Stocks start September strongly, OPEC+ ahead

Morning Note

European stocks kicked off September with a strong start, with the major bourses back towards the tops of recent ranges. The DAX rose close to 1% in early trade to 15,980 as German bond yields hit a 6-week high, whilst the FTSE rose to 7,177 at the start. Wall Street dipped slightly on Tuesday in quiet trade ahead of Friday’s key jobs report but nevertheless managed to eke out a 7th straight monthly gain like its European and global peers. SPX now up 20% for the year without any sizeable drawdown – the 50-day SMA holding the line every time it’s tested and it’s now breezed through 4,500 without a glance back. The question now is after 7 months of gains, valuations stretched and economic growth struggling to retain the kind of perkiness it had on the initial rebound, can the market continue to glide higher? A combination of ongoing earnings strength, normalisation of the economic situation as reopening proceeds, and ongoing support from a dovish Fed suggest there is more upside, but not without some larger pullbacks along the way.

Stagflation: Manufacturing activity across all seven countries in the ASEAN block contracted for the first time since May 2020. PMIs for the region remained firmly in contraction territory, whilst inflationary pressures also remained high. “Input costs increased markedly again, with firms raising their average charges at an accelerated pace as a result,” IHS said. China’s Caixin PMI also registered a drop, marking the first time it has been in contraction for a year and a half. In Europe, German retail sales plunged by 5% – after yesterday’s 3% inflation print for the EZ. PMIs for the Eurozone already showing declining momentum + deeper supply chain problems + accelerating inflation pressures.

Crude oil remains with a slight bullish bias with WTI (spot) holding $69 after a larger-than-expected draw on US inventories, while traders are also looking towards today’s OPEC+ meeting. The API reported a draw of more than 4m barrels for last week, with EIA figures today expected to show a draw of around 2.5m barrels.

OPEC’s meeting today with allies should be simple – agree to raise output by 400k bpd as they have already set out the schedule through to December. Delta has increased downside risks for oil demand but prices have stabilised around $70 and the physical market remains tight even if speculative sentiment rolled over in July and August. Note WH Smith seeing encouraging signs of much stronger demand in Travel though still some way to go to get back to 2019 levels.

Spot Oil Chart 01.09.2021

Also looking at the crypto space, particularly COIN, after the SEC boss Gary Gensler said crypto platforms need to be regulated ahead of his testimony before the European Parliament later today.

On the tape today – US ISM manufacturing PMI called at 58.5 but we will be looking for weakness in sentiment and, of course, inflation pressures.

Week Ahead: Apple and Tesla earnings, Fed meeting and US GDP in focus

Week Ahead

Lots to bite our teeth into this week. We start with the Fed, although we’re not anticipating big things. An optimistic GDP outlook is coming for the US, though, while consumer confidence indicators are on their way.

Elsewhere, China’s manufacturing PMI data is released after 13 months of straight growth.

We’re also looking at another earnings charge as Wall Street reporting season rolls on with Apple, Facebook, Tesla, Alphabet and Microsoft all due to deliver quarterly numbers.

Fed meeting: no major changes ahead

America is gradually getting back to normality. The vaccine roll-out is picking up, people are returning to work and leisure, lockdown restrictions are easing and the economy is surging.

“You can see the economy opening, you can see the riderships [sic] on airplanes going up and people going back to restaurants,” Fed Chair Jerome Powell said in a recent Economic Club interview. “I think we’re going into a period of faster growth and higher job creation and that’s a good thing.”

So, what does this mean for the week’s Fed rate decision? The FOMC meets this week amidst speculation that the current “easy money” strategy may not be the right one.

With three stimulus deals pumping more liquidity into the economy, and historically low rates, ominous inflation war drums are sounding for some. However, we’re not likely to see any wholesale changes this week, with no change expected to rates until at least 2023 and bond purchases continuing at the current pace at least until later this year.

Powell has laid out the criteria for a major policy shift:

  • Effective complete recovery in the labour market
  • Inflation reaching 2%
  • Inflation running above 2% for a sustainable period of time

None of those boxes have been ticked thus far. Even so, jobs numbers are improving. The unemployment rate nudged down to 6% with last nonfarm payrolls. The extra liquidity afforded by Biden’s stimulus deals may also pump up consumer good prices too. Conditions for a rate change are swirling around.

But don’t go into the FOMC press conference expecting a blitz of new policy changes. The course is a steady one from here on out.

