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Market movers today

Fears of a trade war between the US and Europe could reignite today after Trump's announcement yesterday that the US is proposing tariffs on EU goods worth USD11bn in response to EU subsidies to Airbus. While the amount is less than 0.1% of EU GDP, it would further increase tensions between the EU and US and stoke fears that Trump could move on to add tariffs on cars from the EU.

Focus continues on Brexit news today . PM Theresa May visits Chancellor Merkel and President Macron ahead of the EU summit tomorrow, Wednesday, see Reuters . Meanwhile, in London, law makers will have a 90-minute debate on May's proposal to delay Britain's departure date to 30 June from 12 April. For more on Brexit see Brexit Monitor: Long extension despite Brexit fatigue , 8 April 2019.

On the data front, US small business optimism for March is due. After a big drop from November to January, the index rebounded in February and consensus looks for a small further increase.

An EU-China summit will take place in Brussels today. The two sides have struggled to agree on a joint declaration in preparation for the meeting, see SCMP .

Otherwise the markets will be waiting for the ECB meeting as well as the EU summit on Brexit tomorrow.

Selected market news

Risk appetite remained intact yesterday, as equities eked out further gains. Stock markets were mixed overnight in Asia, though, with Chinese stocks higher but Japanese equities trading in red territory. The news on Trump tariffs on EU will probably cause headwinds for European equities today.

Oil prices continued to push higher, with Brent oil moving above USD71 per barrel. Concern over supply in Libya continues to lift prices.

EUR/USD moved up yesterday following news that the ECB is in no hurry to review a tiering system. Bloomberg cited people with knowledge on the matter saying that EU President Mario Draghi's call to reflect on softening the impact of negative rates on banks had spurred limited action inside the ECB.

US-China trade talks continue , albeit not physically but via video conference. A White House official said yesterday that the US is not yet satisfied about all outstanding issues but that progress was made at high-level talks last week, see Reuters . Trump said last week the talks would likely take another four weeks, but that a deal was very likely.

Elliott Wave view on FTSE calls the rally from February 28, 2019 low (7041) as an impulse Elliott Wave structure. An impulse is a 5 waves structure with wave 1, 3, and 5 all subdivide in 5 waves of lesser degree. Up from 7041 low, wave 1 ended at 7370.6 and wave 2 ended at 7146.29. Wave 3 remains in progress and subdivides as 5 waves of lesser degree. Up from 7146.29, wave ((i)) ended at 7222.64, wave ((ii)) pullback ended at 7160.14. Index resumes rally in wave ((iii)) at 7461.39, and wave ((iv)) ended at 7420.41. Short term, Index has scope to extend higher 1 more time in wave ((v)) before ending wave 3.

Afterwards, Index should pullback in wave 4 before the rally resumes in wave 5. Wave 4 should correct wave 3 rally from 7146.29 low and expected to complete at 23.6-38.2 Fibonacci retracement. Once wave 3 is complete, we can then project wave 4 potential area. We don’t like selling the Index and expect buyers to appear to buy dips in 3, 7, or 11 swing as far as pivot at 7146.29 low stays intact.

1 Hour FTSE Elliott Wave Chart Asia Update

Daily Pivots: (S1) 1.5759; (P) 1.5802; (R1) 1.5839; More...

EUR/AUD's recovery was rejected by 4 hour 55 EMA again and it weakens mildly. Still, it's staying in consolidation pattern from 1.5721 and intraday bias remains neutral. Another rise cannot be ruled out. But upside should be limited by 1.6122 resistance to bring fall resumption. On the downside, sustained break of 1.5721 will resume the decline from 1.6765 to 1.5346 key support next.

In the bigger picture, as long as 1.5346 support holds, outlook will still remain bullish. Uptrend from 1.1602 (2012 low) is expected to resume sooner or later. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal, with bearish divergence condition in weekly MACD, and turn outlook bearish.

