Options Market

The first round of the French election has shown that the far right is unlikely to form an absolute majority. The CAC40 is outperforming, with banks leading the charge. Eurozone inflation data is in focus ahead of Suvday's second round of voting. UK stocks are also gearing up from the UK election on July 4th, with housebuilders such as Visrry and bricks and mortar retailers in focus.

Stocks to watch this week include Apple with the Worldwide Developers Conference, Broadcom as it releases fiscal Q4 and full-year earnings, and Oracle amid the release of Q2 earnings.

GBP/JPY is coiling up and primed to fire, sitting in a strong uptrend while bumping up against horizontal resistance dating back to when the Bank of Japan initiated a record FX market intervention to support the Japanese yen in April.

Chinese stock futures have surged on the resumption of trade on Monday, finding buying support after hitting multi-week lows on Friday. If the gains stick, it points to a potential trend change in both the Hang Seng and China A50. The gains track similar moves across the Asian region and follow a late surge on Wall Street to end May.

Obvious month-end window dressing in Australia and United States stocks drove significant late session rallies on Friday, sending Australian ASX 200 futures surging 1.5% from the lows hit in Asia. But with commodity prices down heavily on Friday including iron ore, whether the gains can stick is questionable.

A UK general election will be held on July 4th. Since the announcement, the FTSE has fallen around 1%, and GBP remains well supported. In short, the market is calm about the prospect of Labour, which is ahead in the polls, winning power. This is because it is expected, and the policies aren't radically different from Conservative policies. The economy as a whole isn't expected to change its course and the timing of the BoE rate cut could be more of a market driver. That said, there are some policies that could affect specific sectors, which we consider below.

If the 2-year yield is right, it suggests the USD could be set to rise over the near term. And I suspect that PCE inflation could be the trigger. For now, risk off tones are in the air.

Tuesday looms as a potential make-or-break session for Australia’s ASX 200 with futures sitting at a key technical level on the charts ahead of the RBA interest rate decision. One saving grace may be the continued rebound in iron ore futures in Singapore.

With a quieter economic calendar attention will be on earnings. Disney, BP, and Uber are among some of the companies reporting this week.

The suspected intervention from the BOJ this week has changed the game for USD/JPY, placing a rather large barrier in the way of further upside at a time when US bond yields were already looking toppy.

Earnings drove volatility last week and continue to roll in this week. Attention will be on Amazon, Apple and HSBC. Here we look at what to expect.

The US 2-year bond yield remains support, which is capping the yield at 5% and weighed on the US dollar. And that helped AUD/USD rise for a second day ahead of a key AU CPI report.

EUR/USD futures traders are on the cusp of flipping to net-short exposure, and managed funds are increasing their short exposure to gold and crude oil.

The US dollar has risen around 6% from the late December low. And with bond prices approaching support which could send yields lower, the US dollar rally could at least find some headwinds - if not a retracement.

While the Nasdaq 100 has broken its 2024 uptrend, traders continue to buy the dip, generating a bullish signal on Thursday. That points to possible upside not only for US tech but also Japan’s Nikkei 225.

Bond markets make the financial markets go round, so when they provide a strong signal on how Wednesday’s US consumer price inflation report may be interpreted, every trader should sit up and take notice.