US quarterly GDP set to soar as economy roars

With the US economy roaring back to life, US GDP forecasts for the first quarter are electric.

Q4 2020 saw GDP growth revised upward from 4.1% to 4.3% as US consumers splash their stimulus cash. Consumer spending has been the key driver, but other areas of business investment are helping an economic surge. Exports rose 22.3%. Business investment in intellectual property, inventories and residential housing was up too.

All very good – but the real surge could be about to begin. Estimates for Q1 2021 GDP are exceptionally high.

The Atlanta Fed forecasts a whopping 8.3% at its latest GDP estimates dated April 16th. The key driver here is personal income. In January, household wealth increased by $2 trillion, alongside a 2.4% rise in spending. Combined with the other factors at play, like higher nonfarm payrolls, consumer spending, and industrial output, the recipe for high GDP growth is all there.

Extra household stimulus cheques are on their way. As vaccine rollout progresses, and further sectors are opened to individual spending, it’s likely GPD growth will surge. The challenge, then, is sustaining it.

Can US consumer confidence stay high?

It seems highly likely: consumer confidence hit a one-year high in March and things have only improved since then regards vaccines, reopening and stimulus. Given the way the vaccine rollout and economy are performing, this will probably be the case in April too.

Let’s look at March’s data to gauge April sentiment. Last month, consumers were upbeat about the jobs market. They were feeling cheery as restrictions on small-businesses are lifted. The thought of extra free cash from stimulus cheques is lifting the mood.

Big ticket items like cars, houses and household appliances are on US consumers’ shopping lists going forward as a savings glut plus extra government money is increasing spending power.

In point terms, the Confidence Board’s survey jumped 19.3 points to hit 109.7 in March. That’s the highest it has been for a year, and the highest points leap since April 2004.

March’s mood was good. Will we see the same in April?

China manufacturing PMI: can the sector bounce back?

China’s manufacturing PMI data is released this week as the nation’s economic recovery gains traction.

March’s index showed an increase over February’s numbers, rising from 50.6 to 51.9. While growth is still historically low for Chinese manufacturing, a reading over 50 implies the sector is still expanding. In fact, PMIs have shown growth readings for 13 straight months.

Production capacity was closed during Lunar Festival but it’s been back online. This is partly responsible for the PMI rise, but there are more important factors at play. Namely, the global economic recovery.

Orders are up, which means Chinese plants are busier. The US stimulus cheques are feeding into higher demand for consumer goods – great news for Chinese factory owners. Additionally, domestic and international orders of machinery like excavators are helping prop up sectoral growth.

Future prospects are buoyed by big spending plans overseas. Joe Biden’s mammoth infrastructure plan, if it passes, is being hungrily eyed by Chinese construction machinery and materials manufacturers. There’s profit to be had stateside.

China is on course for a bumper first quarter according to China’s National Bureau of Statistics. GDP growth has clocked in at a record 18.3%, following an economic surge that completely outpaces the US stellar growth.

While the short term outlook is encouraging, questions around sustainability remain. Exports, fuel for China’s manufacturing fire, were up 38.7% overall in Q1 2021, but those eye-watering numbers have been tempered by somewhat by the drop in export activity between February and March. A cause for concern to be sure, so this week’s PMI release will be interesting to watch.

Tech-heavy week ahead for earnings season

Wall Street prepares for another earnings barrage this week. As ever in earnings season, the reports are coming thick and fast.

There’s a bit of a tech focus to earnings this week. Apple, Amazon, Facebook, and Tesla are all reporting in. Tesla will be interesting, purely to see the impact its decision to spend billions on bitcoin has had on its financials. Previous reports suggest it has made more profit from the crypto this year then selling cars.

Apple’s financials come after the company’s 2021 launch event. A shiny new colour the iPhone twelve, plus a rainbow of hues for iMacs, Apple TV updates, and more have all been launched – but the focus is very much on iPhone 12 sales. With six out of every ten smartphones sold in Q1 being an iPhone, Apple could be looking at another record breaking quarter.

We also see oil majors ExxonMobil, BP, Shell, TOTAL, and Chevron share earnings, which probably won’t be as colossal as Apple’s. ExxonMobil says resurgent oil prices means figures may be better than expected but could be facing a chilling $800m loss thanks to the Texas Big Freeze. Will we see more hefty losses for the majors?

