LCG Market Analysis

Week Ahead: Turkish vote, China GDP & UK retail sales

Turkish Referendum

The Turkish referendum on April 16th is going to be the major highlight of the weekend. Turkish citizens will say ‘yes’ or ‘no’ to a constitutional change, including 18 amendments which will consolidate the authoritarian President Erdogan’s power at the heart of the government.

While a ‘no’ vote could trigger a relief-rally across the Turkish lira and lira denominated assets, the market reaction to an eventual ‘yes’ vote is unpredictable. A ‘yes’ victory could bring along a sharp sell-off at Monday’s open, yet a downside squeeze could also attract anti-establishment, dip-buyers and result in a rebound, as has been the case following the US election.

Although the accuracy of the market polls are questioned, Reuters has reported that a ‘yes’ vote may have slightly taken the lead. As such, Turkey could open a new page in its modern history on Monday.

LCG’s Senior Analyst Ipek Ozkardeskaya highlights that two-sided volatility is likely to be on the menu on Monday, as uncertainties regarding both results would reveal many questions.

Even though some interpret ‘yes’ as a continuation of Erdogan’s actual empowerment, an eventual regime change could squeeze the country’s fundamentals, hence reshuffle the valuation of Turkish assets and the lira in the medium to long term. On the other hand, there are rising speculations that a no vote could be followed by another referendum. If this is the case, the anticipated relief rally of an eventual ‘no’ vote could rapidly be replaced with a tenser mood in the short run.


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Lira short of breath on relief rally

Turkey voted ‘yes’ to the constitutional change at Sunday’s referendum. According to the official results, 51.4% of Turkish citizens approved to stretch President Erdogan’s influence at the heart of the government. Social unrest and political tensions were again on the menu given the tight gap between the ‘yes’ and ‘no’ camps.

Lira rallied past 2.0% against the US dollar and surged more than 2.5% against the euro on post-election relief before giving back gains into the open in Istanbul. In our Friday’s analysis, we had mentioned that ‘the only fact of having the vote behind could encourage further gains in the Turkish lira.’ Although the kneejerk rally appears to lose some momentum, the USDTRY could challenge the 3.55/3.50 support in the continuation of the actual momentum. Yet the medium to long-term view remains broadly bearish.

Commerzbank warned that the post-election rally is ‘unlikely to last long’ due to ‘bigger political challenges’. Commerzbank sees the USDTRY back to 3.75 in the coming months.

Indeed, the referendum left Turkey with high political tensions and a decent social unrest. To us, a bearish reversal and a potential sell-off could happen even faster, as Turkey is now facing severe warnings from the EU and rating agencies. In addition, the Central Bank of Turkey (CBT) will certainly be tempted by unorthodox policies, in line with Erdogan’s explicit will for low interest rates.

On the topside, the key USDTRY resistance is eyed at 3.80 and a significant break above this level should suggest a renewed anxiety regarding the Turkish lira, increase the selling pressure and push the USDTRY toward the 4.00 mark.

The Borsa Istanbul index (BIST) gapped higher at Monday’s open, yet failed to consolidate the post-election relief gains. The index rapidly traded down to 90’052.

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USD bid on Mnuchin, French election in focus

As the UK and European traders are back from the Easter break, the attention shifts to the next critical political event in Europe, the French election.

The first round of the French political election is due on April 26th. The popularity of the far-right (Le Pen) and the far-left (Mélenchon) candidates, both more or less against the European Union, weighs on the single currency. The EURUSD is sold into the 1.0700 level, which stands for the major 38.2% retracement on March-April decline.

According to the latest opinion polls aggregated by Bloomberg, Marine Le Pen is given 22% chances of leading the first round of the election. UMP’s Francois Fillon advanced to 21% from 19% a month earlier, the independent candidate Emmanuel Macron retreated to 22%, while Jean-Luc Mélenchon stands at the fourth place with 18%. Although the first round race appears to be very tight, Marine Le Pen is not expected to clear her way to the Elysée, regardless of who she would face between Fillon and Macron in the second and the final round.

