Several positive factors have come together to improve sentiment and equity markets have swung back positively once more. How sustainable the recovery in sentiment proves to be will take at least a few sessions of gains to determine.
- Main drivers: Choppy sentiment swings back positive again; US debt ceiling progress; US President set for virtual meeting with China’s President Xi; Putin increases gas supply; US to consider releasing oil reserves; Weekly Jobless Claims data due.
- Uncertain sentiment turns more positive: buying accelerated through the US session to close around session highs and sustain key support levels on major indices. Positive ADP numbers helped to steady sentiment. Asian markets positive overnight and this improved sentiment has filtered into the early European session.
- US debt ceiling progress: US Sentate politicians are close to agreeing a compromise to extend the US debt ceiling to December, giving them more time for a more sustainable solution. [Risk positive]
- US/China relations improve: recent conversations between top US and Chinese officials have improved the tone, leading to the potential for a virtual meeting between Biden and Xi by the end of the year. [Risk positive]
- Energy supplies: Russian President Putin has said that Russia is ready to stabilise gas priced by increasing supplies into Europe. Also, the US is considering releasing crude oil reserves from the SPR (Strategic Petroleum Reserve) to help stabilise oil prices. [Negative for Oil and Nat Gas prices; Risk Positive]
- ECB considering bond buying options: Once the PEPP programme ends in March the ECB needs a plan for the continuation of asset purchases. [Risk positive]
- Central bank speakers: FOMC’s John Williams (permanent voter, mild dove) speaks at 1240GMT.
- Data watch: US weekly jobless claims at 1230GMT is expected to improve slightly to 350,000 last week (from 362,000 previous week).
- Broad outlook: Equity markets fall over again and are testing key support. USD gaining across major forex pairs. The rally on precious metals commodities is faltering, although oil continues to climb.
- Forex: EUR/USD downside continues on a close below 1.1560 for moves towards next support at 1.1420/1.1490. A mild technical rally today, but we remain sellers into near term strength. GBP/USD the technical rally has faltered around 1.3650 abut is now starting to consolidate. No renewed selling pressure yet. Below 1.3540 re-engages downside momentum. AUD/USD beginning to perform better in recent sessions. Testing resistance at 0.7315. A decisive close above opens recovery towards 0.7400/0.7475.
- Commodities: Gold is finding intraday buyers and is posting some positive daily candles despite the near term consolidation. Above $1770 opens $1780/$1800. A decisive close below $1745 reignites downside momentum. The medium term bias remains negative but we are neutral for now. Silver is still trading around key resistance $22.75/$23.00 and there is the potential for a near term base pattern if the market can close decisively above $23.00. For now, the resistance remains intact. Brent Crude oil bearish engulfing candlestick (bearish key one day reversal) threatens profit-taking and a near term correction towards the 6 week uptrend at $79.10. The unwind is continuing today. Initial support $80.80/$80.00.
- Indices: A swing to a more positive bias today, but moves remain very choppy. S&P 500 futures have rebounded since testing key support early yesterday. A close back above 4388 is needed for signs of a more sustainable recovery. Until a real trend emerges, it is difficult to take a view. DAX held crucial support at 14,810 to the tick yesterday and the market has since looked to rebound. Moves remain very choppy. Outlook improves above 15,200 with confirmation above 15,265 which would open 15,450/15,500. FTSE 100 intraday rebound yesterday but the outlook remains very unsteady and daily technicals are almost entirely neutral. Above 7084 improves.