What sell-off? Bear who? All is rosy again in financial markets following a surge in risk-taking yesterday that catapulted UK and global stocks back into the black for 2016. The FTSE 100 as well as the MSCI All-Country World Index both closed in positive territory for the year. The feat comes days after US stocks and crude oil achieved the same.

The importance of the rise in oil prices in equity markets turning positive this year is made clear by Russia’s benchmark MICEX index closing at its highest since 2008. Russia is one of the world’s biggest exporters of oil and will take part in the meetings at Doha this weekend. It is also in recession, not something typically associated with a stock market approaching record highs.

Oil has become a barometer for global growth. Improving Chinese economic data that saw exports rise for the first time in nine months yesterday is improving the outlook for growth in markets, despite IMF reports to the contrary, and oil prices are moving higher accordingly. Crude did come off its highs yesterday after OPEC warned of deeper cuts to demand and the DOE reported a build in US weekly inventories.

The pullback in oil has contributed to lower expected open for European stocks on Thursday as markets take a breather after yesterday’s gains.

Banks were some of the best performers in European markets on Wednesday. It would appears some of the sell-off that took place after the Italian rescue fund was announced was on the basis it would never get through the EU’s state aid restrictions. Italy’s economy minister signalled this wouldn’t be an issue yesterday and banking stocks soared across the EU on the implications for similar funds being setup other countries. It would appear there is one EU state aid rule for Italy’s banks and another rule for the UK steel industry. A strong EPS beat from JP Morgan boosted sentiment towards the banking sector further.

Contrary to recent trends, the dollar rallied alongside oil and equity markets on Wednesday. The Buck’s strength was all the more notable in the face of a surprise decline in retail sales and wholesale prices, though the Fed’s beige book later showed economic activity continued to expand. The dollar index is coming of lowest levels since June and may have gotten a bit oversold. US CPI data released on Friday is forecast to pickup with a 0.2% m/m rise in March, following a -0.2% decline in February.

The Bank of England is likely to stay unanimous in its decision to keep interest rates unchanged at a record low in its meeting today. The tone in the minutes is likely to remain dovish, despite a surprise jump in UK inflation in March, due to concerns of an economic slowdown ahead of the Brexit referendum in June.

EURUSD – The euro-dollar pair finally moved out of its tight trading range, resolving to the downside below 1.13. The trading range support around 1.1340 ideally needs to hold to sustain a quick breakdown towards support at 1.1150.

GBPUSD – Sterling has fallen for a second day, taking it below 1.42. The last two days including a long wick then a bearish engulfing pattern suggest another peak. The peak is well off the top of the previous trading range around 1.45 and suggests downside momentum is picking up.

EURGBP – Euro-pound has fallen for four days running after hitting the aforementioned confluence of long term resistance near 0.81. The price closed Wednesday at support from the Feb 24 and March 24 peaks at 0.7930 could.

USDJPY – Dollar-yen has extended its rebound to above 109. Psychological resistance from 110 and former support at 11 suggest chances remain high for an eventual sell-off towards 1.07 then 1.06.


Equity market calls

FTSE100: to open 3 points lower at 6,359

DAX: to open unchanged at 10,026

CAC40: to open 4 points lower at 4,486


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