Overview
There is still a sense that market sentiment is jittery this morning, with equity markets the primary focus of this. It is a big week of data ahead and trading looks cautious to start the week.
Today’s news
- Main drivers: Risk aversion is still hampering sentiment; China Evergrande still an issue in Asia; Golden Week public holiday in China; OPEC+ meeting; US Factory Orders
- Market sentiment still cautious: sentiment seems unable to find any sustainable recovery momentum before selling pressure takes hold once more. The week has begun very cautiously for risk assets, with equity markets falling again.
- China Evergrande potential debt restructures: The saga rumbles on. Trading in its shares was halted today with the potential of a takeover. Uncertainty over what this means for a potential restructure on $304bn of debt.
- Golden Week in China: China is in its week long public holiday, which ends on Friday.
- OPEC+ meeting: The monthly meeting for OPEC+ to decide on the path of its production cuts is today. Reports suggest no changes to the cuts which are adding back an average of +400,000 barrels of oil per day, every month.
- Central bank speakers: None due today
- Data watch: Eurozone US Factory Orders at 1400GMT is expected to be +1.1% for the month of August (+0.4% for July). Factory Orders tend to be notoriously choppy data which reduces the reaction potential in the market.
Markets Outlook
- Broad outlook: Equity markets still seem to see near-term recoveries struggling. USD is still set up to unwind recent gains, but a bigger trend of USD strength remains for now.
- Forex: EUR/USD starting to form a near-term technical rally. There is room to unwind towards 1.1670/1.1700. We prefer to sell into resistance because buying for a counter-trend technical rally is high risk. A move above 1.1610 opens 1.1665/1.1700. GBP/USD is bearish but has unwound into 1.3570/1.3600. We are looking for renewed sell signals to play for a retest of 1.3410. USD/JPY looking to now build from support around 110.60/110.80. We look to buy into supported weakness.
- Commodities: Gold is still trading around resistance $1760 but is now breaking a one-month downtrend with the consolidation. We still prefer renewed selling pressure and look to sell into strength. A drift back below $1745/$1750 would suggest renewing downside for $1721 and $1675/$1700. Above $1765 opens $1790. Silver has rebounded to find resistance around $22.75. We are now looking for renewing sell signals. Support now at $21.40. Brent Crude oil is threatening to continue higher and retest the recent high of $80.80. Support is forming around $77.30/$78.30. Technically the outlook is turning more positive again.
- Indices: Selling into recoveries is still being seen, suggesting the corrective phase continues. S&P 500 futures are set up to pressure the hugely important band of support 4223/4295. A breakdown would imply a new bearish medium-term trend formation. A rally back above 4388 is needed to improve. DAX a series of lower highs dominates the near-term outlook as tests of the key medium-term support band around 14,800/15,000 continues. FTSE 100 still has a fairly neutral technical outlook. Trading between support around 7000 and resistance at 7150.
