Chinese and US stock indices maintain growth impulse. Normalisation of 3mo-10y yield curve helps the market’s optimism. EURUSD and GBPUSD finds support at major levels 1.12 and 1.30, respectively. Brent nears $70 on worries about supply.
Stocks
Chinese and US stock indices maintain growth impulse, adding 0.3-1.0% within 24 hours, reflecting the demand for risky assets. The Chinese blue-chip index A50 fully offset the last year decline due to trade wars fears. S&P 500 reached the highest levels since October 10, 2018, when the market collapsed due to the Fed’s tough comments. Among the macroeconomic news, China’s service PMI growth is higher than expected after strong production data at the beginning of the week.
Debt markets
The yield on US 10-year government bonds is growing again, exceeding 2.5%. The yield of 3-month treasuries is at the level of 2.43%. Maintaining a positive spread between 3-month and 10-year bonds allows markets to sustain demand for risk.
EURUSD
EURUSD received support after falling below 1.1200, and this level looks like significant support for the pair since November. The markets focus on the euro-region business activity weak indicators, which may further put pressure on the single currency. On the other hand, improved performance in China often also supports the demand for the euro and may contribute to the consolidation of the pair near this level before the release of important macro statistics from the United States. The focus today is on US employment data from ADP and Non-Manufacturing ISM. In both cases, data are expected to confirm the good state of the largest economy. Indicators better than expected can strengthen the demand for the dollar and contribute to the breakdown of support at 1.1200. Subsequent levels of support in the pair are quite away, at 1.07 or even lower, at 1.05.
GBPUSD
The British pound pushed off from the 1.30 against the dollar after May’s comments that she will ask the EU to postpone the Brexit date further. Formally, until April 12th she still has time to exit without a deal, but the desire of politicians to overcome the deadlock helps the British currency. The reaction of the markets is simple in this case. The longer Britain is in the EU, the better it is for the pound since it is considered as a benefit for the economy. In addition, the alternative to a repeated referendum and a new election is becoming more and more sound option, which is also perceived by market participants as a chance to get out of a painful impasse.
Bitcoin
On Tuesday, the bitcoin price jumped by 20%, at some point breaking the threshold $5,000. The initial impulse was somewhat weakened, and retail investors and the media began to put forward their own hypotheses for such a sharp dynamic. In our opinion, in this situation, it is important that until now there is no sharp correction, and purchases continued on Wednesday morning. Moreover, the Altcoin’s market was inspired by this impulse and began to catch up the main cryptocurrency.
Brent
Oil continues to climb on the increased demand for risks from market participants, as well as due to fears of the production cut impact by OPEC +. Brent crude is currently trading at $69.70, close to MA (200). Closing above this level will be a positive signal and can inspire markets for further purchases. Weekly data on oil reserves and production can support or expand the trend of recent days.
