- Australia's ASX 200 index rose by 113.9 points (1.6%) and currently trades at 7,249.60
- Japan's Nikkei 225 index has risen by 491.09 points (1.64%) and currently trades at 32,437.16
- Hong Kong's Hang Seng index has risen by 469.41 points (2.49%) and currently trades at 19,330.36
- China's A50 Index has risen by 195.73 points (1.56%) and currently trades at 12,757.43
UK and Europe:
- UK's FTSE 100 futures are currently up 4 points (0.05%), the cash market is currently estimated to open at 7,420.11
- Euro STOXX 50 futures are currently up 7 points (0.16%), the cash market is currently estimated to open at 4,367.46
- Germany's DAX futures are currently up 18 points (0.11%), the cash market is currently estimated to open at 16,041.00
- DJI futures are currently up 51 points (0.15%)
- S&P 500 futures are currently up 11.5 points (0.26%)
- Nasdaq 100 futures are currently up 66.5 points (0.43%)
If you needed any reminding that inflation data remains a key driver for global sentiment, then yesterday’s US CPI report should have served you well. With annual, monthly CPI and core inflation prints all below expectations, it certainly stirred some excitement that the Fed may hike one last time in two weeks – with some even speculating whether they’ll pause in July. With money markets suggesting a 92% chance of a hike, I feel inclined to believe them and run with that hike. But any comments next week from Fed members will be scrutinised as strongly as ever, as we veer towards the Fed blackout period ahead of their next meeting.
Asian indices were broadly higher as they tracked the sentiment of Wall Street, looking past weak growth concerns from China’s trade data. Exports slumped -12.4% y/y, down from -7.5% prior and missing estimates of 0.5%. Imports also missed the mark at -6.8% y/y versus -6.1% expected, down from -4.5%.
US jobless claims, PPI in focus today
On today’s docket we have several key data points for the UK at 07:00 including GDP, trade balance and output data for construction, manufacturing and industry. It could take quite a series of misses to shake the pound-bullish tree, given all bets are on for a 50bp BOE hike (thanks to stronger wages data). French CPI is at 07:45, industrial production for the eurozone at 10:00, the OPEC monthly report is at 12:00 and then ECB monetary policy meeting minutes at 12:30.
Given the significance of yesterday’s CPI report, a soft set of US PPI data at 13:30 could further bolster bets of a less hawkish Fed. But a potential fly in the ointment is if we see jobless claims data recede further as it could shed some doubt over a less-hawkish Fed with such a tight labour market.
What immediately jumps out on the FX major dashboard is how most of the pairs have either traded higher or lower over the past five days. It brings into question how much juice is left in the tank to sustain these moves, and the fact that we have only seen a minor follow-through in Asia reiterates this point. Implied volatility is also relatively low to suggest the more exciting action for the week may be behind us for the week. And if there is a potential catalyst for some retracement, perhaps we might find it in stronger employment data for the US later.
DAX daily chart:
The DAX may have completed a classic 3-wave retracement (ABC) on the daily chart, having found support just below 15,500 at a 50% retracement level. The market has rallied for four consecutive days since that low, so perhaps upside could be limited over the near-term. But with index futures pointing higher ahead of the open, it looks like bulls are set for another crack at breaking 16,000 today. Should prices retrace (whether later today, tomorrow or next week), the look signs of support around the 20 and 50-day EMA around 15,925 or yesterday’s low around 15,800. But given the 3-wave retracement spanned most of the bullish channel and bullish momentum has turned sharply higher, we think a run to the 2021 and ATH (all-time high) is now on the card.
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