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Market movers today

Markets will continue to digest gloomy Chinese PMI figures released over the weekend.

A range of Manufacturing PMI figures for April are out in Europe and Scandinavia, as is the EU Commission's economic sentiment indicator. Business indicators have so far remained surprisingly resilient despite the headwinds from the Ukraine war.

In the US, the ISM manufacturing index is the highlight of the day.

Later this week, the FOMC meeting on Wednesday, Bank of England and Norges Bank on Thursday and Russian energy developments will remain in focus, as the EU readies another sanctions package. An emergency meeting among EU energy ministers is scheduled for today.

The 60 second overview

PMI China: Chinese PMI released over the weekend fell substantially in April as the "zero-Covid" lockdowns hampered not only manufacturing production but also service production. Manufacturing PMI fell from 49.5 to 47.4 and service from 48.4 to 41.9 - the latter being the lowest since February 2020.The statistics bureau said that the drop both reflected declines in de supply and demand. Both domestic and export orders fell sharply. The off-shore yuan weakened sharply on the numbers. See this FT story discussing the longer term economic and political impact of the Chinese zero-Covid poliy.

Oil: EU energy ministers are due to hold at an emergency meeting today to discuss the implications of the Russian decision to cut off the gas deliveries to Poland and Bulgaria last week. It seems that an oil embargo on Russia will be on table as Germany have now confirmed that it can replace Russian crude deliveries by late summer according to AP. Hence, it now seems very likely that we will see a gradual phase in of an EU oil ban. Brent oil rose above USD 110 a barrel on Friday as the rumour of an EU ban started to emerge. However, the weak Chinese PMI data have pushed priced down towards USD 106 USD a barrel this morning. OPEC+ will meet this week. But despite a possible EU ban on Russian oil and falling Russian oil production any deviation from the strategy of lifting oil production gradually is not expected. OPEC will be pointing to the negative demand effect from the lockdowns in China. That said, OPEC is already struggling to deliver the extra oil it has pledged in previous months.

Euro area inflation: Flash HICP reached yet another record high of 7.49% in April (from 7.44% in March). Energy price inflation slowed down but with a 3.8pp contribution energy remains by far the biggest driver of headline inflation. Food price inflation on the other hand is still on a steep acceleration path up 6.4% from 5% in March and importantly core inflation reached a new record high of 3.5% up from 3% in March. Headline inflation might have reached a peak if commodity prices are stabilizing. However, underlying inflation are still seeing a clear upward pressure where further upside risks loom from food prices and tentative signs of wage growth picking up.

FI: A swath of European data out on Friday morning led to mostly sideways trading, until the resilient economic performance in Q1 (of 0.2% qoq) and core inflation (3.5% yoy) gave clear signal of ECB on route to hike in July at 11:00CET. However, we remain more concerned about the medium-term headwinds for the euro area. Later in the afternoon, a US lead sell-off with UST selling off by 10bp, led to additional transatlantic spread widening to stay around 200bp - and further spread widening is expected. However, after the weak Chinese PMI during the weekend we expect rates to decline from the morning session. Bund spreads had a very volatile day, albeit ended virtually unchanged on the day after having widened intraday by 4bp.

FX: EUR/USD continues to hover around 1.05. We expect the Riksbank pivot to be supportive of the SEK in coming weeks. NOK was the biggest loser among majors last week posting a loss of almost 5% vs the USD.

Credit: Credit continued the risk-off mode this Friday. iTraxx main widened 1bp and Xover widened 9.8bp. This marks the 8th consecutive session of spread widening and takes spreads to the widest levels recorded this year. Main is now booked at 90.2bp and Xover at 427.6bp.

Nordic macro

Like the rest of Europe, Swedish manufacturing PMI's are released today. The trend remain downwards sloping and expectations are for a modest decline in April, albeit remaining at strong levels. Perhaps even more interesting are the developments of the different sub-indices, for example delivery times/prices and new orders, as these could provide crucial information on both the supply (supply disruptions/cost pressures) and the demand side.

Daily Pivots: (S1) 162.51; (P) 163.25; (R1) 164.09; More...

Intraday bias in GBP/JPY remains neutral for the moment. Correction from 168.40 could extend further. IN case of another fall, downside should be contained by 61.8% retracement of 150.95 to 168.40 at 157.61 to bring rebound. On the upside, firm break of 168.40 will resume larger up trend.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will now remain the favored case as long as 150.95 support holds, even in case of deep pull back.

Daily Pivots: (S1) 136.35; (P) 137.16; (R1) 137.81; More....

Intraday bias in EUR/JPY remains neutral first. Consolidation from 139.99 could extend further. But downside should be contained by 38.2% retracement of 124.37 to 139.99 at 134.02 to bring rebound. On the upside, firm break of 139.99 will resume larger up trend for 144.06 medium term projection level.

In the bigger picture, up trend from 114.42 (2020 low) is in progress. Such rise is seen as the third leg of the pattern from 109.30 (2016 low). Next target will be 100% projection of 114.42 to 134.11 from 124.37 at 144.06. In any case, outlook will now remain bullish as long as 124.37 support holds, in case of deep pull back.

