European Open: China PMI Beats, Equities Rise Ahead of NFP

There’s an air of confidence ahead of today’s NFP, with equity futures and commodities rising overnight. So bulls had best hope it delivers to avoid disappointment.

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Asian Indices:

  • Australia's ASX 200 index rose by 22.1 points (0.31%) and currently trades at 7,083.80
  • Japan's Nikkei 225 index has risen by 62.08 points (0.21%) and currently trades at 29,053.67
  • Hong Kong's Hang Seng index has risen by 143.58 points (0.5%) and currently trades at 28,781.04

UK and Europe:

  • UK's FTSE 100 futures are currently up 39 points (0.55%), the cash market is currently estimated to open at 7,115.17
  • Euro STOXX 50 futures are currently up 28 points (0.71%), the cash market is currently estimated to open at 4,027.44
  • Germany's DAX futures are currently up 88 points (0.58%), the cash market is currently estimated to open at 15,284.74

Thursday US Close:

  • The Dow Jones Industrial rose 318.19 points (0.93%) to close at 34,548.53
  • The S&P 500 index rose 34.03 points (0.816539%) to close at 4,201.62
  • The Nasdaq 100 index rose 110.361 points (0.82%) to close at 13,613.73


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Global indices remain firm ahead of Nonfarms

Caixin’s service PMI for China beat expectations, which rose to 56.3 and at is fastest pace in four months. This simply added to the positive sentiment going into today’s NFP print where expectations are for a punchy data set. That said, expectations need fulfilling to avoid disappointment, so should employment growth and / or wage growth fall short, we may see the markets jolt as positions get reversed.

The FTSE 100 is on track for a bullish outside week. Closing at its high yesterday, it trades less than a day’s range from 7131 resistance, a level which is likely to provoke profit taking should it make it there today.


FTSE 350: Market Internals


FTSE 350: 7076.17 (0.52%) 06 May 2021

  • 228 (65.33%) stocks advanced and 118 (33.81%) declined
  • 30 stocks rose to a new 52-week high, 5 fell to new lows
  • 85.67% of stocks closed above their 200-day average
  • 24.07% of stocks closed above their 20-day average

Outperformers

  • + 19.6%   -  John Laing Group PLC  (JLG.L) 
  • + 14.2%   -  Morgan Advanced Materials PLC  (MGAMM.L) 
  • + 6.24%   -  Fresnillo PLC  (FRES.L) 

Underperformers:

  • -6.92%   -  Trainline PLC  (TRNT.L) 
  • -4.31%   -  Baillie Gifford US Growth Trust PLC  (USAB.L) 
  • -4.00%   -  Admiral Group PLC  (ADML.L) 


Forex: All eyes on the dollar for NFP

As is usually the case ahead of NFP, forex markets are trading in tight ranges. It all hinges around the US dollar which goes into this report on the back ropes. If we’re to see a higher dollar today, USD/JPY would be our preferred weapon of choice for longs. Against its peers however, EUR and CHF are looking particularly favourable for a weak dollar outcome.

USD/CHF closed fractionally beneath its 200-day sMA yesterday. Whilst we prefer our breaks with more conviction, the daily trend structure remains firmly bearish below 0.9164. Next support is closer than we’d like at 0.9045, but beneath here clears the way for a run to 0.9000.

EUR/USD is hovering around yesterday’s highs, after rising 0.47% and confirming a breakout from a bullish wedge pattern. A small Doji had formed around 1.2000 on Wednesday, which coincided with the US dollar index (DXY) stalling at 91.40 resistance. Now both markets have respected their respective key levels, we’re looing for momentum to continue. If we find that NFP is strong overall (with employment and wage growth moving higher) then we may well see a pullback on EUR/USD. However, given the stream of stronger-than-expected data coming out of Europe, we suspect EUR/USD may retest the 1.2150 target before it trades back beneath the 1.1984 low.

Switching to the hourly chart:

  • Our bias is bullish today above the 1.2035/42 support zone (100-hr eMA, daily pivot and swig low)
  • A break above today’s high assumes bullish continuation, whilst we’d still consider bullish setups above the support zone if the retracement is low volatility and a basing pattern forms
  • Target is for a run towards the 1.2093/1.2000 resistance zone

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Metals rise to the occasion

Copper futures continue to scream higher and have probed the February 2011 high in overnight trade. The industrial metal has rallied over 16% since its trough around $4.00 and is, as of yet at least, to send any signs of exhaustion. Clearly the US dollar will be a factor today around NFP but, as things stand, e don’t see why this couldn’t break above 4.70 should the dollar continue to fall. Of course, should the dollar strengthen and cause copper futures to print (say) a bearish hammer below key resistance, it may be on the back ropes early next week.  

Gold extended its lead to 1820 overnight after its convincing break above 1800. The bias remains bullish above 1800 wit a target of 1835 projected form the 1676 double bottom.


Up Next (Times in BST)


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