The CAC quickly reversed gains recorded at the open.


FTSE dives on cheaper oil, commodities

Cable extended gains to three-week highs (1.2595). The stronger pound weighed on the FTSE stocks at the London open. Mining (-1.70%) and energy stocks (-1.20%) lead losses, as even a broad-based USD strength couldn’t send the pound below its 200-day moving average (1.2540).

FTSE resistance is eyed at 7345p.


Mnuchin revived the USD-bulls

The US dollar firmed as the US Secretary of Treasury Mnuchin walked against President Trump’s last week’s comments on the stronger US dollar. Mnuchin said that ‘over long periods of time, the strength of the dollar is a good thing’ to the FT. He also added that Trump’s tax reforms are ‘not realistic’, hinting that the fiscal expansion plans are perhaps far beyond what is about to come.

His comments resuscitated the Federal Reserve (Fed) hawks on expectations that the Fed would not be placed under pressure to hold back fire regarding its ‘neutral’ policy stance.

The Dow Jones is called 19 points softer at 20617 at the US open.

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The FTSE 100 opened downbeat, after recording the biggest one day slump since the Brexit referendum on Tuesday. The key mid-term support to the post-Brexit/Trump rally is eyed at 7038p (minor 23.6% retracement since June 23rd 2016). The MACD index (Moving Average Converge Divergence) turned negative for the first time since December.

A pound recovery above the 1.30 mark against the US dollar and the euro pullback below the 0.80 level should further dent the appetite in the FTSE, which has benefited from the cheap pound since many months.

USD softened as 10-year yields plunged below 2.17%
The Federal Reserves (Fed) George said that there could be a tradeoff between shrinking the portfolio and hiking rates, bringing us back to the idea that the Fed could slightly step on the brake for rate normalization, to avoid a sharp tightening in the US monetary conditions, especially given that the US Secretary of Treasury Mnuchin warned that Donald Trumps phenomenal fiscal plans could be unrealistic.

The US dollar retreated against all of its G10 counterparts in Asia. The US 10-year yields tanked below 1.17%, the lowest levels since the US presidential election.

The probability of a June Fed rate hike plunged to 43.7%.

The Dow Jones is called 20 points softer at $20503 at the US open.


Gold holds the ground at $1278

Gold rebounded from $1278.87 on Tuesday and consolidated gains between $1283 and $1291. Trend and momentum indicators remain comfortably positive for a further recovery to $1300 and $1315 (minor 76.4% retracement on July December 2016 decline). Dip-buyers are touted at $1278 (major 61.8% retrace) and $1272 (minor 23.6% retracement on March April rise).


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FTSE tests 7100p, as Cable eyes 1.30

The Bank of England (BoE) Governor Mark Carney is due to speak in Washington later in the day. He is not expected to comment on the latest political developments, yet if he does, he could give a shake to the pound before Fridays retail sales data. Given that a smoother Brexit would have a lighter impact on the UKs economy, the BoE could be in a position to concentrate on the UKs rising inflation sooner rather than later. The latter reasoning would be GBP-positive.

Although the GBPUSD corrected on the downside, partially due to the swinging mood in the USD, it could be just a matter of time before the pair challenges the 1.30 mark. The next critical target stands at 1.3043, the major 38.2% retrace on post-Brexit sell-off, if surpassed, would suggest a mid-term bullish reversal for the pound. The short-term support to the actual positive trend is eyed at 1.2717 and 1.2600 (minor 23.6% and major 38.2% retrace on March April surge).

Sharp appreciation in the pound has taken its toll on the FTSE stocks. The FTSE 100 shortly fell below the 7100p at Thursdays open. The 100-day moving average (7200p) has been broken for the first time since December. The next key support is eyed at 7088p (major 38.2% retracement). Below this level, the mid-term trend should reverse to bearish and the negative reversal could encourage a further slide to the 7000p mark.

