FTSE -6 points at 7501 DAX -21 points at 12955 CAC -3 points at 5362 IBEX -40 points at 10196
The US dollar is broadly softer before the US traders return from bank holiday today. The US stock indices are trading on a positive note: S&P 500 Futures (+1.50 pts), Nasdaq Futures (+4.75 points) and Dow Jones futures (+24 points). The Dow Jones could renew record at Tuesday's session.
Japan’s trade surplus came in better-than-expected in August. The current account surplus unexpectedly rose from 2320.0 billion to 2380.4 billion yen. The USDJPY traded rangebound in Tokyo and held the ground above 112.50 despite the broad-based USD softening. Decent call options trail above the 113.00 mark at today’s expiry.
The soft USD is giving a boost to the industrial and precious metals. Meanwhile the energy stocks (-0.79%) lead losses in Australia, as OPEC Secretary General Barkindo’s reassuring words on ‘strong and positive’ signs of market rebalancing and Aramco’s biggest customer allocation cuts failed to bring buyers back to the market. The WTI crude trades below the $50 per barrel, as the Brent crude tests the $55/barrel support.
Gold is benefiting from softer US dollar and the anxiety around the Catalan crisis. Some investors could opt for safe-haven allocations before Catalonian President’s speech due at 6pm in Barcelona today. The next natural target for long gold positions is $1’295/1’300 (50-day moving average / major 38.2% retrace on July – September rise).
It could be a make or break day for Catalonia. The Catalan government meets to discuss about an eventual separation from Spain. Catalonian President Carles Puigdemont will deliver a speech to lawmakers on the independence referendum. His choice of words is in focus. If Mr. Puigdemont softens his tone and takes a step back from the possibility of a unilateral declaration of independence, the Spanish stocks and bonds could rally on a temporary relief. On the other hand, a strong rhetoric from Catalonian President could escalate the political tensions and push investors away from the Spanish regional markets. Catalan risks are currently not priced in the euro markets. The EURUSD edged higher in Asia, although the euro’s upside potential could remain limited due to the Catalan event risk. Resistance is eyed at 1.1830 (major 38.2% retrace on September-October downside correction). Decent put options stand at 1.1690 for hedging the downside risks at today’s expiry.
The GBPUSD trades higher on broadly softer US dollar. The UK's August industrial and manufacturing production data is due today and the analyst expectations are mixed. A satisfactory read could underpin the buy-side. However, the rising tensions at the heart of the Tories, heavy critics on PM Theresa May’s Brexit policies and chatter of a potential cabinet reshuffle could keep the pound appetite limited. Intra-day resistance could be found at 1.3250 (200-hour moving average).
The FTSE 100 was dragged lower by mining stocks (-1.30%) on Monday. Bears are fighting back the bulls past 7500p, as the selling pressure in pound appears to decline and may no longer provide a significant positive push to the FTSE stocks.
The Turkish lira remains vulnerable to the US-Turkey tensions. There hasn’t been a diplomatic resolution yet. The lira pares the knee-jerk losses, yet the USDTRY bias remains on the upside. The Borsa Istanbul (BIST) index traded below the 100’000 mark for the first time in a month. The recovery to the Friday’s close (104’000) could be difficult due to unnerved investors. It is important to note that unlike the European stocks, there is a net positive correlation between the BIST and the lira due to Turkish companies’ high level of foreign currency debt. The 40-day correlation is above 60%, meaning that the soft lira is not encouraging for stock investors.