Dollar and Euro are trading as the two weakest ones today as pressured by renewed threats of escalation in global trade war. While trade talks with China continue to drag on, US is preparing to start another battle targeting EU. Meanwhile, Sterling is trading generally firm, but bounded in range, as markets some concrete developments on Brexit. Yen follows as the second strongest with mixed stock markets.

Technically, EUR/USD has yet to break through 1.1273 minor resistance decisively. Thus, near term outlook stays bearish for another fall through 1.1176 low. But then, firm break of 1.1273 will indicate short term bottoming and bring stronger rebound back to 1.1448 resistance. USD/JPY is also holding above 111.18 minor support, which will remain a focus today.

In Asia, Nikkei closed up 0.07%. Hong Kong HSI is up 0.24%. China Shanghai SSE is down -0.35%. Singapore Strait Times is up 0.13%. Japan 10-year JGB yield is up 0.0034 at -0.042. Overnight, DOW dropped -0.32%. S&P 500 rose 0.10%. NASDAQ rose 0.19%. 10-year yield rose 0.018 to 2.519.

US to escalate global trade war again, targeting EU

The US is set to escalate global trade war by considering to impose tariffs on a range of European Union products, ranging from large commercial aircraft and parts to dairy products and wine, from helicopters to some motorcycles.

In a statement published yesterday, US Trade Representative said WTO repeated found that EU subsidies to Airbus have "caused adverse effects" to the US, with harm in USD 11B in trade each year. USTR has begun Section 301 process to identify EU products to tariff, until EU removes Airbus subsidies. A preliminary list of products are identified for public comment.

USTR Robert Lighthizer said: "Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft.  When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted."

Cooper-Letwin bill to avert no-deal Brexit passed

The UK House of Lords finally passed the cross-party bill devised by Labour's Yvette Cooper and the Conservative Oliver Letwin to block no-deal Brexit, on Monday night. Despite filibustering by some MPs, it's an historic swift passage which took three sitting days to complete.

Cooper said the bill "helps avoid the worst outcome on Friday", the April 12 cliff edge. But the prime minister still needs to build consensus around a workable way forward." Under the new Act, Prime Minister Theresa May is requested to table her Brexit delay plan in form of an amendable motion. The plan to extend Article 50 till June 30 will now be debated in the House on Tuesday.

Meanwhile, May will head to Berlin and Paris today, meeting German Chancellor Angela Merkel and French President Emmanuel Macron, to secure her short Brexit delay plan. There will also be an emergency EU summit in Brussels on Wednesday

Separately, there is no conclusion of cross-party talks between May and Labour leader Jeremy Corbyn. Labour spokesman just said ministerial and shadow ministerial negotiating teams will meet tomorrow to attempt to secure a Brexit compromise.

EU chief negotiator Michel Barnier warned that the bloc would refuse to open trade talks with the UK after a no-deal Brexit unless the backstop issue was addressed. But he's happy to offer the UK a customs union.

Moody's downgrades Australia house price forecasts, nationwide to fall -7.7% in 2019

Rating agency Moody's dramatically downgrades Australia house prices forecasts. Weak household consumption, compounded by low wages growth were among the factors. Even though house prices are expected to bottom in Q3, further credit tightening and changes to negative gearing could extend and deepen the decline.

For the whole nation through 2019, house prices are forecast to drop -7.7%, down from January projection of -3.0%. For Sydney, house prices could drop -9.3%, down from January projection of -3.3%. For Melbourne, how price could drop -11.4%, down from January forecast of -5.0%.

Separately, Australian number of of owner occupier housing finance approvals ex-refi rose 0.8% mom in February, above expectation of 0.5% mom.

EUR/AUD Daily Outlook

Daily Pivots: (S1) 1.5759; (P) 1.5802; (R1) 1.5839; More...

