The commodities roller coaster continued yesterday only this time it was supporting stock markets as oil prices rallied strongly on reports of supply disruptions in Nigeria and Libya, while the fallout from the Canadian wildfires has helped support North American crude prices, in the process pushing US markets to one week highs, and the S&P500 to its best one day gain in two months..
These rebounds in oil prices in particular have helped European markets rebound after two weeks of declines so it could be argued that we’re also seeing some a little bit of bargain hunting after a weak start to the month.
Banks also performed well yesterday despite showing poor comparatives from previous years but as with anything the fact they weren’t as bad as feared helped boost Credit Suisse (SIX:CSGN) in particular and the banking sector in general.
These factors outweighed any concerns that investors might have that the recent Q1 GDP numbers from the EU might well have to be revised lower later this week, after some simply awful industrial production data for March from Germany, France and Italy, which helped push the euro lower.
We saw declines of 1.3% in German industrial production with, France declining 0.3% and Italy coming in flat, and to cap all that we also downward revisions to the February data for all three as well. This raises the very real prospect that the 0.6% growth reported last week could well get a significant adjustment lower later this week, bringing it more into line with the Q1 UK and US numbers, of 0.4% and just over 0.1%.
It’s the turn of the UK this morning as we get set for similar reports on manufacturing and industrial production data for March. We already know from the January and February data that manufacturing has come under pressure in recent months, with the Tata steel (NS:TISC) headlines keeping it in the forefront of the public’s thinking, while the most recent PMI data has also been weak.
Expectations are pretty positive after a disappointing February, however given the disappointing reports yesterday it wouldn’t be too much of a shock if we got similar disappointments here too.
Both manufacturing and industrial production data are expected to show a rise of 0.3% and 0.5% respectively, while later in the day that latest NIESR GDP estimate for April could well show a sharp drop from the 0.3% expansion in March.
EUR/USD – the euro continues to slip incrementally low with next support sitting down near the April lows at 1.1220. We need a recovery back through the 1.1480 level to stabilise, and retarget the 1.1600 highs.
GBP/USD – the pound appears to have found a short term base at 1.4360 but needs to get back above the 1.4480 level to suggest a move back through 1.4500 towards 1.4700. While last week’s bearish reversal has weighed on the pound downside should remain limited while above 1.4300.
EUR/GBP – having failed to push above the 200 week MA the bias remains to the downside while below 0.7950. A move below 0.7860 could well target neckline support at 0.7750 from the March lows which, if broken could trigger a sharp down move. A move and close above 0.7940 retargets the 0.8000 area.
USD/JPY – this week’s push back through the 107.80 level has opened up the possibility of a return to levels as high as the 110.20 level. Support currently comes in at the 106.80 area, with the 200 week MA at 105.30 the major support level.
Equity market calls
FTSE100 is expected to open 6 points lower at 6,150
DAX is expected to open 12 points higher at 10,058
CAC40 is expected to open unchanged at 4,338
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