Daily Market Outlook, February 6, 2024

Daily Market Outlook, February 6, 2024Munnelly’s Market Minute…“China Sovereign Fund Stepping In, Leads Asian Markets Higher”Asian stocks showed a mixed performance, as Chinese market stabilization efforts countered early challenges from Wall Street, where yields reached year-to-date highs following strong ISM Services data and recent hawkish Fed comments. The Reserve Bank of Australia(RBA), kept rates unchanged as expected and reiterated its hawkish stance. The Nikkei 225 was subdued by disappointing household spending and soft wage data, but the downside was cushioned by a series of earnings releases. The Bank of Japan (BoJ) is planning a policy shift by April, with a focus on wage outlook. It is preparing to end negative interest rate policy (NIRP) and make changes to other policy framework areas, but is expected to proceed cautiously with further actions. This information comes from sources cited by Reuters. The Hang Seng and Shanghai Comp outperformed, with sentiment boosted by China's recent market stabilization efforts, including reports that China's sovereign fund will further increase ETF holdings, and the CSRC encouraging listed firms to buy back more shares to inject more capital into the A-share market.Looking ahead, today's UK PMI construction report for January will provide a timely update on a sector highly sensitive to interest rates, which has been under pressure recently. While the December reading showed the headline index remaining below the 50 expansion/construction level for the fourth consecutive month, it reached its highest point since August, hinting at a potential slowdown in the rate of output decline in the sector.Housing remained the weakest part of the UK construction sector in December, according to the survey. However, both commercial activity and civil engineering also experienced output declines for the fourth consecutive month, indicating widespread weakness. The consensus forecast suggests another, albeit smaller, fall in activity in January.The European Central Bank's (ECB) survey of consumers’ inflation expectations will offer insight into the speed at which price pressures are easing. November's reading saw 1-year inflation expectations drop to their lowest level since early 2022, while the more stable 3-year measure fell to 2.2%, just above the ECB’s 2.0% inflation target. Market views on the timing of ECB interest rate cuts have been volatile, but a further decline in consumers’ expectations today may increase hopes of a spring move by the Eurozone’s central bank.Several US Federal Reserve policymakers are scheduled to speak, and their comments will be closely monitored for any new clues on the timing of interest rate cuts. Today's speakers represent a range of views, with Cleveland Fed President Mester and Minneapolis Fed President Kashkari being among the more hawkish policymakers, while Boston Fed President Collins has taken a more centrist stance. Additionally, the US will be selling USD 54 billion of 3-year notes on the supply front.Overnight Newswire Updates of NoteRBA Keeps Rate At 12-Year High, Signals Higher Bar For Rate HikesChina Sovereign Fund Vows To Buy More ETFs, Fuelling Stock RallyXi Set To Discuss China Stock Market With Financial RegulatorsBoE Official Sees Interest Rate Cuts Ahead As ‘Reward’ For Lower InflationFed’s Bostic Says Fed’s Goal For Unemployment Has FallenFed Says Banks Tightened Credit Standards In Fourth QuarterBiden Threatens Veto Of US House's Standalone Israel Aid BillUBS To Restart Buybacks This Year As It Integrates Credit SuisseNXP Semiconductors Gains Amid Strong Q4, In-Line GuidanceRTX Receives Subpoenas From SEC Over Engine IssueBank Of America Reaffirms Apple's Buy Rating Over Vision ProNovartis To Buy MorphoSys For EUR2.7 Bln To Gain Cancer DrugsToyota Raises Profit Outlook Amid Strong Sales(Sourced from Bloomberg, Reuters and other reliable financial news outlets)FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0800 (EU2.46b), 1.1000 (EU1.12b), 1.1020 (EU1.1b)USD/JPY: 147.20 ($877m), 148.75 ($709.9m), 149.10 ($657.9m)USD/CNY: 7.2225 ($1.57b), 7.0900 ($700m), 7.1500 ($566.1m)AUD/USD: 0.6610 (AUD1.36b), 0.6580 (AUD1.33b), 0.6590 (AUD964.6m)USD/CAD: 1.3380 ($395m), 1.3150 ($300m)NZD/USD: 0.6005 (NZD703m), 0.6130 (NZD320.4m)GBP/USD: 1.2300 (GBP795.5m), 1.1854 (GBP570m)USD/MXN: 17.12 ($300m)The FX options market was surprised by Friday's strong NFP beat, resulting in limited sales of shorter-dated implied volatility. Implied volatility is only slightly higher on Monday, indicating that the current extension of USD gains is expected to be slow and limited for now. EUR/USD 1-month implied volatility fell on Friday but regained some ground on Monday, while GBP/USD also recovered slightly. There is talk of big exotic related structures at 1.2500 which could increase demand for volatility and downside protection if that level is threatened.CFTC Data As Of 2/02/24USD bearish neutral -5,618 CAD neutral neutral -178 EUR bullish neutral 12,034 GBP bullish neutral 2,711 218AUD bearish increasing -3,849 NZD neutral neutral -64 MXN bullish neutral 2,343 CHF bearish neutral -566 JPY bearish increasing -6,813 Technical & Trade ViewsSP500 Bullish Above Bearish Below 4940Daily VWAP bullishWeekly VWAP bullishBelow 4900 opens 4800Primary support 4800Primary objective is 4981EURUSD Bullish Above Bearish Below 1.0850Daily VWAP bearishWeekly VWAP bearishAbove 1.10950 opens 1.10Primary resistance 1.10Primary objective is 1.0730 – Target Hit New Pattern EmergingGBPUSD Bullish Above Bearish Below 1.2750Daily VWAP bearishWeekly VWAP bearishAbove 1.28 opens 1.2870Primary resistance  is 1.2785Primary objective 1.2570 – Target Hit New Pattern EmergingUSDJPY Bullish Above Bearish Below 147.50Daily VWAP bullishWeekly VWAP bullishBelow 146 opens 145.50Primary support 143.50Primary objective is 149.13AUDUSD Bullish Above Bearish Below .6650Daily VWAP bearishWeekly VWAP bearishBelow .6500 opens .6420Primary support .6525Primary objective is .6260BTCUSD Bullish Above Bearish below 43850Daily VWAP bullishWeekly VWAP bullishAbove  43600 opens 44700Primary resistance  is 44700Primary objective is 44700