See below for a roundup of this week’s reporting large caps.

Major economic data

Date  Time (GMT+1)  Currency  Event 
Mon 26-Apr  9.00am  EUR  German IFO Business Climate 
       
Tue 27-Apr  Tentative  JPY  BOJ Outlook Report 
  Tentative  JPY  Monetary Policy Statement 
  Tentative  JPY  BOJ Press Conference 
  3.00pm  USD  CB Consumer Confidence 
       
Wed 28-Apr  All day  All  OPEC-JMMC Meeting 
  2.30am  AUD  CPI q/q 
  2.30am  AUD   Trimmed Mean CPI q/q 
  1.30pm  CAD  Core Retail Sales m/m 
  1.30pm  CAD  Retail Sales m/m 
  3.30pm  USD  US Crude Oil Inventories 
  7.00pm  USD  FOMC Statement 
  7.00pm  USD  Federal Funds Rate 
  7.30pm  USD  FOMC Press Conference 
       
Thu 29-Apr  2.00am  NZD  Final ANZ Business Confidence 
  1.30pm  USD  Advance GDP q/q 
  1.30pm  USD  Advance GPD Index q/q 
  1.30pm  USD  Unemployment claims 
  3.00pm  USD   Pending House Sales 
       
Fri 30-Apr  2.00am  CNY  Manufacturing PMI 
  9.00am  EUR  Germany Prelim GDP q/q 
  1.30pm  CAD  GDP m/m 

 

Key earnings data

Date  Company  Event 
Mon 26-Apr  Tesla  Q1 2021 Earnings 
  Vale  Q1 2021 Earnings 
  Canadian National Railway Co.  Q1 2021 Earnings 
  Philips  Q1 2021 Earnings 
     
Tue 27-Apr  Microsoft  Q3 2021 Earnings 
  Alphabet (Google)  Q1 2021 Earnings 
  Visa  Q2 2021 Earnings 
  Novartis  Q1 2021 Earnings 
  Texas Instruments  Q1 2021 Earnings 
  Starbucks  Q2 2021 Earnings 
  HSBC  Q1 2021 Earnings 
  GE  Q1 2021 Earnings 
  3M  Q1 2021 Earnings 
  AMD  Q1 2021 Earnings 
  BP  Q1 2021 Earnings 
  Mondalez  Q1 2021 Earnings 
  Chubb  Q1 2021 Earnings 
  Capital One  Q1 2021 Earnings 
     
     
Wed 28-Apr  Facebook  Q1 2021 Earnings 
  Apple  Q1 2021 Earnings 
  QUALCOMM  Q2 2021 Earnings 
  Boeing  Q1 2021 Earnings 
  Moody’s  Q1 2021 Earnings 
  NOVATEK  Q1 2021 Earnings 
  Spotify  Q1 2021 Earnings 
  Ford Motor Corp  Q1 2021 Earnings 
     
Thu 29-Apr  Amazon  Q1 2021 Earnings 
  Samsung  Q1 2021 Earnings 
  MasterCard  Q1 2021 Earnings 
  China Construction Bank  Q1 2021 Earnings 
  McDonald’s  Q1 2021 Earnings 
  Royal Dutch Shell  Q1 2021 Earnings 
  Bank of China  Q1 2021 Earnings 
  Sony  Q4 2020 Earnings 
  Caterpillar  Q1 2021 Earnings 
  TOTAL  Q1 2021 Earnings 
  Airbus  Q1 2021 Earnings 
  S&P Global  Q1 2021 Earnings 
  Gilead  Q1 2021 Earnings 
  Sinopec  Q1 2021 Earnings 
  BASF  Q1 2021 Earnings 
  Baidu  Q1 2021 Earnings 
  Equinor  Q1 2021 Earnings 
     
Fri 30-Apr  Alibaba  Q4 2020 Earnings 
  ExxonMobil  Q1 2020 Earnings 
  AstraZeneca  Q1 2021 Earnings 
  BNP Paribas  Q1 2021 Earnings 
  Colgate-Palmolive  Q1 2021 Earnings 

Week Ahead: NFPs, OPEC & PMIs

Week Ahead

OPEC+ meets this week against a backdrop of weaker oil prices. Nonfarm payroll data is released too. Will we see another strong month or is February’s surge a one-off? Meanwhile, the US and China square off in the manufacturing sphere with key PMI releases. Deliveroo, one of the UK’s most hotly anticipated IPOs, goes live too. 

