European Open: Delta Weighs on Asian Equities, STOXX 50 Eyes New High

Sentiment in China took a knock overnight at Covid cases continued to rise. Yet European bourses are on track for a solid week thanks to strong earnings on Wall Street.

Charts (1)

Asian Indices:

  • Australia's ASX 200 index fell by -1 points (-0.01%) and currently trades at 7,510.10
  • Japan's Nikkei 225 index has risen by 75.29 points (0.27%) and currently trades at 27,803.39
  • Hong Kong's Hang Seng index has fallen by -28.25 points (-0.11%) and currently trades at 26,176.44

UK and Europe:

  • UK's FTSE 100 futures are currently down -2.5 points (-0.04%), the cash market is currently estimated to open at 7,117.93
  • Euro STOXX 50 futures are currently down -5.5 points (-0.13%), the cash market is currently estimated to open at 4,155.58
  • Germany's DAX futures are currently down -7 points (-0.04%), the cash market is currently estimated to open at 15,737.67

US Futures:

  • DJI futures are currently up 271.55 points (0.78%)
  • S&P 500 futures are currently down -1 points (-0.01%)
  • Nasdaq 100 futures are currently down -2 points (-0.05%)


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Delta weighs on Asian Indices, STOXX 50 weighs up a new high

China’s equity markets were in the red a new covid cases in the current outbreak rose to a new high. The CSI300 and SSE composite are down 0.8% and 0.5%. A broader read of Asian markets, the MSCI APAC (ex-Japan) index is currently down -0.35%. Futures market have opened lower pointing to a softer open for Europe, although not at a rate that is causing alarm.


The CAC 40 and STOXX 600 are leading European indices higher and both closed to new record highs yesterday. The DAX managed to close above its 2-week range yesterday and is potentially a day’s trading range away form a new high for itself. However, blue chip stocks ay stand the better chance of a breakout today with the STOXX 50 having probed its all-time high yesterday. It’s enjoyed a four-day bullish streak this week, so all eyes are on the index today for a bullish breakout and 5-day clean sheet. Our bias remains bullish above Wednesday’s low at 4142.33.

The FTSE 100 saw an early break outside of the bearish wedge highlighted in yesterday’s report, yet held above the 7100 support level we were seeking to switch to a bearish bias. Price action on the hourly chart also shows a potential bull flag forming, but we are cognizant of the fact resistance sits nearby at 7150 and 7170 which makes the reward to risk ratio less desirable than if prices break 7100 to the downside. Regardless, should 7100 continue to hold as support then 7150 remains a valid upside target.


FTSE 350: Market Internals


FTSE 350: 4105.04 (-0.05%) 05 August 2021

  • 223 (63.53%) stocks advanced and 114 (32.48%) declined
  • 57 stocks rose to a new 52-week high, 2 fell to new lows
  • 77.78% of stocks closed above their 200-day average
  • 65.81% of stocks closed above their 50-day average
  • 24.5% of stocks closed above their 20-day average

Outperformers:

  • + 26.2%   -  Cairn Energy PLC  (CNE.L) 
  • + 7.76%   -  Savills PLC  (SVS.L) 
  • + 5.87%   -  Rolls-Royce Holdings PLC  (RR.L) 

Underperformers:

  • -5.17%   -  CMC Markets PLC  (CMCX.L) 
  • -5.04%   -  Anglo American PLC  (AAL.L) 
  • -4.77%   -  Hammerson PLC  (HMSO.L) 


Forex:

Clearly, today is all about NFP at 13:30 BST. And we suspect it will be relatively quiet for forex markets leading up to the event. But as Canadian employment is also released at the same time then USD/CAD is a pair to keep in mind, alongside other CAD or USD pairs. For a clear directional move on USD/CAD we’d need to see the two reports diverge. For example, a weak NFP coupled with a strong CA employment report would likely send USD/CAD lower. The least desirable outcome is for both reports to come around expectations, or provide mixed signals (slightly higher employment and unemployment) as this likely leads to a few whipsaws and lack of a directional commitment for price action.

870k US jobs are expected to be added (up from 850k previously), unemployment is expected to fall to 5.7% from 5.8%. The Canadian economy is expected to add 177.5k jobs and unemployment is forecast to fall to 7.4%. Canadian Ivey PMI is scheduled for 15:00 BST.

USD/CHF has risen to a 4-day high yet remains beneath 0.9094, a pivotal level for today. Given the strong move lower last week then bears may be interested in fading moves below resistance should NFP disappoint. If we get a strong NFP then USD/JPY is our preferred dollar long, above 110.


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Commodities:

WTI remains around yesterday’s high, which is the lower part of the 69.15 – 70.0 resistance zone. As long as that zone caps as resistance then the bias remains for another leg lower. So this makes 70.0 our pivotal level for the session.

Copper futures broke a 4-day losing streak yesterday with a miniscule bullish candle. It’s hard to say the low is in although our overall bias remains bullish. A weak NFP print could help boost the bronze metal as it brings into question the ability for the Fed to tighten and of course presents a weaker US dollar.

Gold remains in the lower third of the 1790 – 1834 range. And until either of those levels break then range-trading strategies are preferred.

Lumber futures have turned lower this week and close to testing $500, near its 9-month low. Were it not for the bottle necks in supply chains then it could be seen as disinflationary and, ultimately good for the consumer. That aside it appears to be a decent swing trade.


Up Next (Times in BST)

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.


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