European Open: Cautious optimism for equities, Brent above $70

Overnight trade had a cautiously positive tone, with index futures initially pointing higher. Oil prices hit new highs on geopolitical tensions in the Middle East.

Charts (1)

Asian Indices:

  • Australia's ASX 200 index rose by 28.8 points (0.43%) to close at 6,739.60
  • Japan's Nikkei 225 index has fallen by -65.79 points (-0.23%) and currently trades at 28,864.32
  • Hong Kong's Hang Seng index has fallen by -467.27 points (-1.61%) and currently trades at 28,631.02

UK and Europe:

  • UK's FTSE 100 futures are currently up 51.5 points (0.78%), the cash market is currently estimated to open at 6,682.02
  • Euro STOXX 50 futures are currently up 26 points (0.71%), the cash market is currently estimated to open at 3,695.54
  • Germany's DAX futures are currently up 58 points (0.42%), the cash market is currently estimated to open at 13,978.69

US Friday close:

  • The Dow Jones rose 572.2 points (1.85%) to close at 31,496.3
  • The S&P 500 rose 73.5 points (1.95%) to close at 3,841.94
  • The Nasdaq 100 rose 204.5 points (1.64%) to close at 12,668.51

Employment on the rise, stimulus checks await

Friday’s strong NFP report and news that Joe Biden’s $1.9 trillion fiscal stimulus package got the green light helped elevate sentiment and send indices across all Asian regions higher.

FTSE 100 futures gained an additional 1% during overnight trade, the Euro STOXX 50 futures rose 0.85% and DAX future were up 0.6% before tapering gains later in the session.

It was mixed for US futures which saw the S&P E-minis and Nasdaq 100 futures tick slightly lower, whilst Dow Jones futures were up 0.2%.

S&P 500: 5th March 2021

  • The index closed -2.75% below its 52-week high
  • Energy (3.87%) was the strongest sector and Consumer Discretionary (0.72%) was the weakest  
  • 7 out of the 11 sectors outperformed the index
  • 81.39% of stocks closed above their 200-day average     
  • 63.56% of stocks closed above their 50-day average        
  • 60.59% of stocks closed above their 20-day average        

Oil prices surge as Saudi oil site is attacked

Over the weekend Ras Tanura, the world’s largest oil export facility, was attacked by Iranian-backed Houthi rebels which sent oil prices to new highs. There are currently no reports of any deaths or injuries. With OPEC running a tight policy and COVID-19 vaccinations being rolled out globally it sets the stage for higher oil prices from here. Brent broke above $70 for the first time since January 2020 and WTI rose to a 3.5 year high.

Forex: Commodity FX off to a stronger start

AUD and NZD were the strongest majors overnight as they tracked stock market indices higher. AUD/USD traded back above 0.7700 resistance and its 50-day eMA, although prices remain within Friday’s bearish daily range and momentum overall was a tad lacklustre today. NZD/USD re-tested yet remains beneath its 50-day eMA, although a break above 0.7200 would confirm a bullish hammer seen on Friday.

  • EUR/GBP has been confined to an 87-pip range since Thursday (0.8596 – 0.8653). A break outside either of these levels could signify its next directional move.
  • EUR/USD remains anchored to Friday’s low in narrow trading range, having closed firmly beneath 1.2000. Our bias remains bearish below this key level of resistance.
  • GBP/CAD has found support at its 50-day eMA after breaking beneath 1.7575 support on Friday. Whilst we see the potential for a minor bounce from current levels, our bias remains bearish below 1.7575 over the near-term.
  • USD/CHF is holding above 0.9300 and considering a break of last week’s high. Whilst it appears to be overbought there are no price action signals pointing towards a correction (as of yet).

GBP/USD: 1.3866 could prove pivotal

Friday saw prices break beneath a bullish trendline projected from the December 21st low, although prices are now meandering around this technical level. We are now waiting to see if bulls can regain control and break above 1.3866, or bears can drive it beneath last week’s low.

We can see on the four-hour chart that resistance has been found at 1.3886 and momentum has turned lower during the Asian session. Moreover, prices are trading within a corrective fashion, in line with its bearish hourly trend.

We now wait to see if bulls can regain their footing and use the broken trendline as a springboard, or if bears can drive it lower.

  • A break above 1.3866 without new lows being printed assumes bullish continuation.
  • A break below the current four-hour low brings the 1.3773 low into focus for intraday bears.
  • A break below 1.3773 assumes bearish continuation and brings the 1.3567 low into focus.

Weekly Candlestick scan

  • Elongated Rikshaw man Doji’s on the S&P 500, Russell 2000 (both closed above their 10-week eMA’s
  • Bearish pinbars on Euro STOXX 50, DAX, CAC, ASX 200. The CAC and DAX are the only markets which saw failed breaks to new highs, suggesting buyer exhaustion
  • Evening star reversal on EUR/USD which closed below 1.2000 (not a ‘textbook case’, but close enough)
  • Elongated Doji on copper which found support above the 10-week eMA
  • Bullish outside week’s on WTI, Brent, 10 and 30-year yields

Up Next (Times in GMT)

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.

  • German industrial production is expected to have risen 0.2% in January.
  • BOE (Bank of England’s) Governor Andrew Bailey speaks at 21:00 to provide his outlook on the economy to the Resolution Foundation think tank.
  • BOJ (Bank of Japan) Deputy Governor Masayoshi Amamiya speaks at a seminar ahead of their central bank meeting where they re expected to review their policy tools.

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