Thought For A Day
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rssUK and European benchmark natural gas prices close at record highs
Natural gas prices rise 11%
UK and Dutch natural gas prices both closed up around 11% today to close at the highest settlement on record.
Major European indices close the day higher
German Dax finds support near the 100 hour MA and resistance near the 200 hour moving average
The major European indices are closing higher on the day. The provisional closes are showing:
- German DAX, +0.4%
- France’s CAC, +0.3%
- UK’s FTSE 100 +0.2%
- Spain’s Ibex, +1.4%
- Italy’s FTSE MIB +0.7%
Looking at the German Dax from a technical perspective, the price opened higher today and above its 200 hour moving average (green line in the chart below). The momentum cannot be sustained and the prices started to move back to the downside where traders stalled the fall near the 100 hour moving average at 15559.75.
Going forward, breaking above the 200 hour moving average or below the 100 hour moving average will tilt the bias in that direction. Currently, with the price between the 100 and 200 hour moving averages, the bias is more neutral.
In other markets as London/European traders look to exit:
- Spot gold is trading up $1.32 or 0.08% at $1751.42.
- Spot silver is up $0.30 or 1.34% $22.69
- WTI crude oil futures are up $1.51 or 2.04% at $75.50
- Bitcoin is trading down $76 at $43,140
10-year Treasury yields stick with the breakout, push to highest in nearly three months
10-year Treasury yields up 1.6 bps to 1.475%, the highest since 30 June
There was a light reprieve early on for bond buyers to start the day but sellers are back in control now as yields push higher to its highest in almost three months.
In turn, that is putting upwards pressure on yen pairs with USD/JPY trading up to a session high of 110.94, recovering from the tail-end of Asia Pacific trading around 110.54.
As mentioned last week, a pure technical run in 10-year yields could extend towards 1.60% or perhaps even 1.70% at this juncture, more so that there is backing from the Fed outlining its taper timeline last week.
The US jobs report on 8 October will be a key risk event to watch in validating Fed expectations so until we get there, yields are likely to remain buoyed in the meantime.
China’s State Grid pledges to take comprehensive measures to avoid power outages
China’s power crunch a hot topic to start the week
The State Grid is promising to meet household electricity demands and to ensure that there is sufficient power supply to avoid outages as much as possible. From earlier:
The power crunch in China is going to have a severe impact on the economy towards the end of Q3 and as we approach Q4, as surging coal and gas prices alongside strict emissions targets from Beijing are resulting in a power supply shock.
In part, the energy crisis faced by China is brought about by its own doing as the government is cracking down heavily on energy consumption, with Xi Jinping aiming for “blue skies” ahead of the Winter Olympics in February – due to take place in Beijing.
This is the latest edition to the global energy crisis and puts further strain on the Chinese economy, as it risks a severe shortage of coal and gas – likely to result in rations among factories/businesses and also hit consumers hard amid the higher prices.
Germany’s Scholz calls election victory, says has mandate to form government
Olaf Scholz is on course to succeed Merkel as German chancellor
The dust has not settled yet but with the SPD claiming victory at the election amid the worst showing by the CDU/CSU party, it may be time for a change in Germany.
That said, regardless of what is taking place now, it all still depends on the ‘kingmakers’ despite Scholz claiming that he has a mandate to form a government with both the Greens and FDP. On the balance of things, it is the more likely outcome but we’ll see.
Useless comparisons.
Reversion to the mean.
Here’s what is coming up this week for troubled China property giant Evergrande.
Late last week the property developer made an agreement with domestic bond holders on a yuan-denominated bond.
On Thursday (last week) a US$83.5m coupon payment (on a US42bn offshore bond) became due. I posted on this at length so won’t do so again, suffice to say there is a 30-day ‘grace’ period in which to make payment. What this means is that if payment is made within this time window there is no ‘default’ registered.
Coming up this week is another payment due, $US47.5m. Again, there is the 30 day grace period. Its likely there will be no payment until this period expires … if at all is the bigger question.
Evergrande’s electric vehicle unit extends losses, down another 20%
New Energy Vehicle (NEV) is Evergradne’s electric vehicle unit.
- has extended losses to over 20%
- said it will not proceed with plans to issue RMB shares on Shanghai’s Star Market
On Friday it said its future was uncertain unless it could raise cash. This attempt has not worked.