European Open: China’s imports and exports contract, DAX teases highs

Asian Indices:

Australia's ASX 200 index rose by 41.2 points (0.6%) and currently trades at 6,933.70
Japan's Nikkei 225 index has risen by 347.34 points (1.28%) and currently trades at 27,547.08
Hong Kong's Hang Seng index has risen by 553.43 points (3.42%) and currently trades at 16,714.57
China's A50 Index has risen by 84.53 points (0.7%) and currently trades at 12,169.97

UK and Europe:

UK's FTSE 100 futures are currently down -45.5 points (-0.62%), the cash market is currently estimated to open at 7,289.34
Euro STOXX 50 futures are currently down -3 points (-0.08%), the cash market is currently estimated to open at 3,685.33
Germany's DAX futures are currently down -13 points (-0.1%), the cash market is currently estimated to open at 13,446.85

US Futures:

DJI futures are currently down -38 points (-0.12%)
S&P 500 futures are currently down -25.75 points (-0.24%)
Nasdaq 100 futures are currently down -6.25 points (-0.17%)

China’s trade data was expected to soften due to the latest round of lockdowns, yet it went a step further with both imports and exports contracting. Imports contracted by -0.3% y/y – its fastest (and first) contraction since May 2020. Imports declined by -0.7% y/y – its fastest contraction since August 2020. This clearly shows that international and domestic demand for goods declined, and that the lockdowns are having a greater impact than originally though. Yet China’s equity markets were the strongest of the overnight session, likely on bets that further stimulus will come from Beijing.

EUR/USD considers retest of parity

Currency markets retraced against Friday’s oversized moves, yet remained within relatively tight ranges close to Friday’s respective highs or lows. EUR/USD found support just above 0.9900 and looks set to test parity, although we’d need to see a break above 1.0100 before assuming trend continuation.

It’s not unusual to see prices retrace against a large move from the prior session, and that’s what we’re seeing today with gold pulling back from its 3-week high whilst the US dollar index gently rises from Friday’s low. It looks like we’re off to a quiet start this week after notably bullish Friday. $1700 is within easy reach and I’d expect buyers to step in should prices pull back to the $1660 area, so a conservative estimate is the 1660 – 1700 range heading into Wednesday’s US inflation report. But if the dollar continues to fall then 1720 seems feasible.

DAX daily chart and implied volatility:

The DAX has rallied over 14% from its September low, and a 30bar bullish reversal has formed called a morning star reversal. However, the rally has stalled just below the September high and 200-day EMA, so there’s a decent chance that the 13,565 area will cap as resistance – at least initially. There’s the potential for a pullback with futures markets pointing to a slightly softer open, whilst a break above trend resistance assumes bullish continuation.

FTSE 350 – Market Internals:

FTSE 350: 4042.39 (0.66%) 04 November 2022

229 (65.43%) stocks advanced and 112 (32.00%) declined
5 stocks rose to a new 52-week high, 1 fell to new lows
12.57% of stocks closed above their 200-day average
50.57% of stocks closed above their 50-day average
5.43% of stocks closed above their 20-day average

Outperformers:

+ 15.84% - Morgan Advanced Materials PLC (MGAMM.L)
+ 11.13% - Anglo American PLC (AAL.L)
+ 8.97% - Prudential PLC (PRU.L)

Underperformers:

-3.82% - Hikma Pharmaceuticals PLC (HIK.L)
-3.43% - Bellevue Healthcare Trust PLC (BBH.L)
-3.42% - JLEN Environmental Assets Group Ltd (JLEN.L)

Economic events up next (Times in GMT)

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