EUR/AUD's recovery was rejected by 4 hour 55 EMA again and it weakens mildly. Still, it's staying in consolidation pattern from 1.5721 and intraday bias remains neutral. Another rise cannot be ruled out. But upside should be limited by 1.6122 resistance to bring fall resumption. On the downside, sustained break of 1.5721 will resume the decline from 1.6765 to 1.5346 key support next.

In the bigger picture, as long as 1.5346 support holds, outlook will still remain bullish. Uptrend from 1.1602 (2012 low) is expected to resume sooner or later. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal, with bearish divergence condition in weekly MACD, and turn outlook bearish.

Economic Indicators Update

The UK House of Lords finally passed the cross-party bill devised by Labour's Yvette Cooper and the Conservative Oliver Letwin to block no-deal Brexit, on Monday night. Despite filibustering by some MPs, it's an historic swift passage which took three sitting days to complete.

Cooper said the bill "helps avoid the worst outcome on Friday", the April 12 cliff edge. But the prime minister still needs to build consensus around a workable way forward." Under the new Act, Prime Minister Theresa May is requested to table her Brexit delay plan in form of an amendable motion. The plan to extend Article 50 till June 30 will now be debated in the House on Tuesday.

Meanwhile, May will head to Berlin and Paris today, meeting German Chancellor Angela Merkel and French President Emmanuel Macron, to secure her short Brexit delay plan. There will also be an emergency EU summit in Brussels on Wednesday

Separately, there is no conclusion of cross-party talks between May and Labour leader Jeremy Corbyn. Labour spokesman just said ministerial and shadow ministerial negotiating teams will meet tomorrow to attempt to secure a Brexit compromise.

EU chief negotiator Michel Barnier warned that the bloc would refuse to open trade talks with the UK after a no-deal Brexit unless the backstop issue was addressed. But he's happy to offer the UK a customs union.

Rating agency Moody's dramatically downgrades Australia house prices forecasts. Weak household consumption, compounded by low wages growth were among the factors. Even though house prices are expected to bottom in Q3, further credit tightening and changes to negative gearing could extend and deepen the decline.

For the whole nation through 2019, house prices are forecast to drop -7.7%, down from January projection of -3.0%. For Sydney, house prices could drop -9.3%, down from January projection of -3.3%. For Melbourne, how price could drop -11.4%, down from January forecast of -5.0%.

Separately, Australian number of of owner occupier housing finance approvals ex-refi rose 0.8% mom in February, above expectation of 0.5% mom.

The US is set to escalate global trade war by considering to impose tariffs on a range of European Union products, ranging from large commercial aircraft and parts to dairy products and wine, from helicopters to some motorcycles.

In a statement published yesterday, US Trade Representative said WTO repeated found that EU subsidies to Airbus have "caused adverse effects" to the US, with harm in USD 11B in trade each year. USTR has begun Section 301 process to identify EU products to tariff, until EU removes Airbus subsidies. A preliminary list of products are identified for public comment.

USTR Robert Lighthizer said: "Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft.  When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted."

Full statement here.

STOCKS

Global equities seem to be losing momentum. Among the major indices DAX looks vulnerable for a sharp fall while others like the Dow, Nikkei, shanghai, Sensex and Nifty can either consolidate or dip slightly before moving higher.

Dow (26341.02, -83.97, -0.32%) has come-off yesterday. The resistance-turned-support level of 26250 is holding well as of now. While above this support, the bullish view remains intact for a rise to 26500 and 26700. But a break below 26250 can take the index first lower to 26100-26000 before a rally to 26500-26700.

DAX (11963.40, -46.35, -0.39%) has failed to breach the key resistance level of 12045. While below 12000, it now looks vulnerable for a fall to 11800 or even lower levels.

The resistance at 21870 is holding well and Nikkei (21737, -24.65, -0.11%) has come-off slightly. A fall to 21500 cannot be ruled out while it remains below this resistance. As mentioned yesterday, a strong break above 21870 is needed for the index to move higher to 21930 and 22000 levels.

