European Open: EUR/USD pulls back ahead of PMI’s, futures lower

Asian Indices:

• Australia's ASX 200 index fell by -4.2 points (-0.06%) and currently trades at 7,144.70
• Japan's Nikkei 225 index has fallen by -208.98 points (-0.77%) and currently trades at 26,792.54
• Hong Kong's Hang Seng index has fallen by -282.69 points (-1.38%) and currently trades at 20,187.37
• China's A50 Index has fallen by -143.45 points (-1.07%) and currently trades at 13,253.12

UK and Europe:

• UK's FTSE 100 futures are currently down -47 points (-0.63%), the cash market is currently estimated to open at 7,466.44
• Euro STOXX 50 futures are currently down -19 points (-0.51%), the cash market is currently estimated to open at 3,689.39
• Germany's DAX futures are currently down -62 points (-0.44%), the cash market is currently estimated to open at 14,113.40

US Futures:

• DJI futures are currently down -187 points (-0.59%)
• S&P 500 futures are currently down -194.75 points (-1.62%)
• Nasdaq 100 futures are currently down -39.25 points (-0.99%)

Despite a positive close on Wall Street, US futures moved lower following an earnings warning from SNAP after the close, which helped to weigh on sentiment in Asia. The Nikkei crossed bac below 27k as it tracked Nasdaq futures lower, with most major benchmarks across Asia trading in the red.

PMI’s are in focus today where traders get a sneak peak at growth prospects and inflationary pressure. Asian data has already been released, which saw Japan’s PMI expand at its slowest pace in 3-months, although the services sector (particularly tourism) was looking up thanks to an easing of lockdown restrictions. Asian PMI’s also softened yet remained expansive.

Whilst Asian PMI’s can sometimes be indicative of what to expect in Europe or the US, we’re hopeful we’ll see improvement for Germany and the Eurozone prints today. As the PMI’s are diffusion indices (and essentially a m/m rate of change) there may be a rise for PMI’s across the region businesses adjust to the new post-war conditions. We noted in an earlier report that the German IFO sees a greater than 50% chance of an economic expansion and does not see any immediate signs of a recession. Therefore, a stronger than expected set of PMI report today could help the euro break higher.

EUR/USD rally stops just shy of 1.0700

The euro was yesterday’s strongest currency thanks to firmer business sentiment in Germany and hawkish comments by Lagarde. A bullish trend has formed on the EUR/USD hourly chart, although prices are now pulling back from 1.0700 following a bearish divergence. Perhaps support can be found around the 1.0640 support zone before its next leg higher. Although a characteristic of this trend is for it to pull back slightly below the 50-hour eMA before rallying once more, in which case it may trade lower than the mentioned support zone. The ideal data set to help the euro rise is a stronger PMI report for Europe, relative to the US released this afternoon.

FTSE: Market Internals

FTSE 350: 4184.14 (1.67%) 23 May 2022

• 310 (88.57%) stocks advanced and 32 (9.14%) declined
• 3 stocks rose to a new 52-week high, 4 fell to new lows
• 27.14% of stocks closed above their 200-day average
• 38.57% of stocks closed above their 50-day average
• 20.86% of stocks closed above their 20-day average

Outperformers:

• + 19.28% - Kainos Group PLC (KNOS.L)
• + 11.15% - Moonpig Group PLC (MOONM.L)
• + 8.15% - Virgin Money UK PLC (VMUK.L)

Underperformers:

• -4.38% - Coats Group PLC (COA.L)
• -3.94% - Intertek Group PLC (ITRK.L)
• -2.55% - Vietnam Enterprise Investments Limited (VEILV.L)

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