Market Roundup
• China's premier pledges market opening in bid to avert U.S. trade war.
• China urges WTO members: put U.S. tariff "beast back in the cage".
• NY Fed's Dudley says regulators should increase focus on bank executives.
• U.S., EU to expel more than 100 Russian diplomats over UK nerve attack.
• U.S. Feb National Acitivity Index, 0.88, 0.12 previous, 0.02 revised.
• New EU law could make ECB's bad loans rules "redundant": Nouy.
• French deficit below 3 pct of GDP for first time in decade.
• IMF head tells euro zone time right to set up rainy day fund.
Looking Ahead - Economic Data (GMT)
• 00:00 Australia Feb HIA New Home Sales m/m, -6.15 previous.
Looking Ahead - Events, Other Releases (GMT)
• 26 Mar 20:30 Federal Reserve Bank of Cleveland President Loretta Mester speaks before an event hosted by Princeton University's Julis-Rabinowitz Center for Public Policy and Finance – New Jersey
• 27 Mar 07:00 Riksbank executive board meeting to be held at Stockholm
• 27 Mar 08:00 Bank of Finland governor and ECB governing council member Erkki Liikanen speak about monetary policy and global economy in a press conference - Helsinki
• 27 Mar 08:00 ECB releases monthly data on lending and money supply – Frankfurt
• 27 Mar 09:30 BoE's Record of the Financial Policy Committee meeting held on March 12 will be published - London
• 27 Mar 15:00 Fed Atlanta's President Raphael Bostic participates in a conversation before the HOPE Global Forums 2018 annual meeting - Atlanta
Currency Summaries
EUR/USD is likely to find support at 1.2366 levels and currently trading at 1.2450 levels. The pair has made session high at 1.2460 and hit lows at 1.2396 levels. The euro strengthened against US dollar on Monday as optimism that the United States and China are set to begin negotiations on trade helped ease fears of a trade war and investors' appetite for risk improved. Global markets were shaken last week after U.S. President Donald Trump moved to impose tariffs on Chinese goods, sparking fears of a trade war between the world's two largest economies, but latest reports indicated a slightly more selective stance. The United States asked China in a letter last week to cut a tariff on U.S. autos, buy more U.S.-made semiconductors and give U.S. firms greater access to the Chinese financial sector, a media report showed on Monday. Alarm over a possible trade war between the world's two largest economies has chilled financial markets as investors anticipated dire consequences should trade barriers go up due to President Donald Trump's bid to cut the U.S. deficit with China. The dollar index which measures the greenback against a basket of six other major currencies, was down 0.44 percent at 89.044, after slipping to a five-week low of 88.979.
GBP/USD is supported in the range of 1.4149 levels and currently trading at 1.4229 levels. It reached session high at 1.4242 and dropped to session low at 1.4186 levels. Sterling rose against the dollar on Monday as investors became more convinced that the Bank of England would raise interest rates in May.The pound rallied last week after Britain secured itself a Brexit transition deal with the European Union, official data showed British workers' wages growing at their fastest rate in nearly 2-1/2 years and the BoE confirmed its hawkish tilt. On Friday, monetary policy committee member Gertjan Vlieghe indicated that the bank base rate would need to rise one or two times each year in the current tightening cycle. However, Hardman said the UK rate market had already priced in the May hike as well as one more later this year and "there is now a higher hurdle in the near-term for further pound gains on the back of changes in BoE policy expectations alone”. The pound was last trading at $1.4230 after earlier rising to $1.4240, its highest level since it briefly soared above $1.43 in January to a post-Brexit vote high. Against the euro, sterling added 0.2 percent to 87.280 pence per euro.
USD/CAD is supported at 1.2800 levels and is trading at 1.2848 levels. It has made session high at 1.2921 and lows at 1.2855 levels. The Canadian dollar strengthened against its U.S. counterpart on Monday as Canadian dollar gained on hopes that the United States could strike a more constructive tone in negotiations over the North American Free Trade Agreement (NAFTA). Canada's commodity-linked economy could be hurt if global trade slowed. The price of oil, one of Canada's major exports, pulled back from an earlier two-month high. U.S. crude prices, which had been supported by escalating Saudi-Iran tensions, were down 0.6 percent at $65.5 a barrel. On Friday, the currency touched its strongest since March 12 at C$1.2824 after better-than-expected domestic inflation data raised prospects of a further Bank of Canada interest rate hike as soon as next month. The Canadian dollar was last trading up 0.3 percent higher at C$1.2848 to the greenback. The currency traded in a range of C$1.2842 to C$1.2924.
USD/JPY is supported around 104.78 levels and currently trading at 105.39 levels. It peaked to hit session high at 105.47 and made session lows at 104.89 levels. The U.S. dollar strengthened against the yen on Monday as optimism that the United States and China are set to begin negotiations on trade, eased fears of a global trade war. The move tracked a surge in global appetite for high-risk assets in the wake of a Wall Street Journal report that U.S. Treasury Secretary Steven Mnuchin was considering a visit to Beijing to begin negotiations. Fading concerns over the possibility of a damaging protectionist feedback loop following U.S. President Donald Trump's decision to slap tariffs on steel and aluminum imports drove. Signs of potential compromise were also supported by news that South Korea would be exempt from U.S. steel tariffs in a revision of the bilateral trade pact between the two countries. Fears of a trade war mounted this month after Trump slapped tariffs on steel and aluminum imports and then on Thursday announced plans for tariffs on up to $60 billion of Chinese goods. The dollar was last trading up 0.62 percent against the Japanese currency at 105.40.
Equities Recap
European shares fell on Monday as a late surge in the euro and diplomatic tensions with Russia more than offset hopes that the protectionist shift in U.S. trade policy may be more selective and tactical than first feared.
The UK's benchmark FTSE 100 closed down by 0.52 percent, FTSEurofirst 300 ended the day down by 0.81 percent, Germany's Dax ended down by 1 percent, and France’s CAC finished the down by 0.69 percent.
Wall Street's three major indexes jumped to their greatest one-day gain in two-and-a-half years on Monday, led by the tech sector, as trade war fears eased on reports that the United States and China were willing to renegotiate tariffs and trade imbalances.
Dow Jones closed up by 2.85 percent, S&P 500 ended up 2.72 percent, Nasdaq finished the day up by 3.27 percent.
Treasuries Recap
U.S. Treasury yields rose and the yield curve flattened on Monday following a lackluster two-year note auction, in a test of investor appetite following last week's strong run spurred by nervousness about a global trade war.
The yield on 10-year Treasury notes rose 2.4 basis points to 2.850 percent. It hit a six-week low of 2.792 percent on Friday.
Commodities Recap
Gold prices rose to more than five-week highs on Monday after the United States said it would expel 60 Russian diplomats, prompting investor flight into assets considered safe havens.
Spot gold was up 0.6 percent at $1,354.62 per ounce by 1:33 p.m. EDT (1733 GMT), while U.S. gold futures for April delivery settled up $5.10, or 0.4 percent, at $1,355 per ounce.
Crude oil futures slipped on Monday as investors cashed in some profits from last week's rally but concerns about Saudi-Iran tensions kept losses in check.
Brent crude futures slipped 33 cents, or 0.5 percent, to settle at $70.12 a barrel. U.S. West Texas Intermediate (WTI) crude futures also lost half a percent, or 33 cents, to end at $65.55.