The rally in Shanghai (3236.65, -8.16, -0.25%) seem to have paused. A sideways consolidation between 3200 and 3280 is possible for some time before the uptrend resumes towards 3250.

(38700.53, -161.70, -0.42%) has been stuck in between 38500 and 39000 over the last few days. A decisive break above 39000 is needed to regain strength and rally to fresh highs of 39500 and higher. But while it remains below 39000, Sensex is vulnerable to break 38500 and fall to 38000 and 37800 in the coming sessions.

Nifty (11604.5, -61.45, -0.53%) has support in between 11550 and 11500 which might be tested in the near term. A bounce from this support zone can take the index higher to 11700 levels again. But a strong break below 11500 will leave Nifty under pressure for a fall to 11400.

COMMODITIES

Oil continues to trade strong as concerns on supply disruption due to fresh conflicts in Libya are supporting the prices. Gold and silver gets a breather and can move higher in the near term. Stable dollar coupled with a pull-back in the equities are supporting gold at the moment.

Gold (1299) has moved higher as expected. It has come-off slightly from around 1304. An immediate support is at 1294. While above this support, an upmove to 1305 and 1310 is possible in the near term.

Silver (15.24) has risen and is hovering around the 15.25-15.28 resistance region mentioned yesterday. If it sustains above 15.20, a strong break above 15.28 is possible which will then pave way for a test of 15.40 and 15.45.

Copper (2.93) is holding higher and is likely to test the 2.95-2.96 resistance region in the near term. A decisive break above 2.96 is needed for it to move further higher to 3.00 levels. A pull-back from 2.95-2.96 can drag it to 2.90 again.

WTI (64.55) has breached the important 61.8% Fibonacci retracement resistance level of 63.7 and is heading towards 65 as expected. This level will now act as a good support now. The current leg of upmove has the potential to target 68 and 70 levels in the coming days.

Brent (71.2) has gained momentum over the last couple of trading days. It keeps the bullish view intact for a test of 72.7 - the key 61.8% Fibonacci retracement resistance level. Supports are at 70.40 and then in between 70.10 and 70.0

FOREX

Dollar weakened yesterday pulling up Euro, Euro-Yen and Aussie. Yuan and Rupee could strengthen a bit today.

Dollar-Index (97.01) has fallen from resistance levels of 97.75 and could get some near term support near 97 or 96.75 levels. If 96.75 produces a bounce, we may see a rise back towards 97.75; else a fall towards 96.50 or lower cannot be rules out.

Euro (1.1264) has remained above 1.12 rising from 1.1225 to current levels of 1.1264. We had mentioned a sideways range of 1.1150-1.1250 yesterday with a gradual fall towards 1.11 in the longer run. While the Euro has moved up, we may negate the sideways range and instead look for a test of 1.13 on the upside before resumption of fall towards 1.11 in the longer run.

Euro-Yen (125.40) has risen from levels near 125 seen yesterday. Interim resistance could come in from 125.7-126.0 levels which if holds could push the pair back towards 124 in the medium term.

Dollar Yen (111.31) has scope to rise towards 112.50 but if it falls below 111, we could see it move down towards 110.50 in the near term. 111.50-110.50 could be the region for trade in the near term.

Aussie (0.7127) could probably test 0.7180 on the upside before falling from there back towards 0.7050. Note that 0.7050 is an immediate support and is likely to hold well for the near term.

Pound (1.3077) is likely to be volatile this week as the UK no-deal exit from EU on Friday comes closer. Immediate support is seen near 1.30 while the upside could see trade towards 1.3150.

USDCNY (6.7128) is trading below 6.7270 and has some scope of coming down towards 6.70 or lower. Line charts show immediate resistance at current levels that indicates an upcoming fall in USDCNY.

Dollar-Rupee (69.68) has scope of rising towards 70 but could possibly see a corrective fall towards 69.50/40 initially before it could resume the upward rally targeting 70.

