Whiplash Session Sees Furious Buying Of Futures To Defend 50-DMA As New Quarter Begins

It has been another whiplash, rollercoaster, illiquid session which saw US equity futures tumble early overnight driven by a bout of USDJPY and Nikkei selling, only to regain all losses as European, and BIS, traders walked in, and promptly BTFD. In fact at last check, it was as if all the fireworks that took place just a few short hours ago and sent the ES as low as 2037, and below what has become the key support level, the 50-DMA…

 

… never happened.

 

So here is what happened: overnight Asian stocks mostly fell with the exception of Chinese bourses, following a negative Wall Street close which saw the DJIA post its first quarterly decline for 2yrs. Nikkei 225 led the rout after breaking below 19,000, following a disappointing BoJ Tankan survey, with saw capex expectation at the lowest since Q1’ 2013. This prompted a sharp technical-led slump across US index futures which saw both the S&P 500 (-0.8%) and DJIA (-0.8%) E-mini futures break below their 50 DMAs. Hang Seng and Shanghai Comp rose, the latter posting yet another fresh 7yr high underpinned by higher than expected Chinese Official/HSBC Mfg. PMIs.

On the first trading day of the month and quarter European indices trade higher, supported by a series of better than expected PMI releases, window dressing heading into the new quarter and a recovery after yesterday’s close lower. Core Europe has now caught up with the UK after early outperformance in the FTSE 100 as the index was supported by positive single stock news and core Europe underperformed the UK due to lingering concerns surrounding Greece. Notably, Eurostoxx trade at the highest level since 2008. The markets will now be looking for any details that emerge from a working group call between the Eurogroup and Greece after an official said yesterday that he hopes for deal at the 1500 call although creditors have said there will be no deal at hand and there will be no negotiating.

Alongside any indication of progressive in Greek talks, markets now turn their attention to the release of several pieces of tier 1 US data with ADP, Manufacturing PMI, ISM Manufacturing and DoEs all due. Focus will be on the employment sub-component of these data points ahead of US NonFarm Payrolls due on Easter Friday. Attention will also be paid to any details on Iranian nuclear talks after a German Delegation source said this morning that Iranian talks have led to no deal as of yet, however if all parties show willingness to compromise, an agreement could be reached soon. Furthermore, heading into the North American crossover, Iran’s Deputy foreign minister Araghchi says he hopes a deal will be reached by tonight.

In-line with gains in stocks USD/JPY has seen a bid, reversing overnight JPY gains which was attributed to safe-haven flows following a sharp-sell off across both Asian stocks and US index futures. Recent upside in the pair has led to a break back above 120.00 and this means that current prices sit close to large expiries due to roll off at tomorrow’s 10am NY cut including ~2.6bln at the handle. Despite this morning’s USD strength there has been little movement in commodities markets this morning, another factor which has provide the FTSE with room for upside.

WTI crude futures fell overnight after last week’s API crude oil inventories showed a larger than previous build in oil stockpiles (+5.2mln vs. Prev. +4.8mln). Recent USD strength has also led to fresh lows heading into the US crossover and ahead of today’s DOE inventories which are expected to show a build of 4.2mln. In the metals markets, Iron ore printed a fresh 10- year lows as problems of overcapacity continue to plague the market, and although gold and silver trade lower, they trade above yesterday’s lowest levels.