OPEC+ meeting – more cuts or staying the course? 

Supporting oil prices throughout the lockdown and return normalcy has always been top of OPEC’s agenda. This will take on renewed importance in April’s meeting, as crude oil prices have dropped down from their $70 high over the past couple of weeks. 

At the time of writing, prices had risen off a six-week low despite the EIA reporting higher than expected storage volumes at US warehouses. WTI is trading about $60 with Brent at $63. 

Cuts are very likely to stay in place. OPEC and allies have taken 7% of pre-pandemic supply out of circulation, and chair Saudi Arabia has committed to a further 1m bpd cut. 

However, there is an EU-shaped spanner in the works.  

Vaccine rollout, or lack thereof, in Europe has also put pressure on oil prices. Politically motivated supply tussles, and now more questions around the AstraZeneca vaccine’s effectiveness, have all conspired to impact oil demand as speculators unwound long positions they had booked on higher summer travel demand. 

Vaccine uptake coupled with a fresh wave of new Covid-19 cases across Europe has resulted in tighter lockdowns. France and Germany, for example, have announced more restrictions, as has Poland. The UK has also said it has had to slow is own vaccine programme, one of the best in the world, due to vaccine supply pressure. 

For the second quarter of 2021, the EIA sees Brent prices averaging $64 per barrel and then averaging $58 a barrel in the second half of 2021, as it expects downward price pressures will emerge in the coming months as the oil market becomes more balanced.  

OPEC’s next move will be crucial if it wants to help support its members through better prices in 2021. 

US nonfarm payrolls – all eyes on labour market after February surge 

US nonfarm payrolls are released on Friday. Following February’s blowout month, the market will be watching March’s report intensely, hoping to pick up more signals that the US is quickly returning to economic health. 

 Payrolls surged 379,000 in February, smashing expectations of 210,000 and edging down the unemployment rate to 6.2%.  

The battered leisure and hospitality sector showed the lion’s share of new payrolls, with 355,000 added in February. While this encompasses cinemas, hotels, museums, resorts and amusement parts, it was food service that propped up the leisure and hospitality industry in terms of new jobs added, with 285,900. 

 Biden’s stimulus deal is likely supportive of new job creation. As part of the President’s $1.9 trillion  package, small businesses are receiving further support in order to a) support existing jobs and b) possibly lead to new hires or rehires. This includes: $25bn for restaurants and bars; $15bn for airlines and another $8bn for airports; $30bn for transit; $1.5bn for Amtrak and $3bn for aerospace manufacturing. 

Because of the stimulus package, other companies have halted lay off programmes. United Airlines, for instance, had scheduled 14,000 layoffs in February. According to a Washington Times report, this has been cancelled with extra government money flooding into United’s coffers. 

Local transport authorities, especially the Metropolitan Transportation Authority of New York, will be receiving billions, allowing them to protect jobs. New York will be receiving $6bn, for example, so it can stop layoffs and service cuts. 

Of course, this is mostly about protecting existing jobs. It will be interesting to see what effect that has on nonfarm payrolls for March. If SMEs are anticipating more government funds, that may then feed into increased payroll numbers, as their finances may allow recruitment to kick off again. 

US & China Manufacturing PMI 

The two global economic titans reveal their latest manufacturing PMI data in the week ahead. 

Starting with the US, we’ve already seen IHS Markit’s US manufacturing PMI for March, showing another strong month for the country’s factory output. This edged higher to 59 in March from 58.6 in February, implying  activity in the manufacturing sector continued to expand at a robust pace. This reading came in slightly lower than the market expectation of 59.3, but nothing to really fret about. 

We’re waiting for the Institute of Supply Management (ISM) PMI data in the week ahead. February’s was a blockbuster month for manufacturing, according to ISM, with the PMI reaching a three-year high of 60.8. If we take the IHS data as an indicator, then we’ll probably be looking at steady expansion, rather than another massive surge has seen in February. Still, encouraging signals for factory production levels throughout the US. 

The US’ economy has been in a healthier state since the new year. Stimulus put more money into consumers’ pockets, and we already know more is coming. Being able to pump that liquidity back into the economy may be why manufacturing is in such a good place. Vaccine rollout isn’t bad in the US either, which is also underpinning renewed confidence throughout the country. 