INTEREST RATES

The German yields have risen slightly but could face resistance just above current levels. The German 10Yr (0.011%) has resistance near 0.1% while the 30Yr (0.64%) could face rejection from 0.7%. The yields could rise in the next 1-2 sessions before falling from there.

The corrective fall after the recent sharp rise in the US yields mentioned yesterday has not taken place, instead the 10Yr (2.52%) and the 30Yr (2.92%) have risen slightly from levels of 2.50% and 2.91% seen yesterday. The 2Yr (2.366%) is also bouncing from support levels and could head towards 2.40% in the near term. On the upside there is room for the 30Yr towards 3%, for the 10YR towards 2.55/58%. Immediate rise could be limited to the next few sessions while overall long term view is bearish for the US yields.

The 10Yr GOI (7.5632%) has risen well yesterday and could head towards 7.60% in the near term while interim dips could test 7.50% on the downside.

Australia: number of owner occupier housing finance approvals ex refi up 0.8%, value of investor loan approvals ex refi up 0.9%.

Housing finance approvals posted a modest gain in Feb, owner occupier approvals in line with expectations but investor loans a touch better.

The total number of owner occupier loan approvals ex refi rose 0.8%mth, slightly better than the consensus forecasts of a 0.5% gain but in line with Westpac's view of a 1% gain. That follows a sharp decline since mid 2018 with monthly declines averaging 1.5% between June and January. Approvals are down 12.5%yr.

The value of investor loans ex refi rose 0.9%mth, a starker turnaround after average declines of 3.6%mth over the previous six months. The monthly value of loans to this segment is still down heavily by 29.1% over the last year.

The combined total value of housing finance approvals across both owner occupier and investor segments (and excluding refi) rose 2.7%mth but was still down 18.6%yr.

Overall, the February update was firmer than expected, consistent with the improved tone from auction market activity and a slowing in price declines in recent months. Some of the effects of tightening credit conditions may also be dissipating. That said, the signs of improvment are still only tentative. The market may be starting to find a base in terms of finance activity but conditions remain weak overall.

Details:

Owner–occupiers (no.) 2%mth, -10.7%yr – ex-financing (no.) 0.8%mth, -12.5%yr

Construction of dwellings (no.) 2.5%mth, -5.2%yr Purchase of newly built dwellings (no.) -2.4%mth, -31.2%yr

Value of loans: Owner-occupiers ($bn) 3.9%mth, -12%yr Investors ($bn) -0.2%mth, -26.6%yr Total ($bn) 2.8%mth, -16.6%yr Total ex refi ($bn) 2.7%mth, -18.6%yr

Wall Street mixed as upward momentum stalls

It was a mixed performance on Wall Street overnight, with the US30 index weighed down by Boeing, the SPX500 flat and the Nas100 index eking out small gains.

US30USD Daily Chart

The US30 index slid lower for a second consecutive day yesterday as production cuts at Boeing dragged the index lower

The 55-day moving average at 25,616 could be the next technical support point

US factory orders fell 0.5% m/m in February, less than the -0.6% forecasts had suggested. It’s another slow data day today, with a speech from Fed’s Clarida likely the main highlight.

DE30EUR Daily Chart

The Germany30 index fell for the first time in 11 sessions yesterday as a lack of momentum on Wall Street pressured

The 10-day rally stalled just below the 61.8% Fibonacci retracement of the May-December decline at 12,089. The 200-day moving average at 11,703 could be the next support level

There are no data releases for either Germany or the Euro-zone today. The main event for the week will be tomorrow’s ECB rate meeting.

JP225USD Daily Chart

Today the Japan 225 index looks set to retreat further from the 4-month high struck yesterday amid broader weakness across equity markets

The index is pivoting around the 200-day moving average, which is at 21,889 today

Japan’s bank lending is expected to slow to +2.0% y/y in March following a 2.3% gain in February. Machinery orders are expected to continue their sluggish phase, with a 5.2% y/y decline in February, the second contraction in a row. Both data sets are scheduled for release early tomorrow morning.