European Open: ‘Jack in the box’ trading continues

Asian Indices:

Australia's ASX 200 index rose by 112.3 points (1.54%) and currently trades at 7,426.20
Japan's Nikkei 225 index has risen by 424.11 points (1.49%) and currently trades at 28,880.66
Hong Kong's Hang Seng index has fallen by -28.75 points (-0.12%) and currently trades at 23,954.91
China's A50 Index has risen by 182.67 points (1.16%) and currently trades at 15,969.88

UK and Europe:

UK's FTSE 100 futures are currently up 3 points (0.04%), the cash market is currently estimated to open at 7,342.90
Euro STOXX 50 futures are currently up 8 points (0.19%), the cash market is currently estimated to open at 4,284.20
Germany's DAX futures are currently up 18 points (0.11%), the cash market is currently estimated to open at 15,831.94

US Futures:

DJI futures are currently up 492.4 points (1.4%)
S&P 500 futures are currently up 86.25 points (0.53%)
Nasdaq 100 futures are currently up 18.25 points (0.39%)

Asian equities jump higher in line with sentiment

Of course, the force which suppressed prices was the Omicron variant and there now seems to be no shortage of headlines suggesting all is well. And that lift in sentiment saw Asian equities race out of the gates as they tracked Wall Street higher in a similar fashion.

The ASX 200 did its best impression of a telegraph pole by opening at the low and now on track to close at the high of the day, and currently up around 1.6%. Japan’s markets were the leaders with the Nikkei 25 rising over 1.9% and China’s A50 up around 1.1%. The Hang Seng was underwater slightly, weighed down by Kaisa which missed a debt payment and Evergrande hit a new low.

GBP feels the weight of commodity FX

The US dollar index saw a false break above 96.43 resistance yesterday and closed with an indecision candle. Traders appear hesitant to front-run Friday’s CPI data, and perhaps there are downside risks given the consensus is for already hot-inflation to heat up further. If so, perhaps euro saw the low for the week yesterday above the 1.1 handle.

The British pound felt the might of commodity FX yesterday, with GBP/AUD hitting a 1-week low yesterday and sliding a little further today. GBP/NZD printed a bearish outside day at its 2-month high, whilst GBP/CAD fell to our initial 1.6730 target near the November low. We favour GBP/CAD for further shorts.

GBP/CAD teases November low

The daily chart remains in a strong downtrend, and momentum realigned with that trend yesterday after repeatedly failing to break above 1.7100. Yesterday’s bearish candle broke trend support with ease and prices are now hugging the lows. We suspect any upside bounce from here could be limited and a break back to the March 2020 low (1.6551) to be the path of least resistance.

BOC rate decision is the main event today

It’s their final show of the year and the central bank is expected to hold rates at 0.25%. Yet with economists expecting four hikes in 2022 they’ll be looking for some form of assurance current expectations are correct. Therefore, the contrarian approach is to short CAD should the central bank not be as hawkish as hoped today, whilst the biggest bullish surprise (although not likely) would be for a hike at this meeting. And with GBP/CAD at a key support level heading into the meeting it provides a clear pivotal level for markets to trade around.

FTSE 350: Market Internals

FTSE 350: 4199.99 (1.49%) 07 December 2021

293 (83.48%) stocks advanced and 53 (15.10%) declined
18 stocks rose to a new 52-week high, 1 fell to new lows
55.84% of stocks closed above their 200-day average
76.35% of stocks closed above their 50-day average
17.66% of stocks closed above their 20-day average

Outperformers:

+ 9.26% - Moonpig Group PLC (MOONM.L)
+ 9.10% - Trustpilot Group PLC (TRST.L)
+ 8.10% - Network International Holdings PLC (NETW.L)

Underperformers:

-2.67% - Baltic Classifieds Group PLC (BCG.L)
-1.94% - B&M European Value Retail SA (BMEB.L)
-1.90% - Domino's Pizza Group PLC (DOM.L)

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