European stocks rebound, euro about to give it up
Stocks were lower across the board yesterday as the weight
of the US-China trade dispute pushed everything down. From pretty much assuming
the US and China would strike a deal, the market is repricing for a prolonged
SPX closed lower by 19
points, or 0.69%, at 2,783, resting close on the 100-day moving average. This
was a little off its lows of the day and a shade above the all-important
200-day moving average at 2776. The Dow shipped over 200 points and was briefly
The FTSE is also flirting with the 200-day line having
closed 83 points lower at 7185. The pattern looks decidedly bearishy and flaggy
right now. Support on the 38% retracement of the bottom-to-top rally from the
2018 low thru Apr high sits at 7150, which we saw tested and rejected
yesterday. This was also an area of support that produced a bounce through the
third week of May.
We are seeing a small rebound in Europe on the open but there’s still lots of nervousness out there and the downward pressure is rather powerful and looks hard to resist. Any gains look hard won and easy to give up at the moment.
Dollar is still bid, pressuring everything else, with the
dollar index on the 98 handle as
it hoovers up haven demand. The euros is on
the brink of capitulation on the 1.11 handle, with the pair last at 1.11343,
ready to test those key May lows again, which marked a 2-year trough for the
single currency. A breakdown through 1.11 on the downside brings 1.08 back into
doing very little still, trapped around the 1.2640 region. Whilst we are yet to
retest Thursday’s low at 1.2610, we are making progressively lower highs and
lower closes – the pound is still under a lot of pressure and this doesn’t look
like having much chance of lifting until we know who the next PM will be.
Brexit uncertainty remains.
That renewed dollar strength seems to be weighing on gold,
which was last back at 1277. Rising trend support appears around the 1270 mark
but for now the metal looks caught in a range.
The GDP second print for Q1 is later – with the market already betting big on a rate cut this year it’s hard to see how a downward revision will really shift things. The first reading showed 3.2% and is expected to be revised down to 3.1%.
Watches of Switzerland
Meanwhile the latest IPO is in London – Watches of Switzerland has priced at the top of its range, at 270p. Shares will start trading today on the open. As we’ve seen this year IPOs can be a rough ride for shareholders and management. Hopefully for the management and buyers it won’t turn out to be another turkey like Aston Martin – one feels the omens are better for this one.