Risk assets are moving higher to start the week as markets are expecting European leaders to release a 130 billion Euro loan payment to Greece during their meeting today. Another risk-positive story was seen in China over the weekend, where the central bank made monetary policy more accommodative by lowering the reserve requirement ratio for private banks. This was balanced to the downside by macro numbers from Japan, which showed that merchandise trade deficit increased for the month of January.
In UK trading today, we will not see any significant macro figures but there will be earnings reports from XP Power, CSR Plc, and International Ferro Metals. The FTSE 100 futures are pointed toward a higher open, following the generally bid tone that we are seeing in global equities. At the end of last week, we saw the release of the Rightmove UK house prices, which rose on a monthly basis with the average home price coming in 4.1 percent higher for the month of February, which is the biggest increase since the beginning of 2002, and and a sharp rebound after the 0.8 percent drop that was posted in January.
Asian markets are seeing the biggest advances, on the Chinese reserve requirement story with the Nikkei 225 pushing higher by 1.0 percent to trade back above 9,480. Not surprisingly, some of the biggest gainers were commercial banks in China, with Industrial & Commercial Bank of China (ICBC) and Bank of China posting strong performances during the Asian session.
US equities futures are up slightly, as we will see no major macro releases today and the S&P 500 futures are showing a rise of roughly 8 points. Oneok Inc., Cabot Oil, Choice Hotels, and Watts Water are scheduled to report earnings in New York trade. But in Europe today is where most of the attention will be focused and the DAX and CAC futures are already showing a firm rise. We will have some macro data, with the French Business Confidence Indicator and the Production Outlook scheduled for release. In corporate earnings, look for numbers coming from Ageas SA, Bank of Ireland, and Beko Holdings AG.
The main source of volatility and direction in equity markets and in Forex will come with the finance ministers meeting in Greece but with prices already showing a strong rise on Monday, it is questionable if there is much more buying that can occur even if we see a positive result. If a loan agreement is already priced-in to stock markets, expect a reversal as some of the later long positions are cut when the meeting decision is released.
The USD/JPY is showing a strong rally after prices pushed through the upper end of the shorter term range at 78.30. This move accelerated gains and propelled prices all the way through a test of resistance at 79.50, which has since broken. An hourly close above here will be a very bullish sign and turn our bias to a buy on dips strategy.
The S&P 500 continues to push higher in this year’s monster rally, with prices now trading firmly above the 1360 level. We saw some hourly consolidation into the close last week but there has been very little in the way of a meaningful pullback here, so long positions in this area are risky. For buys, we prefer to wait for a test of support at 1330 so that we can get in at a cheaper level.