May 17, 2016 - *SUP 1: 2893.63 Low May 6. *SUP 2: 2866.80 Bollinger band base. *SUP 3: 2860.32 Monthly Low Apr 7. *SUP 4
A Eurex publication focused on European financial markets, produced by MNl
Morning Briefing May 17th 2016 The calendar picks up pace on Tuesday, with data and central bank appearances aplenty on both sides of the Atlantic. The European calendar gets underway at 0630GMT, with the release of the Bank of France retail trade survey. At 0745GMT, ECB Governing Council member Peter Praet will deliver a speech during a Public Hearing on the Call for Evidence, in Brussels. In the UK, the monthly inflation report is the headline release. Inflation is seen slipping back slightly again in April, although holding above zero on an annualised basis. The Bank of England will be paying close attention, as it looks for annual CPI to head towards 1% by year end and then on to around 2.2% around the end of the 3-year target medium term horizon.
Back on the Continent, the EU April trade data is set for release at 0900GMT, before the Bundesbank publishes their Monthly Report for May at 1000GMT. Across the Atlantic, the calendar kicks off with the release of the latest RetailEcon-GS Store Sales data at 1145GMT. The day's main US data is expected at 1230GMT, when the NY Fed Business Leaders Survey, the April CPI and the April housing starts data are published. The CPI is expected to rise by 0.4% in April. Analysts expect energy prices to rise further, building on March's 0.9% increase, while food prices are seen posting a modest gain. AAA reported that unadjusted gasoline prices rose solidly in midApril from a month earlier, though some of that gain will be blunted by seasonal adjustment factors. The core CPI is expected to rise by 0.2%. The pace of housing starts is expected to rebound to a 1.130 million annual rate in April after falling back in March.
Global Economic Trading Calendar
Starts were still up 11.3% year/year before seasonal adjustment in March, while permits were up 7.9% and housing completions were up 28.6%, an indication of the strength of home building. The Redbook retail sales index will be released at 1255GMT, with the April industrial production data expected at 1315GMT. Industrial production is expected to rise 0.2% in April after a sharp decline in the previous month. Factory payrolls rose by 4,000 in April, with auto production jobs up 6,000. The factory workweek was unchanged at 40.7 hours for fourth straight month. The ISM production index fell to 54.2 in April from 55.3in the previous month. At 1625GMT, San Francisco Federal Reserve Bank President John Williams and Atlanta Federal Reserve Bank President Dennis Lockhart will speak at a Politico event in DC.
Markets FOREX: The aussie was the big mover this morning in the AsiaPacific, the move higher sparked off by the release of the RBA's minutes of its May policy meeting. Aussiedollar traded a $0.7366 high after the RBA minutes, and is currently holding just off that at $0.7351. Elsewhere, other major pairs have been relatively steady at the end of the morning session, after spending the early half of the day in narrow ranges. Dollar-yen was barely changed at Y108.93 compared with the US close of Y109.03 and after a tight Y108.89 to Y109.11 range today. Euro-dollar was also equally flat at $1.1318 vs $1.1321 at the US close. It traded a $1.1313 to $1.1326 range this morning. US INDEX FUTURES: US stock index futures are trading slightly lower in a fairly uneventful Asian session as the market awaits today's crucial CPI data, with the market unable to get a boost from a further rise in energy prices which has seen Jun'16 WTI add another 0.28c or 0.58% from the close. Currently the Jun'16 e-mini S&P futures are trading down 0.75 of a point at 2,062.00, the Jun'16 e-mini Nasdaq futures are trading down 1.50 points at 4,373.75, while the Jun'16 e-mini Dow futures are trading down 8 points at 17,654. US STOCKS CLOSE: US stocks closed firmly Monday, more than offsetting the losses seen Friday. The DJIA closed up 175 pts or 1.00% at 17,710.71, the Nasdaq Composite closed up 58 pts or 1.22% at 4,775.459 and the
S&P 500 closed up 20 pts or 0.98% at 2,066.66. The S&P 500 posted a 2016 high of 2,111.05 April 20 and then succumbed to profit-taking as global investors began to fret various event risks (Brexit, China slow down, US sluggishness, BOJ policy), with the S&P 500 bottoming at 2,039.45 May 6. The index has found support in the 2,030-2,045 zone on several occasions since late March and should continue to do so. US TSYS: Meanwhile in futures space there has been some reasonable volume transacted at 130-18, with some 2.9k trading at this level in what appears to be mostly buying. In options there has just been a 2k buyer or the Jul'16 10yr 131.50 calls for '31. Traders expect a 1.72%/76% range for 10's today in what is expected to be a quiet Asian session overall. After seeing a small bid push 10yr year futures some 3-ticks higher from the close in early trade, the release of the RBA minutes pushed the market to its session lows, with Aussie bonds unable to rally despite the minutes suggesting an unclear outlook for inflation, with the outlook to the Chinese economy a key issue. However, the market has seen some stabilization back to its closing levels, but trade overall is quiet with only some 2.5k on 10yr futures trading over the 5-minute period post the RBA release and seeing some 29k overall.
