FTSE -42 points at 7336
DAX -72 points at 11890
CAC -24 points at 4978
Euro Stoxx -18 points at 3411
The US dollar consolidated losses against the yen, the euro and the pound; the Aussie (-0.35%) has been the biggest G10 loser against the greenback in Asia, as iron ore futures plunged by 4.87%.
Gold extended gains past $1245 yesterday for the first time in three weeks. The way is open for a further recovery toward the 200-day moving average, $1261. Dip buyers are touted at $1225/1220 (50-day moving average) as the US yields continue shifting lower.
The US 10-year yields are testing the 2.40% on the downside. The FOMC’s median forecast is now leaning toward two more rate hikes in 2017; in June and in December. Expectations are back to where they were at the beginning of 2017.
The US stocks recorded the worse session of 2017 on Tuesday. The S&P 500 (-1.24%) and the Dow Jones (-1.14%) sold off, as financials (-2.38%) led losses on softer interest rate expectations. Bank of America (NYSE:BAC) plunged 5.8%, while JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) lost 3% in New York. The sharp pullback in banking share prices is due to readjustment of the Federal Reserve (Fed) expectations which were apparently pushed too far away from the reality on the run up to the March Fed meeting. The downside correction is certainly pulling the share prices closer to their fair value. Banking revenues are still expected to rise in 2017 as a result of higher rates, yet certainly less than investors projected prior to the FOMC meeting.
The USD/JPY hit the 111.60 target (minor 23.6% retracement on January – February decline). Stronger trend and momentum indicators suggest a further drawback to the mid-term support of 110.55 (Fibonacci 50% level on post-Trump rally), before 110.00 mark comes back to focus.
Japanese stocks had a bad day in Tokyo. The Nikkei (-2.00%) and the Topix (-1.92%) sold off on stronger yen.
Likewise, the sharp appreciation in the pound is taking its toll on the UK stock markets.
Cable rallied to 1.2494 on Tuesday, after the February inflation report revealed that the consumer prices rose by 2.3% year-on-year, much higher than 2.1% expected by analysts. This is the first time the UK’s inflation breached the Bank of England’s (BoE) 2% target in three years. Hence, the British policymakers’ worries regarding the rising inflationary pressures are funded and several MPC members could find it necessary to raise interest rates sooner rather than later.
The hawkish shift in BoE expectations should keep the GBP-bulls in charge of the market. Technically, the 50-day moving average is diverging positively from the 100-day moving average (1.2407). Solid support is eyed pre-1.2400 against the greenback. Cable could extend gains toward 1.2565 (minor 76.4% retracement on February – March decline), before the critical 200-day moving average, 1.2610, which has not been tested since June 23rd, the Brexit referendum.
The FTSE 100 broke the 200-day moving average (7365p) and traded down to 7360p on Tuesday. Pound’s appreciation above the 1.25 against the US dollar could encourage a further decline toward 7280p (50-day moving average). The FTSE is called lower at London open on stronger pound and softer oil, commodity prices.
Copper futures are down by 0.74%, as the WTI (-0.35%) consolidates losses near $48 per barrel before the weekly EIA data release due later in the US. Analysts expect the US crude oil inventories increased by 1.9 million barrels last week. Solid inventories report could encourage a sell-off below the $47.50 level (March 13th low), if broken, could pave the way toward $45/barrel for the first time since OPEC committed to cut production in November 2016.
Finally, the EUR/USD is testing the 1.0820 (Fibonacci 50% retracement on post-Trump decline) on the upside. More resistance is eyed at 1.0830 (2017 resistance), yet improved trend and momentum indicators suggest a positive breakout to the 200-day moving average, 1.0853. Support is eyed at 1.0700/1.0715 area. Some of the latest French polls showed that Emmanuel Macron is now leading the presidential race, as his popularity rose to 26% following the first televised presidential debate.
The DAX (-0.75%) and the CAC (-0.19%) failed to consolidate gains on rising hopes that Macron could win the French presidential election. The euro strength has clearly been an important killjoy for the European stock traders. French and German stocks are set for a negative open. The DAX 30 is set to open below 11900 and the CAC 40 is expected to slip below the 5000 in Paris.