STIR: Hawkish CHF STIR Reaction To CPI Could Prove Short-Lived

FI markets continue to edge away from session highs.

• A few factors at play here:
• Recovery from lows in crude oil futures.
• Medium-term French political and fiscal risks remaining evident despite the potential for some short-term respite if the Socialists come to an agreement with the government (increased odds of this following the headlines covered in detail earlier). OATs now 1.5bp tighter to Bunds on the day after briefly printing ~3bp tighter at one point this morning. Still, short-term French positives and bid in European equities leaves EGB spreads to Bunds tighter on the day.
• Potential that modest EGB/EU syndication pressure is being felt, although demand across those books remains notable, leading to spreads being set at tighter than guidance levels.

The trend structure in WTI futures remains bullish and the contract traded higher again Monday. The stronger reversal to the upside has resulted in a breach of key short-term resistance at $76.41, the Oct 8 high. Clearance of this hurdle strengthens a bull theme and opens $79.59, the Jul 5 ‘24 high. On the downside, a reversal lower would expose the 20-day EMA, at $72.69. This average is seen as a key short-term support. Recent gains in Gold appear corrective - for now. However, the yellow metal is holding on to the bulk of last week’s gains and scope is seen for a continuation higher near-term. A stronger recovery would open $2726.2, the Dec 12 high and an important resistance. Clearance of this level would be a bullish development. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2642.9, the 50-day EMA.

• WTI Crude up $0.11 or +0.14% at $78.94
• Natural Gas down $0.15 or -3.89% at $3.782
• Gold spot up $5.09 or +0.19% at $2667.46
• Copper up $1.5 or +0.35% at $434.35
• Silver up $0.1 or +0.35% at $29.7113
• Platinum up $0.36 or +0.04% at $956.85

A bull cycle in the Eurostoxx 50 futures contract remains intact and the latest pullback appears corrective. Initial support is at 4937.06, the 50-day EMA. It has been pierced, a clear break of this EMA would undermine a bullish theme and signal scope for a deeper retracement. For bulls, resistance at 5040.00, Dec 9 high, has recently been pierced. Clearance of it would resume the bull cycle that started on Nov 21 and open 5068.13, a Fibonacci projection. A bear threat in the S&P E-Minis contract remains present and the contract traded to a fresh short-term low on Monday. The reversal from the Dec 26 high, confirms the end of the Dec 20 - 26 correction. 5866.00, the Dec 20 low and a key short-term support, has been cleared. This strengthens a bearish theme and sights are on 5784.00, the Nov 4 low and an important short-term support. Initial pivot resistance is seen at 5991.72, the 50-day EMA.

• Japan's NIKKEI closed lower by 716.1 pts or -1.83% at 38474.3 and the TOPIX ended 31.54 pts lower or -1.16% at 2682.58.
• Elsewhere, in China the SHANGHAI closed higher by 80.185 pts or +2.54% at 3240.94 and the HANG SENG ended 345.64 pts higher or +1.83% at 19219.78.
• Across Europe, Germany's DAX trades higher by 118.37 pts or +0.59% at 20250.54, FTSE 100 higher by 13.18 pts or +0.16% at 8237.44, CAC 40 up 68.03 pts or +0.92% at 7476.67 and Euro Stoxx 50 up 45.63 pts or +0.92% at 4999.84.
• Dow Jones mini up 141 pts or +0.33% at 42664, S&P 500 mini up 30.25 pts or +0.51% at 5905, NASDAQ mini up 153.75 pts or +0.73% at 21102.