European Open: EU bans Russian oil, EUR/GBP perks up ahead of CPI

Asian Indices:

• Australia's ASX 200 index fell by -39 points (-0.54%) and currently trades at 7,247.60
• Japan's Nikkei 225 index has fallen by -12.47 points (-0.05%) and currently trades at 27,356.96
• Hong Kong's Hang Seng index has risen by 91.33 points (0.43%) and currently trades at 21,215.26
• China's A50 Index has risen by 156.22 points (1.17%) and currently trades at 13,539.69

UK and Europe:

• UK's FTSE 100 futures are currently down -1.5 points (-0.02%), the cash market is currently estimated to open at 7,598.56
• Euro STOXX 50 futures are currently down -5 points (-0.13%), the cash market is currently estimated to open at 3,836.62
• Germany's DAX futures are currently down -26 points (-0.18%), the cash market is currently estimated to open at 14,549.98

US Futures:

• DJI futures are currently up 28 points (0.08%)
• S&P 500 futures are currently up 78.5 points (0.62%)
• Nasdaq 100 futures are currently up 9.5 points (0.23%)

Oil prices continued to move higher overnight after the EU agreed to ban the import of Russian oil by the end of 2022. However, the current agreement is not as strong as the original proposal as it only targets seaborne crude – which accounts for around 2/3^rd of the supply. Brent rose to $122 and WTI rose above $118 to a 12-week high.

Soft economic data from Asia

The Japanese yen was weaker overnight after industrial production contracted -1.2% - its fastest pace in three months – missing estimates of -0.2%. If you were excited about the BOJ Governor Kuroda speaking about a ‘smooth exit’ [from loose policy] last week then this is not the sort of data you want to hear. And with BOJ happy with a weaker currency then traders were happy to short it overnight. USD/JPY rose to 128.30 and we suspect a move to 129 is a real possibility.

China’s PMI data contracted at a much slower pace in April. In fact, the manufacturing, services and composite PMI’s rebounded at their fastest monthly pace since the pandemic. And that is quite remarkable given the length and severity of lockdowns which are yet to be fully scaled back.

US markets reopen following Memorial Day, and they’re expected to open higher and close the gap with European bourses. US President Biden is set to meet Fed Chair Jerome Powell for the first time since Powell was confirmed for a second term. The state of the economy and inflation are the key talking points, according to the White House.

Eurozone inflation up at 10:00

But first, key inflation data for Europe is released at 10:00 BST, with France releasing their data at 07:45. If yesterday’s inflation for Germany is anything to go by, we’re in for another hot report. CPI rose 7.9% y/y in May with food and energy rising 38.3% and 11.1% respectively. Estimates for today’s HCIP flash PMI are around 7.8 – 8%. Strong inflation leads to greater expectations that the ECB will hike by at least 50-bps at their next meeting (and in turn, a firmer euro).

EUR/GBP is considering a break to a 4-day high. The cross has printed a series of higher lows, two of which confirmed support at the monthly R1 pivot and weekly pivot point. Momentum has turned higher ahead of the open, we are therefore waiting for strong inflation to break prices above 0.8530 and signal trend continuation.

FTSE: Market Internals

FTSE 350: 4237.75 (0.19%) 30 May 2022

• 252 (72.00%) stocks advanced and 86 (24.57%) declined
• 10 stocks rose to a new 52-week high, 0 fell to new lows
• 31.43% of stocks closed above their 200-day average
• 46.86% of stocks closed above their 50-day average
• 26% of stocks closed above their 20-day average

Outperformers:

• + 18.61% - Countryside Partnerships PLC (CSPC.L)
• + 7.96% - Aston Martin Lagonda Global Holdings PLC (AML.L)
• + 6.50% - Dr Martens PLC (DOCS.L)

Underperformers:

• -5.07% - Airtel Africa PLC (AAF.L)
• -2.66% - British American Tobacco PLC (BATS.L)
• -2.65% - Helios Towers PLC (HTWS.L)

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