Finally, the stronger bearish momentum in the EURGBP suggest that the cross could test the 0.8232 (major 61.8% retracement on post-Brexit surge) on the downside. Whether the move could extend toward the 0.80 mark will depend on the first tour of the French election due on April 23rd. A renewed euro appetite on Monday could compromise a further advance to 0.80 in the short-term.


Rosengren says Fed should shrink portfolio relatively soon with little impact on rate hikes

The US dollar swung higher again, as Federal Reserves (Fed) Rosengren said that the Fed should start shrinking its balance sheet earlier, yet gradually and without interfering with the rate normalization process.


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Increased hedging against French risks

Cable slipped below 1.2800, as the UK’s retail sales excluding auto fuel contracted by 1.5% on month to March. The FTSE’s intraday positive trend on cheaper pound. The FTSE 100 traded past 7130p after the release.

From a technical perspective, the GBPUSD is considered in a positive trend above 1.2600 (major 38.2% retracement on March – April rise). Intermediate support is eyed at 1.2765 (pivot) and 1.2717 (minor 23.6% retrace & 100-hour moving average). Put options are waiting at 1.2800 at today’s expiry, while call options trail above the 1.2850, if exercised, could give a positive spin to the pound against the US dollar for a weekly close above the 50-week moving average (1.2860).


Paris attack, a ‘benediction’ for Le Pen’s populist campaign?
Thursday’s terrorist attack in Paris could butter Marine Le Pen’s bread just before the first round of the French presidential election due on Sunday, April 23rd.

According to the latest polls aggregated by Bloomberg, the independent candidate Emmanuel Macron has taken the lead with 23% chances of winning the first round, followed by Front-National’s Marine Le Pen (22%), the Republican François Fillon (20%) and the Socialist Jean-Luc Mélenchon (19%).

Could Thursday’s attack reshuffle the odds into Sunday’s decision?


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CAC, EUR rallies on predicted Macron win

The CAC 40 rallied past €5’200 at the open in Paris; French banks surged 10%, as the most feared scenarios were left out of the frame at Sunday’s French election.

The outcome of the first round of the French presidential election was remarkably in line with the opinion polls. Emmanuel Macron took the lead with 24% of the votes, Marine Le Pen came the second with 22%. François Fillon, whose support remained just shy of 20%, has been a clear victim of a scandal revealing that his wife received some €900’000 from the public money in exchange to little-to-no work. The far-left candidate Jean-Luc Mélenchon obtained 19.5% of the votes, a good performance per se yet not enough to take him to the final race to the Elysée Palace.

The run-off will be held between the independent centrist Emmanuel Macron and the far-right, anti-European Marine Le Pen.

Le Pen is given low probability of winning the second and the final round of the election. Her radical views on immigration, the European Union and the euro should see a solid resistance from the majority of the population. In this respect, François Fillon and Benoit Hamon already called their supporters to vote for Macron. According to the earlier polls, Le Pen would gather less than 40% of the voters by her side. In this context, Emmanuel Macron seems to be the closest to becoming the next President of France.

This is the first time in the modern French history that the two establishment parties are left out of the game as early as at the first round. This particular situation would, of course, raise many practical questions regarding how Mr. Macron would proceed in the government and what the new political balance would look like, given that Emmanuel Macron is not linked to the major political parties.


Euro rallies as Macron victory is being fully priced in

The euro took a deep breath on Monday, after the first round results excluded the possibility of Le Pen/Mélenchon run-off, a scenario which would have been dramatic and fundamentally detrimental for the single currency and has been broadly priced in during last week.

The EURUSD rallied more than two figures at the Asian open, up to a five-month high of 1.0937. The 1.10 mark is the next natural target for the euro-bulls. Support is eyed at 1.0795/1.0785 (major 38.2% retrace on April 6th to April 24th surge / 200-day moving average).

