Commodity Rally To Lift FTSE On The Open

European bourses are pointing to a positive start at the open, despite a mixed finish on Wall Street from a lacklustre session. Whilst the S&P and the Nasdaq rose for a third straight session, the Dow closed 38 points lower dragged down by IBM, which tumbled over 7%. IBM posted better than expected results, however they were attributed to a one-off tax gain.

Crude Hits Fresh 3 ½ year high
The broader US market and trading in Asia overnight have been supported by a rally in commodities. Crude oil charged over 3.5% higher in the previous session, hitting a fresh 3 ½ year high after oil inventories dwindled and concerns of supply disruptions lingered. Traders are starting to get excited that the oil market is finally rebalancing with the global supply glut evaporating. Whilst it may be premature for the OPEC led group implementing supply cuts to cheer, the numbers are certainly pointing to a potential end in sight.

The energy sector was the top performer in Tokyo and a standout performer on the Hang Seng; we are expecting to see a rally from the FTSE oil and gas sector on the open. Improved metal prices boosted miners & metal index in Australia taking it to a 3-month high; FTSE mining sector is also expected to race out of the blocks on the open, tracing metal prices higher. Given the heavyweight nature of commodity stocks on the FTSE,

Pound Trading Cautiously at $1.42 Ahead of Retail Sales
Overnight the pound closed 0.6% lower versus the dollar, just managing to keep its head above $1.42 following a slide in inflation, which is causing traders a reassess the probability of a Spring rate hike by the BoE. This morning the pound remains at $1.42 as investors look cautiously ahead to UK retail sales figures. Retail sales are expected to have increased 1.4% year on year in March, up from 1% in February. After weaker than expected wage growth and inflation could we see a hattrick of disappointment for the pound?

Despite the strong sell off in sterling following the miss on wage growth and inflation, the odds of a rate hike from the BoE are still elevated at 83% according to Bloomberg, down from 88% prior to the releases. There are still several factors supporting a rate hike which pound traders are opting not to focus on right now. The fact that wages are outpaced inflation in February points to a stronger consumer, any evidence that the stronger consumer was spending well in March could once again boost the odds of a rate hike.

GBP/USD is currently at $1.42 in cautious trading ahead of the release. Disappointment could see the pair break through support at $1.4175, before heading towards $1.4130 and on to $1.4090. On the upside a positive read in retail sales could send GBP/USD back towards $1.43.

Opening calls
FTSE to open 10 points higher at 7327
DAX to open 23 points higher at 12613
CAC to open 15 points higher at 5395