JAPAN STOCKS: Japanese stocks have seen a positive morning session buoyed by a softer yen as well a further gain in energy prices. The Nikkei has closed for lunch up 0.90% or 148.71 points at 16,615.11, while the Topix is up 0.83% or 11 points at 1,332.65.
GOLD: Spot gold last up $4.83 at $1279.03 per ounce, in a $1273.42 to $1281.05 range so far this morning in Asia, with demand solid after a heavy pullback at the beginning of the US session on Monday. The metal is still struggling to break the $1280/$1300 area where producer selling has been expected. However, a shift in funds focus to being long gold is helping absorb that pressure and it's doing a lot of work just below the resistance. The weaker USD across the majors today is also helping the metal and commodities in general. OIL: WTI crude oil futures for Jun'16 delivery last up $0.49 at $48.21 per barrel, after a $47.74 to $48.28 range in Asia today, on low volume outright but the spread to Jul'16 very active as the market prepares to change the spot contract. Adding to the strength is a shift northward of the Fort McMurray wildfire in Canada and a shift in analyst expectations of the weekly DOE/EIA inventory data. Analysts this Wednesday looking for a drop in stockpiles for a second week, and production is also naturally expected to drop again after rig counts continue to slide. Plenty of resistance from here to the low $50 area but support is growing steadily.
Technical Analysis BUND: (M16) Below 162.67 To End Bullish Hopes *RES 4: 165.51 Low Feb 24 now resistance (continuation) *RES 3: 164.79 Bollinger band top *RES 2: 164.75 Low Feb 23 now resistance (continuation) *RES 1: 164.60 High Apr 11 *PREVIOUS CLOSE: 163.88 *SUP 1: 163.42 Low May 6 *SUP 2: 163.12 High May 5 now support *SUP 3: 162.67 Low May 4 *SUP 4: 161.84 Low May 2 *COMMENTARY: Bears have been so far unable to capitalise on Thursday’s bearish key day reversal with M16 continuing to find support ahead of the 162.67-163.42 support region where 21 & 55-DMAs are noted. Bears need a close below 162.67 to end bullish hopes and shift focus to 161.46-84. Bulls need a close above 164.60 to reconfirm a bullish bias and above 164.75 to confirm focus on 165.51. O/B daily studies looking to correct remain the key concern for bulls.
EUROSTOXX: Correcting O/S Studies Key Concern *RES 4: 3159.78.12 200-DMA *RES 3: 3156.86 High Apr 21 *RES 2: 3033.00 21-DMA *RES 1: 3013.59 55-DMA *PREVIOUS CLOSE: 2951.39 *SUP 1: 2893.63 Low May 6 *SUP 2: 2866.80 Bollinger band base *SUP 3: 2860.32 Monthly Low Apr 7 *SUP 4: 2786.21 Low Feb 15 *COMMENTARY: The 55-DMA confirmed significance as resistance having capped the recovery from 2896.63. Bulls need a close above the 55-DMA to ease bearish pressure and above 3067.61 to shift focus to 3156.86-3195.79 where the 200-DMA is located. While the 55-DMA caps bears dominate and look for a close below 2860.32 to confirm overall focus on a retest of 2016 lows (2672.73).
Eurex Futures Market Close Prices unavailable today due to technical issues.
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