Furthermore, the euro-favourable outcome will also remove a major weight off the European Central Bank’s (ECB) shoulders, which is due to meet on Thursday.


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Stocks rally on Trump’s tax reforms, DAX renews record

The US stocks were resuscitated after the White House announced that the US corporate taxes will be cut by 15% as part of Donald Trump’s ‘major’ fiscal plans. According to the latest news, the personal income taxes will also be reduced. More details are due at the Wednesday’s announcement. Donald Trump will prioritize the tax cuts over the budget deficit. In this respect, the US debt ceiling should be adjusted to avoid an eventual government shutdown. Nevertheless, the early highlights regarding the very much expected tax reforms pleased the private sector investors. The optimism is back in the US markets.

The US stocks rallied to three-week highs on early indications concerning the Trump’s tax reforms. The Dow Jones traded just shy of $20’800 in New York. The S&P500 advanced to $2’377. The US stock rally could continue until the official announcement due on Wednesday.

The Dow is called 46 points firmer at $20’810 at the New York open.

The US optimism helped the Asian stocks higher on Tuesday’s trading session. Nikkei (+1.08%) and Topix (+1.09%) closed the session in the green, as the USDJPY took over the 110.00 mark into the end of the trading session in Tokyo.


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Markets cheer likely Macron presidency

Given that the markets have priced in the Macron victory as done and dusted, the euro is assumed to be brought up to a ‘fair value’ based on the information that Emmanuel Macron will take the lead of the country. Hence, the future of the euro and the integrity of the Eurozone will no longer be questioned, at least from a Frexit perspective.

Based on the previous assumption, the euro is expected to be driven by new factors, a major one being the European Central Bank’s (ECB) monetary policy outlook.
With the French election considered as being out of the way, an increasing number of analysts expect the ECB President Mario Draghi to review his forward guidance and hint at the policy normalization earlier than previously anticipated. In fact, Mr. Draghi could hint at Quantitative Easing (QE) exiting plans as early as at the June meeting. This is six months earlier than September, as expected till the first round of the French election.

An eventual hawkish shift in the ECB expectations could reinforce the euro appreciation across the board.

What are the downside risks?

The major and the most straightforward downside risk is a surprise rise in Le Pen’s popularity in the opinion polls.

The probability of Le Pen victory is indeed low given that she has a radical view on France’s membership in the European Union and the Eurozone. In this respect, only Mélenchon’s anti-establishment supporters could be tempted to vote Le Pen.

François Fillon and Benoit Hamon already called their supporters to vote for Macron, for the sake of the European integrity.

Given that a Le Pen win could have very drastic and dramatic consequences for the future of France at the heart of the EU and the Eurozone, many French citizens could also be brought to vote against Le Pen, even though they are not necessarily supportive of Emmanuel Macron.


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EUR up, WTI down, focus on US tax plans
By Ipek Ozkardeskaya

The euro has had a solid week so far, after the first round of the French election was perceived as a major relief from the markets, which already declared Macron the next President of France. The far-right finalist Marine Le Pen is given 39% chances of winning the final round of the election versus 61% for the centrist Emmanuel Macron.

The French election considered out of the way, EUR-traders’ attention shifts to the European Central Bank (ECB). The ECB will meet on Thursday and will likely keep the policy unchanged. Yet, the market is calling for a more hawkish accompanying statement from President Mario Draghi. He is expected to give more details about the Quantitative Easing (QE) exit plans at the June meeting, six months earlier than previously anticipated. In this respect, Draghi is expected to adopt his language at the communiqué as early as this week.

On a side note, it is well possible that the markets have gone well head of themselves, given that we could also expect the ECB to be less emotional and more pragmatic and wait until the official result of the French election before moving into action.

Since Monday, the euro gained 2.10% against the yen, 1.35% against the Aussie, 0.70% against the US dollar, 0.42% against the pound and 0.37% against the Swiss franc.

