FTSE higher as Europe enjoys holiday

Morning Note

UK stocks moved tentatively higher in early on Monday but contained by the recent peaks as global investors continue to search for meaningful direction as they pick over signs of inflation and assess likely central bank reaction. The FTSE 100 moved 0.3% higher and trades comfortably above 7,000, whilst European bourses are mainly shut for the Pentecost/Whit Monday holiday. Iron ore prices plunged as China steps up efforts to control ‘excessive speculation’, whilst oil trades at a 5-day high with WTI (Jul) above $64.50, testing the 200-hour moving average. US futures trade higher after a mixed finish to a choppy week on Wall Street.

As such it’s a quiet day on the calendar, with market attention on US inflation numbers due later in the week. Friday’s core PCE index is the one to watch, but ahead of this today we have two Fed speakers (Brainard and Bostic) on the tape, while the Bank of England’s Andrew Bailey is due to testify in front of MPs.

Cineworld shares rallied as the company reported a strong opening weekend in the UK, thanks to the success of Peter Rabbit 2: The Runaway. In a sign that movie goers will not shun the big screen, management said the weekend was ‘beyond our expectations’. The company also said it has received a $203m tax refund. Shares rose 3% in early trade but remain a quarter off the March highs.

Cryptocurrencies remain under the cosh after a turbulent week as a crackdown on both mining and trading activity in China bites. Mining operators are suspending operations in the country as they seek alternatives. Declines were seen on Friday as Chinese vice-premier Liu Hu announced the regime would “severely crack down on illegal securities activities and severely punish illegal financial activities” whilst also promising to “crack down on bitcoin mining and trading”. The move is a source of concern for crypto backers and underscores the regulatory uncertainty and headwinds facing the market at a time when institutions are dialling down their bets. Bitcoin took a $33k handle early this morning before turning up to rise above $36k. Last week had prices plunge to $30k in a sharp correction that betrays fundamental weakness in the market.

With much of Europe closed, FX markets are relatively subdued. GBPUSD trades a bit firmer at 1.4160 after touching a low around 1.41360 overnight. Friday’s peak at 1.42339, a three-month high, is the target for bulls. EURUSD also trades a tad firmer as it tries to recapture the 1.22 handle. Hourly charts shows near-term bullishness with MACD crossover and price action moving above 50-hr and 100-hr MAs.

GBPUSD, 1hr. Near-term momentum seems to be with the bulls this morning but 1.42 is proving a tough nut.

Chart showing gold movement on 24.05.2021

WTI (Jul), 1hr. A bullish engulfing candle on Friday (not shown here) is encouraging.

WTI crude oil contract performance chart.