European Open: Reality check for risk as China data misses

Asian Indices:

Australia's ASX 200 index rose by 18.3 points (0.26%) and currently trades at 7,093.40
Japan's Nikkei 225 index has risen by 167.78 points (0.63%) and currently trades at 26,595.43
Hong Kong's Hang Seng index has fallen by -73.65 points (-0.37%) and currently trades at 19,825.12
China's A50 Index has fallen by -151.19 points (-1.14%) and currently trades at 13,144.84

UK and Europe:

UK's FTSE 100 futures are currently down -25 points (-0.34%), the cash market is currently estimated to open at 7,393.15
Euro STOXX 50 futures are currently down -13 points (-0.35%), the cash market is currently estimated to open at 3,690.42
Germany's DAX futures are currently down -40 points (-0.29%), the cash market is currently estimated to open at 13,987.93

US Futures:

DJI futures are currently down -128 points (-0.4%)
S&P 500 futures are currently down -69 points (-0.56%)
Nasdaq 100 futures are currently down -21 points (-0.52%)

Data form China today was underwhelming to say the least. We knew it was never going to be great due to lockdowns, but retail sales, industrial production, output and investment all slumped in tandem whilst the unemployment rate rose. This dented sentiment in the region, saw copper hand back early gains, Chinese equities trade lower along with AUD/JPY and US futures.

However, what has helped to soften the blow is a light is at the end of the tunnel for lockdowns. Shanghai announced over the weekend that they would allow restaurants, shops and shopping malls to reopen today, and then revealed their target to open back up is on June the 1^st.

Yen takes safe-haven inflows

Commodity currencies were once again weaker, mirroring the pattern seen through much of last week. The yen stepped up to the safe-haven plate and even outperformed the US dollar, with USD/JPY breaking a key trendline on the hourly chart.

A bearish divergence formed on the stochastic oscillator whilst prices met resistance at the 100-hour eMA, and the trendline break confirmed a rising wedge pattern is in play, which targets the lows at 127.50. For today we’d prefer to fade into weakness below the 129.50 resistance zone, with the 128.30 support zone making an interim target.

FTSE 100 closes above its 200-day eMA

The FTSE 100 enjoyed its best day in two months on Friday as risk-assets bounced ahead of the weekend. It opened at the low of the day and closed just off the high, just below its 20-day eMA.

The stochastic oscillator generated a buy signal on Wednesday despite its bearish close in the day. But it is worth noting that a false break of 7200 on that day marked a swing low ahead of Friday’s rally, which also saw it close above the 200-day eMA.

From here we would be keen to explore dips within Friday’s range, especially if prices can hold above the 7340 – 7350 support zone. If so, 7500 makes a suitable interim target ahead of 7600, whereas a break (or hourly close) beneath the 200-day eMA at 7269 invalidates our bullish bias.

FTSE 350: 4132.07 (2.55%) 13 May 2022

322 (92.00%) stocks advanced and 25 (7.14%) declined
1 stocks rose to a new 52-week high, 2 fell to new lows
24.86% of stocks closed above their 200-day average
26.86% of stocks closed above their 50-day average
9.14% of stocks closed above their 20-day average

Outperformers:

+ 12.66% - Baltic Classifieds Group PLC (BCG.L)
+ 10.71% - Moonpig Group PLC (MOONM.L)
+ 10.58% - TI Fluid Systems PLC (TIFS.L)

Underperformers:

-3.04% - Drax Group PLC (DRX.L)
-2.67% - Vietnam Enterprise Investments Limited (VEILV.L)
-1.66% - VinaCapital Vietnam Opportunity Fund Ltd (VOF.L)

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