The EURUSD extended gains to 1.0951, as the ECB hawks are taking the lead before Thursday’s meeting. The 1.10 level is the next natural target and wet the EUR-bulls’ appetite. Support to the positive trend that started in April is seen at 1.0860 (minor 23.6% retrace on April rise) and the critical 1.0804 (major 38.2% retrace).

German 10-year yields spiked to 0.38% for the first time in April, as a combined result of the first round of the French election and anticipation of the ECB QE exit. French 10-year yields remained capped below 1.00%.

There is a lack of enthusiasm in the European and the UK stock markets this morning. The majority of sectors opened in the red across Europe.


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DB tanks post-results, EUR flat pre-ECB

The European Central Bank (ECB) meeting is the major highlight of this Thursday. The ECB is broadly expected to maintain the status quo, yet the focus will be on the accompanying statement. President Mario Draghi could ‘tweak’ the language of his communiqué in line with the expectations that the ECB could start reviewing the Quantitative Easing (QE) exit options as soon as the June meeting. This is six months earlier than anticipated until this week. Many think that the EUR-favourable outcome from the first round of the French election could give a reasonable justification to start the tapering talks. We warn that the markets could have gone well beyond themselves, along with the over-excitement vis-à-vis an eventual, though high probability Macron win. Therefore, we could expect the ECB to be down to earth and wait until the official results of the election, then move into action. A less hawkish than expected ECB rhetoric could temporarily dent the appetite in the EUR crosses.

The EURUSD advanced to 1.0951 on Wednesday. The 1.10 level is the main challenge before the EUR-bulls and could be breached if Draghi hits the nail on the head at his press conference. Support to the actual positive trend stands at 1.0860 (minor 23.6% retracement on April rise) and 1.0805 (major 38.2% retrace).

The European stocks were handed in a risk averse market. The majority of sectors traded in the red.

Deutsche Bank sharestanked at the open, as investors refused to buy into what looked like a solid results at the first sight. In fact, the DB announced that its Q1 profits more than doubled on the back of improved market activity.

The Trump-reflation environment has indubitably been a favourable playground for banks and financial institutions. Improved yields, enhanced market activity and volumes are expected to play in favour of the financial businesses. Yet apparently, the DB results remained far behind its US peers, while the equity trading revenues dropped 11%, versus a flat performance across the Pacific.

The DB lost up to 3% in Frankfurt.

Across the Channel, the market reaction was much better regarding Lloyds (+3.56%), as the Q1 adjusted tax profit rose to 2.08 billion pound versus 1.96 billion expected by analysts. Statutory pretax profit rose 99% to 1.304 billion pound. The bank also upgraded its guidance for the 2017 net interest margin (NIM) and capital generation. In the aftermath of the results, it is obvious that Lloyds has not suffered the consequences of the Brexit this far and the damages are expected to remain limited given that 97% of the bank’s business is in the UK. Hence, news are encouraging for Lloyds that will be owned by private investors only after eight years of public support. The average 12-month price target is set at 70.43p; 55% of investors are positioned in favour of the long side, 22% remain on hold, while 22% would prefer selling the stock.


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UK GDP slows, FTSE rebounds from 7200p

The UK’s GDP growth fell to 0.3% quarter-on-quarter from 0.7%. The downturn in services growth has been a major focus, reviving concerns that the deterioration in the living standards has just started creeping in following the Brexit vote.

GBPUSD extended gains to 1.2945 before the data and remained well supported after the release given that the slowdown was mostly priced in. As a result, the 1.30 level stands as an appetizing target for the GBP-bulls, especially on the back of an almost sure majority for Tories at the upcoming snap election. Key short-term supports to the current positive trend stand at 1.2725 (minor 23.6% retracement on March – April rise) and 1.2607 (major 38.2% retrace).


FTSE flirts with 7200p

The deterioration in the global risk appetite after a renewed Trump disappointment, combined to a stronger pound and cheaper oil justify the solid selling pressures in the FTSE 100 stocks. In addition, the threat from the pharmaceutical giants to leave the UK, unless an extra 20 billion pounds are invested in the NHS each year add to the anxiety.

