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Stocks set for positive start

Overnight, China’s CPI on an annual basis came in at 1.9% for June, while economists were expecting 1.9%, and the previous report was 1.8%. 

The PPI report was 4.7%, while the consensus estimate was 4.5%, and the May report was 4.1%.

Sterling took a hammering yesterday after the resignation of David Davis and Boris Johnson – two cabinet ministers. The announcements ramped up pressure on Prime Minister May, and yesterday she announced the UK should be prepared for a ‘no-deal Brexit’. It seems that Mrs May left the ‘no-deal’ option on the table as a way of appeasing the more Eurosceptic elements of her party. Survival is the name of the game in politics, and given the shaky ground Theresa May is on, we could see further appeasing of the pro-Brexit wing of the Conservative party.

European and US equities rallied as trade fears subsided. The standoff between the US and China is still very much alive and well, but that there were no new developments was taken as a positive sign by investors. The trade spat between Washington DC and Brussels has cooled a little and traders will be keeping an eye on President Trump this week, as he will be in Europe for the NATO summit. Mr Trump is likely is to play the ‘America first’ card, which could ruffle a few feathers, and weigh on stocks.

Eurozone equities were also assisted by the upbeat comments from Mario Draghi the European Central Bank (ECB) chief. Mr Draghi believes the currency bloc is on a self-sustained path, and the aim is still to wind down the bond-buying scheme by the end of this year. Interest rates are likely to remain on hold until at least the back-end of 2019. The update came with a warning too, as Mr Draghi expressed concern that protectionist policies could risk growth in the eurozone. Jerome Powell, the head of the US central bank, also expressed concerns about the state of global trading relationships in recent updates. 

There are a number of economic announcements which are due to be released this morning. At 9.30am (UK time), the UK will release the latest construction output, industrial output and manufacturing output and goods trade balance. Traders will be watching the reports closely, to see if British economic activity picked up in the second-quarter.  

At 10am (UK time), the German ZEW will be released, and the expectation is for a reading of -18, compared with -16.1 in June. It is worth noting the June report was the lowest reading since September 2012. 

EUR/USD – has been edging higher since late June, and a break above the 1.1850 area could pave the way for 1.2000 being tested. A move below the 1.1510 region could put 1.1400 on the radar.

GBP/USD – has been in a downward trend since April, but it has been creeping higher recently. A move through 1 3315 could bring 1.3472 into play. If the wider bearish move continues it could target 1.3049.

EUR/GBP – has been in an upward trend since mid-April and if the bullish move continues it could target 0.8900. A pullback might find support at 0.8785 – the 100-day moving average, and a break below 0.8785 might bring 0.8725 into play. 

USD/JPY – has been pushing higher since late-May and if 111.39 is cleared it could pave the way for 113.57 to be targeted. A move to the downside might find support at 109.37 – 109.19 area.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.


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