Daily Pivots: (S1) 0.8367; (P) 0.8400; (R1) 0.8419; More...

Break of 0.8380 minor support argue that rebound from 0.8248 has completed at 0.8456 already. Intraday bias is back on the downside for 0.8248 support. On the upside, above 0.8465 will turn focus back to 0.8511 resistance intact. Further break of 0.8511 will reaffirm that 0.8201 is a medium term bottom, and target 0.8697 medium term fibonacci level next.

In the bigger picture, a medium term bottom could be in place at 0.8201, on bullish convergence condition in daily and weekly MACD. Rise from there could either be a correction to the down trend from 0.9499 (2020 high), or a medium term up trend itself. In either case, further rise should be seen to 38.2% retracement of 0.9499 to 0.8201 at 0.8697. Sustained break there will target 61.8% retracement at 0.9003.

Daily Pivots: (S1) 1.4768; (P) 1.4855; (R1) 1.5025; More...

Intraday bias in EUR/AUD remains neutral and further rise is in favor with 1.4687 minor support intact. On the upside, break of 1.5053 will resume the rebound from 1.4318 to target 61.8% retracement of 1.6223 to 1.4318 at 1.5495. However, firm break of 1.4687 will argue that the rebound has completed and bring retest of 1.4318 low.

In the bigger picture, as long as 1.5354 support turned resistance holds, larger down trend form 1.9799 (2020 high) is still expected to continue. On resumption, next target is 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). However, firm break of 1.5354 will indicate medium term bottoming and bring stronger rally.

Daily Pivots: (S1) 1.0214; (P) 1.0242; (R1) 1.0294; More....

Intraday bias in EUR/CHF remains neutral at this point. Another decline cannot be ruled out as consolidative pattern from 1.0400 extends. Below 1.0186 will target 1.0086 support. On the upside, above 1.0289 will target 1.0369/0400 resistance zone. Firm break there will resume the rebound from 0.9970 to 1.0610 structural resistance.

In the bigger picture, as long as 1.0505 support turned resistance (2020 low) holds, long term down trend from 1.2004 (2018 high) is expected to continue. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. However, firm break of 1.0505 will suggest medium term bottoming, and bring stronger rebound towards 1.1149 structural resistance.

Daily Pivots: (S1) 1.0495; (P) 1.0544 (R1) 1.0596; More...

Intraday bias in EUR/USD remains neutral for consolidation above 1.0470. Upside of recovery should be limited by 1.0756 support turned resistance to bring fall resumption. Break of 1.0470 will target 161.8% projection of 1.1494 to 1.0805 from 1.1184 at 1.0069.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1185 support turned resistance holds. The break of 1.0635 (2020 low) now raises the chance that it's resuming long term down trend from 1.6039 (2008 high). Retest of 1.0339 (2017 low) low should be seen next. Decisive break there will confirm this bearish case.

Daily Pivots: (S1) 1.2480; (P) 1.2547; (R1) 1.2647; More...

Intraday bias in GBP/USD remains neutral as consolidation from 1.2410 is extending. Upside of recovery should be limited below 1.2999 support turned resistance. On the downside, break of 1.2410 will target 161.8% projection of 1.3641 to 1.2999 from 1.3297 at 1.2258.

In the bigger picture, rise from 1.1409 (2020 low) has completed at 1.4248, ahead of 1.4376 long term resistance (2018 high). Based on current momentum, fall from 1.4248 is probably the start of a long term down trend. The break of 61.8% retracement of 2.1161 to 1.1409 at 1.2493 is affirming this bearish case too. For now, deeper decline would be seen as long as 1.3158 support turned resistance holds. Next target is 1.1409 low.

Daily Pivots: (S1) 0.7021; (P) 0.7100; (R1) 0.7142; More...

AUD/USD's decline resumed after brief recovery and intraday bias is back on the downside. Current development suggests that larger correction from 0.8006 is in its third leg. Deeper fall should be seen to retest 0.6966 low first. Break will target 0.6756 medium term fibonacci level next. On the upside, above 0.7179 minor resistance will turn intraday bias neutral again.

In the bigger picture, price actions from 0.8006 are seen as a corrective pattern to rise from 0.5506 (2020 low). Fall from 0.7660 should be the third leg of this pattern. Break of 0.6966 will target 50% retracement of 0.5506 to 0.8006 at 0.6756. On the upside, break of 0.7660 will revive that case that the correction has already completed at 0.6966.

Daily Pivots: (S1) 1.2765; (P) 1.2813; (R1) 1.2907; More...

Intraday bias in USD/CAD remains neutral, with focus on 1.2879 resistance. Break there will resume the rally from 1.2401 towards 1.3022 fibonacci level. Decisive break there will carry larger bullish implications. In any case, outlook will stay cautiously bullish as long as 1.2675 support intact, in case of another retreat.

In the bigger picture, focus stays on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. However, rejection by 1.3022 will maintain medium term bearishness. Break of 1.2005 will resume the down trend from 1.4667 and that carries larger bearish implications too.