FTSE 100 broke below the 7222p (50% retracement on the weekly rise) and traded just shy of the 7203p (major 38.2% retracement). The 7200p could act as a solid intraday support, given that the softer-than-expected GDP read somewhat dented the GBP-bulls’ appetite.

Offers are touted above the 200-day moving average (7250p) for an eventual slide to


Barclays sold on surprise drop in trading revenues

Barclays (-5.30%) traded at the bottom of the FTSE 100, despite announcing solid first quarter results before the open. The 1Q pretax profit beat estimates with GBP1.68bn print versus GBP792 million expected by analysts, the CET1 ratio rose to 12.5% from 12.4%.
The surprise drop in fixed-income and equity trading revenues is what caused the sell-off in London.


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FTSE higher on BP, oil under pressure

The FTSE opened upbeat. Mining stocks (+0.54%) were better bid on improved copper futures, which gained on the US Commerce Secretary Ross’ positive comments regarding the trade relations with China, although the Chinese PMI data has been a disappointment.

Energy stocks (+1.12%) lead gains on solid first quarter results from British Petroleum.

Gains across the FTSE could remain limited due to the relatively stronger pound and globally softer oil prices. Offers are eyed at 7300/7305p (50-day moving average).


Cable opens downbeat in London, weekly trend remains positive

The GBPUSD slipped below the 100-hour moving average (1.2892) and is preparing to test the 200-day moving average (1.2850) on the downside. Despite the bearish intraday dynamic, the weekly trend remains positive with minor support at 1.2761 (minor 23.6% retracement on March – April rise) and the critical 1.2636 (major 38.2% retracement).

Buyers continue targeting the 1.30 psychological threshold. The golden cross formation on the daily chart (50-day moving average crossing above the 200-day moving average) could increase the appetite in the pound against the US dollar. Above 1.30, solid resistance is eyed at 1.3040 (major 38.2% retracement on post-Brexit sell-off), if surpassed, would signal a mid-term bullish reversal.

UK local elections are due on Thursday and could result in a significant shift from Labour to Conservatives before the upcoming snap election.


BP’s Q1 results please investors

BP (+2.82%) started the session upbeat on the back of better-than-expected first quarter results. The 1Q adjusted net income printed $1.51 billion, beating analysts’ forecast of $1.21 billion. The adjusted EPS (earning per share) came in at 7.74c versus 6.42c expected. The first quarter dividend per share, 10c, pleased investors.


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Apple miss, Fed verdict, Brexit tensions

A dollar-pound quotation nearing the 1.30 hurdle and softer commodity prices dented the appetite in the FTSE stocks in London. Mining (-0.75%) and energy stocks (-0.45%) lead gains at the open
Tensions between London and Brussels rise. FT reported that the costs of the divorce could reach $100 billion based on the EU demands. Brexit Secretary David Davis responded saying that the UK will not pay this amount. The EU’s chief negotiator Michel Barnier is expected to reveal more details today.

The pound remains strong despite the rising Brexit tensions, as the UK is focused on Thursday’s local elections and June 8th snap election, where PM Theresa May will be seeking to consolidate and eventually to extend her power at the heart of the government. Many believe that a stronger support for Theresa May could result in more favourable Brexit negotiations for the UK.
Cable remains well bid with 1.30 targeted as the next stop. The key resistance is eyed at 1.3040 (major 38.2% retracement on post-Brexit sell-off), if surpassed, would signal a mid-term bullish reversal in the pound against the greenback.


Apple falls nearly 2% on extended trading, as iPhone sales fell 1%
Apple announced one percent year-on-year fall in iPhone sales in the first three months of 2017; though the actual sales printed 1% increase in revenues as clients opted for the more expansive iPhone 7 Plus. CEO Tim Cook suggested that the slowdown in sales could be partly due to clients waiting for the new iPhone 8.
Good news is that the contraction in iPhone sales was offset by 18% revenue increase from Apple services, such as iCloud, App Store and Apple Pay.

