European Open Trudeau Re Elected Selling Pressures Subside

Asian Indices:

• Australia's ASX 200 index rose by 8.4 points (0.12%) and currently trades at 7,256.60
• Japan's Nikkei 225 index has fallen by -601.48 points (-1.97%) and currently trades at 29,898.57
• Hong Kong's Hang Seng index has fallen by -193.73 points (-0.8%) and currently trades at 23,905.41

UK and Europe:

• UK's FTSE 100 futures are currently up 37 points (0.54%), the cash market is currently estimated to open at 6,940.91
• Euro STOXX 50 futures are currently up 13.5 points (0.34%), the cash market is currently estimated to open at 4,057.13
• Germany's DAX futures are currently up 69 points (0.46%), the cash market is currently estimated to open at 15,201.06

US Futures:

• DJI futures are currently up 169 points (0.5%)
• S&P 500 futures are currently up 43.25 points (0.29%)
• Nasdaq 100 futures are currently up 15.75 points (0.36%)

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Indices

Japan’s equity markets were underperformers as it was the first day back after a long weekend. The Nikkei fell around -2% and the TOPIX was down -1.8% as traders caught up with yesterday’s negative sentiment. Evergrande shares slipped a further -4%, although downside momentum is waning slightly as expectations are rising that Beijing will step in to calm market jitters, whether it be from a government restructure of the property developer or simply supporting markets.

The ASX 200 is on track for a minor gain after finding support around 7200 after a particularly volatile session yesterday. And we suspect it could be a similar pattern today on the FTSE.

Futures markets are pointing to a positive open, which paves the way for a ‘Turnaround Tuesday’. Whilst we do not anticipate a complete reversal of yesterday’s losses on Wall Street, we would urge caution being too bearish at these lows.

FTSE 350: Market Internals

FTSE 350: 3999.41 (-0.86%) 20 September 2021

• 61 (17.38%) stocks advanced and 284 (80.91%) declined
• 5 stocks rose to a new 52-week high, 27 fell to new lows
• 65.24% of stocks closed above their 200-day average
• 46.44% of stocks closed above their 50-day average
• 12.25% of stocks closed above their 20-day average

• Outperformers:
• + 11.16%   -  International Consolidated Airlines Group SA  (ICAG.L) 
• + 6.15%   -  AstraZeneca PLC  (AZN.L) 
• + 5.89%   -  SSP Group PLC  (SSPG.L) 

Underperformers:

• -9.06%   -  Moneysupermarket.Com Group PLC  (MONY.L) 
• -9.01%   -  Reach PLC  (RCH.L) 
• -8.37%   -  Prudential PLC  (PRU.L) 

Forex:

Justin Trudeau has been forecast to win the national vote in Canada, although it remains unclear whether the sitting PM will be able to form a majority or minority government. At the time of writing Liberals have taken 148 federal districts, so 22 short of the 170 required. Less than 24hrs ago it was a very close race, one he could just as easily lose than win. USD/CAD has pulled back from yesterday’s high and has dipped below 1.2800, with its next directional cue likely to come from whether Trudeau can form a majority (likely bearish for USD/CAD) or a minority government (likely bullish).

GBP/USD recouped about 0.1% of yesterday’s losses overnight, although this comes with little surprise as it had found support at the 200-day eMA and August low. And with little relevant news for cable overnight then profit taking / retracement seemed likely.

The New Zealand dollar was softer overnight after RBNZ’s Assistant Governor Christian Hawkesby referenced 25 bps hikes in speech, which all but removed any expectations that they may go for a 50 bps hike at next month’s meeting. NZD/USD probed the 70c level as it touched a 3-week low yet continues to meander around its 200-day eMA.

However, perhaps traders need to look at the upside, in that RBNZ may be raising rates by 25bps next month, which is a lot more hawkish than other central banks. So it is a good time to revisit GBP/NZD for a potential bearish setup. Its decline from the August high was effectively in a straight line as part of an impulsive move, and the steady retracement of the past 2-weeks failed to reach the 38.2% Fibonacci level. Yesterday’s bearish engulfing candle therefor suggests the corrective high was seen at 1.9567 which itself was just below a broken trendline. Our bias remains bearish below 1.9567 and for a break of 1.9330 support on its way to 0.9200.

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Commodities:

WTI probed $70 yesterday yet closed above it after finding support at the 20-day eMA. If we can get a rally on Wall Street then its possible oil may try to drag itself up from tis low. $70 remains the pivotal level today, as a break beneath it opens up a run for $67.

Silver has fallen around -11% this month so far, although yesterday’s bearish candle was relatively small ad bears failed to test the November low which shows downside momentum is waning. Like gold, which closed above 1750 for a third straight day yesterday, today’s bias remains bullish above yesterday’s low as part of a corrective bounce.

Up Next (Times in BST)

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