FTSE 100 +21 points at 7411
DAX +27 points at 12457
CAC +23 points at 5196
Euro Stoxx +13 points at 3491
The 40% drop in Goldman Sachs (NYSE:GS)’ fixed-income revenues and its worst quarter for commodities portrayed the picture of the waning Trump-reflation trend in the second quarter. The Dow Jones Financials erased 1.25% on Tuesday, led by Goldman Sachs (-2.60%). Today, Morgan Stanley's (NYSE:MS) 2Q results could outperform its competitors due to its stronger focus on equities, yet may not reverse the sector-wide anxiety.
The soft US data, discouraging bank results combined with Republicans’ failure to propose a suitable healthcare replacement plan weigh on the US market sentiment. The US yields further flattened, the 10-year yield slipped below 2.26% and is currently near its three-month average. The US Dollar Index eased below the 95 level for the first time since September 2016.
Gold advanced near 1’245 and paused in Asia due to a better appetite in stocks. The short-term bias in gold remains positive above $1’230 (200-day moving average). The July rebound from the $1'200 support could carry the price of an ounce to $1’247 (100-day moving average) and $1’250 (50% level on June – July decline).
In Europe, the sovereign yield rally is cooling down. The French, Italian and Spanish 10-year yields are back to their three-month averages respectively, the German yields remain on the top of the three-month range. The EURUSD is seeking a temporary top before the European Central Bank (ECB) meeting due Thursday. Some traders prefer realising their profit and walking away into the ECB decision. The 1.1580/1.1600 zone should provide resistance before a further advance to 1.1616, the 2016 peak.
The DAX (-1.25%) and the CAC (-1.09%) were offered yesterday. All DAX sectors ended the session in the red. Mining (-1.99%), healthcare (-1.56%) and financial (-1.38%) led losses. The European stocks are set for a positive open; gains could be limited.
The Aussie is extending rally versus the US dollar, the euro and the yen on the back of the widening rate differential. The AUDUSD surged to 0.7940 on Tuesday. The daily relative strength index advanced to 79%, as a warning that the Aussie is in a clearly overbought market. A tactical correction could help the pair to gather a stronger momentum before confronting the 0.80 resistance. Dip buyers are alert on price pullbacks. Support is eyed at 0.7800/0.7780 (including minor 23.6% retrace on April – July rally, former mid-term resistance).
Cable tested the $1.30 level amid June data showed that the inflation in the UK eased to 2.6% year-on-year from 2.9% printed a month earlier. The BoE-doves made an attempt to bring the pound lower as the inflation pulled away from the critical 3% level. Yet, the failure to remove the $1.30 support prevented the downside move from gaining traction. This could be an early indication that the bullish trend could develop further. The weekly positive momentum is the strongest since the Brexit referendum and the next critical mid-term resistance is eyed at 1.3420, the 50% retracement on the post- Brexit decline. Large 1.30/1.31 call options are waiting to be exercised on Thursday.
The FTSE 100 closed yesterday’s session 13.91 points lower at 7390p. Earlier today, the rolling index traded slightly below the May-July down-trending channel top, 7420p. Strong pound, lack of direction in oil and metals could intimidate buyers. Resistance is eyed at 7445p, the 50-day moving average.
The WTI crude is flat before the weekly US data. The US crude stockpiles may have retreated by 3.6 million barrel last week, versus -7.6 million a week earlier. It is important to keep in mind that the oil-positive data failed to push the oil markets higher over the past two weeks. Selling pressures remain tight, suggesting that any rally could bump into resistance pre-$48.05 (Fib 50% retrace on April – June decline) and $49.55 (major 61.8% retrace).