Still, investors were disappointed as Apple missed estimates on revenue and forecasts for the fiscal 3Q and preferred trimming their positions in the after-hours trading.
The rising competition in China, which caused 14% decline in revenues from the world’s biggest emerging market, and Samsung’s return to the race with its well-noted Galaxy S8 raise questions regarding the much expected iPhone 8’s ability to foster a suitable revenue growth in the coming quarters.
Apple shares retraced nearly 2%, the CFDs retreated to $146.80 after the stock traded at an all-time high of $148.09 on Tuesday.
Despite the kneejerk sell-off, loses could remain limited on Apple's promises to redistribute a part of its $257 billion cash holdings at the end of the quarter. The company announced $50 billion in buy-backs and a higher dividend of 63 cents, up from 57 cents and slightly better than 62 cents expected by analysts.
Nearly 80% of analysts surveyed by Bloomberg maintain a positive view on the Apple stocks and 18% remain on hold for an average 12-month target price at $156.74.

US stocks called softer at the open

Nasdaq 100 rolling index withdrew on Apple disenchantment, after renewing record for the second consecutive day on Tuesday.

The S&P500 tested the $2’400 offers for the second straight day. The Dow Jones remained slightly shy of the $21’000 hurdle.
The Dow is expected to open 35 points softer at $20’915 in New York, the Nasdaq is set to give back 10 points to $5’625 and the S&P500 is seen 6 points lower at $2’385.

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Facebook shares fell, HSBC gained on results

The UK services sector expanded unexpectedly faster in April. Solid data wet the appetite in the pound, which started the session on a negative note. The GBPUSD recovered to 1/2895, after trading at 1.2830 ealier.

FTSE rallied on cheaper pound and solid corporate results at the London open.

Energy stocks (+2.02%) lead gains, as financials (+1.51%) joined the rally.

HSBC (+3.30%) reported $5.94 billion profit beating $5.30 billion forecast by analysts. The cost saving program is on track according to the bank, it will continue removing the low-return, risk-weighted assets. Although HSBC disappointed some investors who were hoping a new share buyback announcement, the surprise rise in the first quarter profit pleased investors.

Randgold (+1.89%) rallied as the first quarter profit rose by 28%. Gold production increased by 10% year-on-year. Randgold made a solid start to the year, along with the recovery in gold prices. The recent bearish reversal in the gold markets encouraged day-traders’ to sell the top. Randgold surged by 4.70% before rapidly giving back the majority of the earlier gains.

Glencore (-1.30%) couldn’t avoid the sector-wide sell-off despite raising the profit forecast for its trading division and revising up its dividend outlook. The quarterly copper production contracted by 3%, as coal production improved 4%.

Anglo American (-2.49%) and BHP Billiton (-1.22%) plunged as iron ore futures lost up to 7% and copper futures extended losses past 2% in the session.


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Pearson rallies, oil tanks, NFP in focus

Asian stock indices traded south. The sell-off in oil, metals and commodities deepened and increased the anxiety across the global financial markets. Japan was closed.

Hang Seng (-0.84%) and Shanghai’s Composite (-0.78%) declined. Energy (-2.01%) and mining stocks (-1.07%) led losses on heavy headwinds in oil and commodity markets.

The FTSE was handed over a fairly bearish market. Energy and mining stocks started the trading session at the bottom of the FTSE 100, while Pearson (+15.50%) rallied on restructuring plans.

The early results from the UK’s local elections suggested a solid victory for the Tories; Labour lost some more blood, as UKIP collapsed. As such, PM Theresa May is set for a greater majority in June 8th snap election, in line with the opinion polls.

