European markets underwent a fairly uneventful session yesterday, with the CAC40 slipping back and the FTSE100 briefly putting in a new 18 month high. All the focus was on US markets which once again have proved to be impervious to any of the concerns that appear to give European investors pause.

Once again, we’ve seen new record highs for the Dow and the S&P500, and while the Nasdaq is lagging behind, we still managed to see a strong finish there, with Tesla standing out, pushing above $1,000 a share, and in so doing becoming the latest US company to add another zero to its market cap with a valuation in excess of an eye watering $1trn.

Facebook also reported a mixed set of Q3 numbers, beating on profits, but missing slightly on revenues, while downgrading revenue guidance for Q4 to between $31.5bn to $34.5bn, from $34.8bn. The shares initially dipped after hours; however, the blow was softened by the announcement of a $50bn share buyback, with the shares rebounding strongly.  

The continued resilience in stock markets is happening despite a backdrop of rising concern about increasing Covid cases in Asia, and the prospect of action by some central banks to rein back on stimulus. The move higher is being helped by rising oil prices driving gains in the oil and gas sector. US crude prices hit a 7 year high after US rig counts fell for the first time in seven weeks, amidst concern over low inventory levels.

This rise in oil prices is already a significant concern for the Biden administration who for the past few months have been trying to divert attention away from their own culpability in helping to push fuel prices higher with their green agenda, and the refusal to invest in new shale capacity, as well as the cancellation of the Keystone pipeline. It does however make good politics to blame an external third party, the only problem being that the US public isn’t buying it. If President Biden really wanted to help try and keep a lid on prices, he could simply sanction a release from the Strategic Petroleum Reserve.

As we look ahead to today’s European open, last night's strong finish in the US looks set to translate into a similarly positive start here.

On the data front we have the latest US consumer confidence numbers for October. In August these served as an early warning indicator of souring sentiment, as well as a sharp slowdown in US retail sales, falling sharply from their July peaks. In September the numbers hit their lowest levels since February although retail sales actually picked up during the month. The slowing jobs market, as well as the expiry of the remaining government stimulus measures at the beginning of September appears to have made US consumers much more cautious, and this trend is expected to continue with today’s October numbers with a further fall to 108.5 expected.

Looking closer to home the pound has got off to a solid start to the week ahead of tomorrow’s budget from Chancellor of the Exchequer Rishi Sunak, which is due tomorrow, although it would seem a lot of the measures have been largely briefed beforehand, including increases to public sector pay, a huge cash injection for the NHS, investment in regional transport, skills, housing and education, however the devil will be in the detail.

Later this morning the latest CBI retail sales numbers for October are expected to show a modest increase from September.  

EURUSD – Slipped below the 1.1610 level yesterday, which opens up the risk of a move towards the 1.1560 area. We need to break above 1.1680 to crack on towards 1.1760. Below 1.1520 targets the 1.1450 area.

GBPUSD – Have managed to hold above the 1.3720 area after last week’s failure at the 200-day MA at 1.3840. A move below 1.3720, targets the 1.3670 area. The bias remains for a move towards the 1.3900 area on a move through 1.3850.

EURGBP – Last week’s Friday rebound ran out of steam at the 0.8470 area, slipping back towards support at 0.8420. We need to break above the 0.8470 level to target the 0.8520 area. A break below the 0.8400 area targets the 0.8280 level.   

USDJPY – Last week’s failure to crack through the November 2017 peaks at 114.75, has raised the prospect of a pullback, with the 113.20 level the next support, followed by the 112.40 area. 

FTSE100 is expected to open 10 points higher at 7,233.

DAX is expected to open 53 points higher at 15,652.

CAC40 is expected to open 10 points higher at 6,723.

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