On the other hand, Chinese output slowed in February, according to the March release of the Caixin PMI, the country’s key factory productivity tracker. Could we see the slowdown continue in April? 

According to the last Caixin PMI, the index fell from January’s 51.5 reading to 50.9 in February – the lowest for 9 months. A reading above 50 still indicates growth, but the fact its dropping suggests a retraction. 

Why so? Domestic Covid-19 flair ups and slowing global demand for imported Chinese goods put a strain on China’s manufacturing centre. Factories also laid off workers and were in no hurry to fill their vacancies.  

Analysts still expect a strong year for China, as it was one of the few countries to show any real economic growth during 2020 at the height of the pandemic. However, February’s manufacturing slowdown highlights some fragility in the ongoing Chinese economic recovery. We’ll get a clearer picture when March’s PMI is released. 

Deliveroo IPO – save the date 

Deliveroo launches its IPO on March 31st, although unrestricted trading will not be available until April 7th 

Deliveroo has set a price range for its shares of between £3.90 and £4.60 per share, implying an estimated market capitalisation of between £7.6 billion and £8.8 billion.  

The company will issue 384,615,384 shares (excluding any over-allotment shares) and expects to raise £1bn from its IPO. Even at the lowest end of the range, it would be the largest listing in London for a decade and Europe’s largest this year.  

Amazon has a 15.8% stake in the company, but it plans to sell 23,302,240 shares for between £90.8 million and £107.2 million, depending on where the IPO prices. Chief executive and founder Will Shu will sell 6.7m shares, leaving him a remaining stake of 6.2% of the company, worth around £500m. 

Major economic data 

Date  Time (GMT)  Currency  Event 
Tue 30 Mar  3.00pm  USD  CB Consumer Confidence 
       
Wed 31 Mar  2.00am  CNH  Manufacturing PMI 
  1.15pm  USD  ADP Nonfarm Employment Change 
  1.30pm  CAD  GDP m/m 
  3.30pm  USD  US Crude Oil Inventories 
       
Thu 1 Apr  All Day  All  OPEC+ Meetings 
  3.00pm  USD  ISM Manufacturing PMI 
  3.30pm  USD  US Natural Gas Inventories 
       
Fri 2 Apr  1.30pm  USD  Average Hourly Earnings m/m 
  1.30pm  USD  Nonfarm Employment Change 
  1.30pm  USD  Unemployment Rate 

 

Key earnings data 

Date  Company  Event 
Mon 29 Mar  Sinopec  Q4 2020 Earnings 
     
Tue 30 Mar  Bank of China  Q4 2020 Earnings 
  Carnival  Q1 2021 Earnings 
     
Wed 31 Mar  Micron  Q2 2021 Earnings 
  Walgreens  Q2 2021 Earnings 

Hong Kong turmoil risk roils markets

Morning Note

Shares in Hong Kong plunged on fears Beijing’s tough stance will spark fresh pro-democracy protests, potentially leading to the kind of widescale unrest we saw last year.

The Hang Seng slid over 5% as China imposes controversial national security legislation that bypasses local lawmakers. The move was taken as China’s National People’s Congress convenes. Carrie Lam, the Hong Kong chief executive, says the territory will fully cooperate with China.

This is a potentially significant flash point that will stir local protests and will anger the US. At a time of already strained relations between China and the West, this decision will only isolate Beijing even more. Investors will need to add renewed Hong Kong-Beijing tensions into their mix of geopolitical risks, whilst the way it fits into the broader US-China rivalry will be closely watched.

The risk-off tone fed into European trading with the FTSE 100 off almost 2% at 5900 in early trade on Friday.  Asia-focussed banks HSBC and Standard Chartered were among the laggards. UK retail sales plunged 18.1% in April, led by a 50% decline in clothing sales. Online shopping rose to a record 30.7% of all retail – good for the nimbler retailers with good online operations, not so encouraging for the rest.

US stocks closed lower on Thursday, with the S&P 500 down 0.78% to 2,948. Having nudged to the top of their respective ranges, indices are retreating to more comfortable levels for investors given the state of the economic damage and uncertainty over earnings. Futures indicate Wall Street will open lower.

US initial jobless claims came in at 2.4m as expected and was the lowest reading since March. It takes the total jobs lost since the crisis began to almost 39m. Now we need to look at the continuing claims rather than the initial claims counts. It certainly raises hopes the jobs market has bottomed – the bulk of jobs to be lost have already been lost.