The GBPUSD is well bid above the 1.2900. It could be just a matter of time before the 1.30-offers are taken out. The key resistance is eyed at 1.3044 (major 38.2% retracement on post-Brexit decline). Above this level, Cable will step in the mid-term bullish consolidation zone.


Oil, metals and commodities hammered

Crude extended losses below $45 for the first time since OPEC announced to cut output on November. Fears that the OPEC’s output reduction plans would not suffice to reduce the global supply glut weigh on the price of a barrel. The sell-off deepens as OPEC keeps silent.


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we prefer the trade recommendation

Oil bounces, EUR pares gains post-Macron

The risk-on environment pushed the global indices and equity futures higher. Nikkei and Topix rallied past 2%, as gold, yen and the franc retreated. Australia’s ASX gained 0.50% despite a failed recovery attempt on iron ore prices. Shanghai’s Composite (-1.03%) diverged negatively, as data showed that Chinese exports grew by 8% year-on-year in US dollar terms, from 16.4% printed a month earlier. The trade surplus improved to $38.05 billion from $23.92.

The CAC (-0.17%) failed to gather a positive momentum on Macron’s victory in the final round of the French presidential election. The DAX (+0.25%) outperformed its peers as Volkswagen (+1.07), Daimler (+0.86%) and BMW (+0.71%) lead gains in Frankfurt.

The FTSE opened firmer in London, yet failed to preserve gains. Rebound in oil prices were jeopardized by stronger pound and softer commodities.
The downside risks prevail, as the GBPUSD flirts with the 1.30 resistance.

Cable flirts with 1.30 before the BoE, QIR

The GBPUSD strengthened to 1.2989. It is just a matter of time before the 1.30 resistance is tested.

The key mid-term support stands at 1.3044, the major 38.2% retracement on post- Brexit sell-off. This level should distinguish between a mid-term bullish reversal and a short-term downside correction.

Is Cable ready for a mid-term trend reversal against the US dollar?


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Stocks rangebound, mixed appetite

The early enthusiasm on Monday left its place to a rangebound, mixed market sentiment.

Emmanuel Macron’s victory encountered a correction sell-off in the euro and the European stock markets.

Nikkei (-0.26%) and Topix (-0.26%) couldn’t find buyers in Tokyo, despite a softer yen. Shanghai’s Composite (+0.06%) and ASX 200 (-0.53%) remained on the back foot, even with an improved sentiment in the energy sector (+1.23%). Hang Seng index (+1.00) diverged positively on the back of an increased demand in information technology stocks (+1.67%).

FTSE 100 opened slightly upbeat in London. Mining stocks rebounded; Glencore (+1.99%), Anglo American (+1.8%), BHP Billiton (+1.47%), Antofagasta (+1.33%) and Rio Tinto (+1.26%) led early gains.

The stronger pound is still a downside risk for the FTSE traders, yet the Bank of England (BoE) hawks seem to refrain Cable from taking over the 1.30 resistance before Thursday’s policy meeting and Quarterly Inflation Report (QIR).


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Strong pound caps FTSE gains

Firmer pound and subdued oil prices weigh on the FTSE.

WTI consolidated above the $46 level amid the API printed 5.79 million barrels fall in the US inventories last week. Today’s EIA data is expected to confirm the decline in oil inventories. The consensus is a contraction of 2 million barrels versus -900K printed a week earlier. Soft data could revive buyers and encourage a renewed positive attempt in WTI. The next positive target is seen at $47.78 (major 38.2% retrace on April – May drop).

Cable’s advance toward the 1.30 level dents the appetite and prevents the FTSE from gaining upside momentum, while soft expectations vis-à-vis Thursday’s Bank of England (BoE) meeting and the Quarterly Inflation Report (QIR) could bring in top-sellers if the pound succeeds to take over the 1.30-resistance.

The divergence between the Federal Reserve (Fed) and the BoE policy outlooks could prevent the pound from a mid-term bullish reversal. Therefore, the key resistance is eyed at 1.3044, the major 38.2% retracement on post-Brexit sell-off.


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