Markets pare recent gains ahead of corporate earnings

Tuesday, July 08, 2014

Asian markets slipped lower overnight, building on Monday’s losses as they pared recent gains which had sent benchmark indices in the region towards multiyear highs in recent weeks. Investor sentiment in Asia was dampened by a similar mood on Wall Street where both the S&P 500 and DJIA closed lower yesterday, pulling back from record highs ahead of corporate earnings. With Alcoa kicking off earnings season with Q2 results due later today, risk appetite may remain subdued throughout the morning as market participants take a breather after the recent bull run which has seen both the S&P 500 and DJIA rally to record levels.

Three month LME nickel prices pulled back towards the 50 day MA during intraday dips yesterday as market participants viewed the sharp hike in nickel inventories as sufficient over the short term. LME warehouse stocks increased 7.2% towards the end of June, adding to the 18.5% year-to-date increase in inventories which prompted a downward correction in prices briefly below $18,000/tonne before recovering back above $19,000/tonne. This week, investors continue to struggle with the near term outlook for nickel with prices rallying towards $20,000/tonne last week before dropping lower yesterday as they wrestle with a short term outlook of ample supply against the longer term pressures of an Indonesian ban on exports of raw ore.

On the macro data front, today will see the release of UK manufacturing and industrial output data which market participants hope will bolster the positive growth outlook for the UK. With manufacturing activity expected to increase 5.6% y/y in May and industrial output by 3.2% y/y in May any positive surprise could see sterling gain further ground against its major counterparts. Against the dollar, sterling remains well supported above 1.7100 after pushing to a 5 and a half year high on speculation of action by the BOE. Moves in recent sessions have found firm support towards 1.7108 while resistance towards 1.7180 has proven difficult to breach in recent sessions.    

LME 3-M nickel prices drop back towards $19,000 on ample stocks

LMNIDS03 Comdty LME NICKEL 3 2014 07 08 07 34 38

Sterling remains well supported towards 1.7108 while resistance firms at 1.7180

GBP Curncy British Pound Spot 2014 07 08 08 00 55

Events for today

0700

DE

May

Trade Bal

0930

UK

May

Industrial Output

0930

UK

May

Manufacturing Output

2000

US

May

Consumer Credit

Topics: USD, LME, GBP, Nickel
More from: Kash Kamal