European Market Outlook: US Stock Index Futures Trading Slightly Higher on Thin Volumes

MARKETS

FOREX: It was a quiet end to another busy week in the Asia-Pacific region, with little in the way of a catalyst to drive markets, investors were happy to take a ‘back-seat’ as the weekend fast approaches. Dollar-yen started the day at Y118.18 and held a Y117.96 to Y118.40 range, last at Y118.19. Euro-dollar traded higher from $1.0406 to $1.0432 on light profit-taking. Euro was last at $1.0431. Cable eased from $1.2436 to $1.2383 before recovering and was last at $1.2405. Meanwhile, Aussie-dollar carved out a $0.7349 to $0.737 0 range and was last at $0.736

US INDEX FUTURES: US stock index futures are trading slightly higher on thin volumes, as markets continue to digest the Fed’s actions and higher bond yields. Currently the Mar’17 e-mini S&P futures are trading up 1.50 points at 2260.00, the Mar’17 e-mini Nasdaq futures are trading up 4.75 points at 4,939.25, while the Mar’17 e-mini Dow futures are trading up 24 points at 19,827. After pausing on Wednesday, US share markets resumed their bull run Thursday, with some moderate gains across the board. The Dow Jones climbed 59.71pts to 19,852.24 and the S&P 500 advanced 8.75pts (0. 4%) to 2,262.03. The Nasdaq Composite rallied 20.18pts (0.35%) to 5,456.85 and the Russell 2000 returned to its outperforming ways, zooming 0.75% higher, to 1,366.41, partly reversing the previous day’s 1.3% loss. Financials returned to their winning ways, outperforming all other major S&P sectors yesterday with a more than 1% rise as a group while materials gained 0.7% and telecoms advanced 0.65%.

US TSY FUTURES: The end of the trading week has seen a very non-descript start for treasury futures, with 10yr futures essentially unchanged from Thursday’s close. Thursday saw 10yr futures test multi-month lows at 122-145 surpassing the Apr’14 lows of 122-225, with a close below this level, seeing scope for the sell-off to extent to the 120-00 region, which is the half-way point of the 104-04 to 135-29 Jun’07/Jun’12 rally. There is very little on the data calendar today, although treasuries may keep an eye on developments in Chinese markets after H-Shares skidded some 2.3% on Thursday.

JAPAN STOCKS: Japanese stocks have continued to advance to their 2016 highs as the Yen continues to weaken, with exporters again leading the charge. The Nikkei has closed for lunch up 0.68% or 131.82 points at 19,405.61, while the Topix is last up 0.5 1% or 7.82 points at 1,550.54.

GOLD: Spot gold last up $1.15 at $1,129.65 per ounce, in a $1,130.55 to $1,126.10 range so far this morning in Asia, with the market again on the defensive as the US Dollar continues to surge in wake of the hawkish Fed, which saw Gold fall to 10 1/2 – month lows. Commerzbank analysts note that The nearly 22 tons of outflows from gold ETFs that were reported for Wednesday were the most “pronounced on a single day since July 2013”. Commerzbank says “they are probably attributable to the Fed meeting to only a minor extent, however”. They note the SPDR Gold Trust saw outflows of ‘only’ 6.8 tons yesterday, for example, so we would not be surprised if there were further extensive outflows Thursday. Commerzbank notes “speculative financial i nvestors are also likely to have retreated further from gold, thereby exacerbating the price slide” and they target roughly $1,100 per troy ounce before it stabilizes.

OIL: WTI crude oil futures for Jan’17 delivery last up $0.25 at $51.15 per barrel, after a $51.27 to $51.04 range in Asia today, with the market trading slightly higher on short-covering post the EIA data which saw another inventory build of 1.22 mbbl. The Jan’17/Feb’17 spread has been active this morning ahead of Jan’17 first notice day next Thursday, with many expected to roll early as liquidity becomes and issue next week. The Jan’17/Feb’17 switch is last at -$1.08 on volumes of 1.7k. Interesting to note that the term structure for WTI has seen the contangos widened sharply since Wednesday, with the Jan’17/Jan’18 spread moving from -$2.81 to -$4.05.

Technical Analysis
BUND: (H17) Bears Need Close Below 160.80
eurex_121616

  • RES 4: 163.19 55-WMA
  • RES 3: 163.06 High Dec 5
  • RES 2: 162.62 High Dec 14
  • RES 1: 162.37 Daily Bear channel top

PREVIOUS CLOSE: 161.70

  • SUP 1: 161.19 Low Dec 15
  • SUP 2: 160.80 Low Dec 12
  • SUP 3: 160.46 Hourly support Dec 8a
  • SUP 4: 159.91 Low Dec 8

COMMENTARY: The contract continues to stumble ahead of the daily bear channel top on attempts to rally. Bulls continue to look for a close above the 55-WMA to confirm a break of the channel top and to shift immediate focus to 163.87-164.07 where the 55-DMA is located. Layers of support remain with bears now needing a close below 160.80 to gain breathing room and below 159.81 to return focus to 157.93-158.29 where channel bases are noted.

EUROSTOXX: 3206.82 Support Remains Key
eurex_121616-2

  • RES 4: 3394.83 High Dec 7 2015
  • RES 3: 3345.20 High Dec 17 2015
  • RES 2: 3314.28 High Dec 29 2015
  • RES 1: 3256.20 Bollinger band top

PREVIOUS CLOSE: 3249.74

  • SUP 1: 3206.82 High Dec 12 now support
  • SUP 2: 3172.01 Hourly support Dec 8
  • SUP 3: 3141.42 Low Dec 8
  • SUP 4: 3111.31 200-WMA

COMMENTARY: Bulls followed up an inside day with fresh 2016 and 12 month highs that reconfirm the bullish bias and retain immediate bullish focus on the 3314.28-3394.83 region last seen in Dec 2015. Bears continue to look for a close below 3206.82 to ease immediate bearish pressure and below 3178.88 to hint at a correction back to the 200-WMA.

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