European markets look set for a mixed open on Tuesday with the FTSE 100 pulling back whilst stocks in Germany and France add to Monday’s gains. The weaker open for UK stocks could be the first signs of a shift in leadership in Europe.

The heavy-weighting of oil & gas shares could become a burden again for the FTSE 100 with no agreement on a price freeze to support oil prices. It could also be that stocks within the Eurozone are starting to sizzle before Thursday’s ECB meeting and the prospect of soothing commentary for ECB head Mario Draghi.

Global stocks largely recovered initial jitters over the discord in Doha as Brent crude actually closed 24c higher on the day. Travel and leisure shares kick-started the rally on the FTSE 100 but high-beta mining stocks took over leadership into the close, showing good relative strength on a bad news day for commodities. UK technology shares, notably ARM Holdings have come under pressure in the last week as concerns grow over Apple and broader US tech earnings.

The Dow closed above 18,000 for first time since July on Monday as companies report lower earnings but continue to beat lowered estimates.

Netflix didn’t get FANGS earnings off to the best of starts, the streaming service beat estimates but weak guidance on subscriber growth could see the shares open down by 12%. Amazon has announced it will directly compete with Netflix via a streaming-only monthly service, unbundled from its Amazon Prime membership. On Tuesday Goldman Sachs will be kicking off the next round of earnings reports with what is likely another big drop in trading revenues but possibly a beat of bottom line estimates.

The dollar ended up lower against most major currencies on Monday, sent lower by cautious comments by Fed Member Bill Dudley as commodity currencies bounced back with oil. The Aussie dollar went from one week low to 10-month high. Housing data will be the US economic focus on Tuesday.

The euro has started to edge higher ahead of ECB, which appears to have run out of ammunition but could still go deeper into the rabbit hole and hint at more stimulus. The ECB releases its bank lending survey on Tuesday, which could offer some clues on the effectiveness of the latest measures on credit growth. The German ZEW is expected to rise to 50.8 from 50.7 in April.

The British pound stormed higher across the board on Monday after the treasury released its report on Brexit suggesting it would cost British families £4300 each year by 2030. The figures have been hotly disputed so the next poll of public opinion will give some clue on whether they’ve been swayed.

EURUSD – The euro closed a low range day largely unchanged but above 1.13. The weekly bearish engulfing candlestick would suggest there is a good chance the price moves back to the middle off the long term range at 1.09.

GBPUSD – A strong rally off Monday’s low has taken Cable back above 1.43 and towards the top of its down-sloping trading range. Long term, there is scope for a down-sloping inverted head and shoulders pattern but price needs to hold 1.39 to keep that pattern alive.

URGBP – A bearish engulfing candlestick has taken the euro-pound pair below critical support at 0.7930. The aforementioned bias for a downward break after hitting a confluence of long term resistance at 0.81 appears to be playing out.

USDJPY – The dollar-yen rebounded from 108 and closed its opening gap, suggesting a possible move back above 110. Former support at 111 suggests chances remain high for an eventual sell-off towards 107 then 106.

Equity market calls

FTSE100: to open 17 points lower at 6,336

DAX: to open 44 points higher at 10,164

CAC40: to open 12 points higher at 4,518

 

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