As various US states reopen and business gets going again, we ought to see hiring exceed firing. The key will be how swiftly the hiring replaces lost jobs – it’s hard to see the 39m being replaced as quickly as they were lost. Temporary layoffs will become permanent as businesses slowly reopen and find demand down and cash flow a problem.

Data compiled by software company Envestnet Yodlee shows Americans used their stimulus cheques to buy stocks. Middle income earners – those on $35,000 to $70,000 a year – were the main drivers. This chimes with the view that the bounce off the March lows was driven by incremental retail buyers, not a return of positive institutional flow.

The US manufacturing PMI also showed some mild improvement as did the European and UK numbers, but as mentioned yesterday, this was off a very low base and numbers still indicate sharp contraction.

In FX, the dollar is bid as risk-off sentiment rules. EURUSD broke 1.10 yesterday but retreated as it looked to test the 200-day resistance a little above the round number. Cable moved back under 1.22 at 1.2180.

Having rallied Thursday to $35, crude oil (WTI Aug) slipped sharply overnight, breaking the trendline, as China’s NPC decided to scrap its GDP target for 2020. It suggested Beijing is not about to really stimulate infrastructure investment like it has in the past. Markets, in particularly commodities, were looking for more.

Oil spikes as Iran responds, Trump to speak

Morning Note

Geopolitics will dominate the session on Wednesday as traders grapple with the US-Iran fracas. Geopolitics always means uncertainty – we simply cannot know what will happen next, so look carefully at positions as markets are liable to knee-jerk moves.

Oil and gold spiked and stocks fell as Iran fired 22 surface-to-surface missiles at two US airbases in Iraq, in direct retaliation for the killing of Soleimani. So we know the Iranian response at last – this could actually reduce uncertainty unless we see escalation.

The next move lies with the US. Iran said the attacks were ’concluded’ and said it is not seeking a broader conflict. “We do not seek escalation or war,” Javad Zarif, the Iranian foreign minister tweeted in English. The implication is that they will not carry out further reprisals and wish to draw a line under the situation. Frankly they’ve barely scratched the US with this attack – it appears like nothing but a way to save face. Threats to hit Dubai and Haifi are frankly ridiculous.

However Donald Trump has said previously he would respond to any reprisals with his own. The president plans to address the media on Wednesday morning eastern time.

Following the attacks he tweeted:

“All is well! Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well equipped military anywhere in the world, by far! I will be making a statement tomorrow morning.”

The president has a chance to de-escalate – but does he want to? My inclination remains that a broader conflict will be averted, largely because Iran does not want to be lured into a regime-changing conflict before it has the bomb, even if that’s what the US is seeking. But increasingly there is the risk of miscalculation as neither side wants to back down.

Meanwhile, a Ukrainian passenger jet crashed shortly after take-off in Tehran with all 176 souls lost – not sure what this means or whether related. It was a Boeing. The coincidence is too much to ignore – it was surely caught in the crossfire?

Oil surged as the Iran strikes broke but has pared gains. WTI jumped to $65.60 but has since retreated to a little above $63. The May 2019 peak at $66.60 remains intact for the time being. Brent rallied north of $71 but subsequently fallen back to $69. Should this escalate quickly into a broader conflict there is a risk of supply disruption in the region that could send Brent to $80 a barrel. However, we must as ever stress that the global oil market is simply not exposed to shocks like it once was.

Gold surged to new 7-year highs at $1610 before easing back to $1590. Net longs are already stretched – is there any more this can run? As ever keep an eye on US real yields. Against this backdrop of rising geopolitical tension oil and gold are making new highs and higher lows for the time being. Gaps need to be filled quickly or they don’t get filled.

US stock market indices weaker on Tuesday handing back much of Monday’s rally, and we will see the impact of the Iranian reprisals dent European stocks on Wednesday. US futures have dipped but erased most of the initial drop following the strikes. Dow last trading around 28445 having dipped under 28150.

We need this US-Iran stuff to go away to focus again on the data. US services ISM yesterday was v good but Europe is still not swinging. German factory orders were below expectations coming in -6.5% yoy vs expected -4.7%. But the Ifo momentum points to turnaround coming.

In FX, GBPUSD has held the key support around 1.3140 to trade at 1.3150. Brexit comes back on the agenda but the exit is now a done deal. EURUSD is steady at 1.1150 but the failure to surmount 1.12 raises downside risks near-term.

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