over the 0.85 offers, despite the broad-based lack of appetite in the single currency.
The US dollar started mixed against the G10 majors, as the US 10-year yields tested 2.30% on the downside. Leverage funds cut long USD positions for the seventh consecutive week, heading into Donald Trump’s first speech before the Congress on Tuesday. The markets will be fully focused on Trump administration’s fiscal plans, which may include a major boost to the spending in military, massive cuts to the US State Department and the Environmental Protection Agency (EPA), ‘phenomenal’ corporate tax cuts, deregulation and so.
It is the moment of truth for the US stock markets. The US stocks are set for new records on the count down to Donald Trump’s speech. On the other hand, the very high level of expectations suggests a rising risk of disappointment, which in turn, could trigger headwinds in the US equity markets.
Asian equities sold-off, gold held the ground above $1254.
Nikkei (-0.91%) and Topix (-1.04%) traded lower in Tokyo, as the USD/JPY extended weakness to 111.92. From a technical perspective, the pair is in the bearish consolidation zone. Below the critical 112.50 resistance (major 38.20% retracement on post-Trump rally), the USD/JPY could aim for a deeper downside correction to 110.60 (50% retracement) and 110.00 psychological level.
Shanghai Composite (-0.87%) and Hang Seng (-0.36%) are also under pressure as the Hang Seng index sees solid resistance pre-24’000 handle. Hong Kong Exchange (-1.16%) was among the leading losers after the announcement of full-year profit drop on trading. HK Exchange said that the trading environment in 2017 would remain challenging.
Finally, the FTSE futures gained 0.30% on softer pound, even though unfavorable news on LSE, softer commodity prices and stagnation in oil prices at the topside of the multi week range could weigh on the UK stocks at the London open.