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Europe Roundup: Sterling consolidates as PM Johnson begins election battle, euro rebounds on upbeat economic data, European shares nudge lower - Wednesday, November 6th, 2019

Market Roundup

  • Eurozone retail sales pick up year-on-year in September
  • Eurozone economy at risk of contracting in fourth-quarter: PMI
  • Germany's Scholz signals open to move on post-crisis bank reform
  • Euro zone banks may need more buffers: ECB
  • German engineering orders fall 4% year-on-year in September: VDMA
  • French business activity picked up in October: PMI

Economic Data Ahead

  • (0830 ET/1330 GMT) The U.S. Labor Department will release preliminary labour costs report for the third quarter. The indicator is expected to rise 0.9 percent after posting a gain of 2.3 percent in the previous quarter.  
  • (0830 ET/1330 GMT) The U.S. Labor Department is likely to report that preliminary non-farm productivity edged higher 2.2 percent in the third quarter, after rising 2.6 percent in the previous quarter.
  • (1000 ET/1500 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of October. The index posted a reading of 48.7 in the prior month.
  • (1100 ET/1600 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending November 1.

Key Events Ahead

  • (0800 ET/1300 GMT) Chicago Fed President Charles Evans gives a speech
  • (0930 ET/1430 GMT) Federal Reserve Bank of New York President John C. Williams' speech

FX Beat

DXY: The dollar index edged lower as some investors started to temper their optimism in the absence of concrete progress in negotiations between the United States and China on scaling back their trade war. The greenback against a basket of currencies traded 0.1 percent down at 97.79, having touched a low of 97.11 on Friday, its lowest since August 9.

EUR/USD: The euro rebounded from a near 3-week low hit in the previous session, after data showed Eurozone business activity expanded slightly faster than expected in September but remained close to stagnation. Moreover, data showing Eurozone retail sales accelerated more than expected year-on-year in September further supported the bid tone around the major. The European currency traded 0.1 percent up at 1.1088, having touched a low of 1.1063 on Tuesday, its lowest since October 17. Immediate resistance is located at 1.1106, a break above targets 1.1133 (5-DMA). On the downside, support is seen at 1.1045, a break below could drag it below 1.1022.

USD/JPY: The dollar eased on profit-taking after rising to a near 1-week peak in the prior session on rising hopes for a U.S.-China trade deal and an improving outlook for the U.S. economy. The major was trading 0.1 percent down at 109.01, having hit a high of 109.25 on Tuesday, its highest since October 30. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. flash nonfarm productivity and unit labour cost data. Immediate resistance is located at 109.28 (October 30 High), a break above targets 109.62 (May 31 High). On the downside, support is seen at 108.74, a break below could take it near at 108.54 (5-DMA).

GBP/USD: Sterling continued to consolidate within narrow ranges, as British Prime Minister Boris Johnson kicked off his election campaign vowing to get Brexit done. The major traded flat at 1.2886, having hit a high of 1.2975 on Thursday, it’s highest since October 22. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2949 (October 24 High), a break above could take it near 1.3000. On the downside, support is seen at 1.2806, a break below targets 1.2748. Against the euro, the pound was trading 0.1 percent up at 86.03 pence, having hit a high of 85.74 last month, it’s highest since May 8.

USD/CHF: The Swiss franc eased, extending losses for the third straight session, as risk sentiment improved on rising hopes for a U.S.-China trade deal. The major trades at 0.1 percent up at 0.9932, having touched a low of 0.9850 on Friday, it’s lowest since October 21. On the higher side, near-term resistance is around 0.9944 and any break above will take the pair to the next level till 0.9964. The near-term support is around 0.9906 (10-DMA), and any close below that level will drag it till 0.9882 (50-DMA).

Equities Recap

European shares declined from a 4-year peak, weighed down by a mixed bag of earnings reports and weak services sector data from the eurozone.

The pan-European STOXX 600 index declined 0.2 percent at 403.53 points, while the FTSEurofirst 300 eased 0.05 percent to 1,584.30 points.

Britain's FTSE 100 trades 0.2 percent down at 7,376.60 points, while mid-cap FTSE 250 fell 0.5 to 20,190.14 points.

Germany's DAX rose 0.05 percent at 13,154.58 points; France's CAC 40 trades 0.2 percent higher at 5,857.26 points.

Commodities Recap

Crude oil prices declined, weighed down by a larger-than-expected build in U.S. crude stocks and weak euro zone economic figures. International benchmark Brent crude was trading 0.5 percent down at $62.60 per barrel by 1046 GMT, having hit a high of $63.17 on Tuesday, its highest since September 24. U.S. West Texas Intermediate was trading 0.5 percent down at $56.96 a barrel, after rising as high as $57.46 on Tuesday, its highest since September 24.

Gold prices steadied after falling over 1 percent in the previous session in the absence of concrete developments on the U.S.-China trade front. Spot gold was trading 0.2 percent to $1,486.80 per ounce at 1050 GMT, having dipped 1.7 percent to a low of $1,479.27 on Tuesday, its lowest since Oct. 16. U.S. gold futures were up 0.2 percent at $1,487.40.

Treasuries Recap

The U.S. Treasuries jumped during the afternoon session ahead of the country’s non-farm productivity data for the third quarter of this year, scheduled to be released today by 13:30GMT and the 10-year auction, also due to be held today by 18:00GMT. Besides, Chicago Fed President Evans and Federal Open Market Committee (FOMC) members Williams and Harker, are all lined up to deliver their respective speeches later today, which shall add further direction into the debt market. The yield on the benchmark 10-year Treasury yield slumped 2 basis points to 1.846 percent, the super-long 30-year bond yield plunged 2-1/2 basis points to 2.323 percent and the yield on the short-term 2-year too traded nearly 2-1/2 basis points down at 1.611 percent.

The United Kingdom’s gilts remained tad higher during European trading hours ahead of the Bank of England’s (BoE) monetary policy meeting, scheduled to be held on November 7 by 12:00GMT, followed by Governor Mark Carney’s speech on the same day. The yield on the benchmark 10-year gilts, slipped nearly 1-1/2 basis points to 0.764 percent, the 30-year yield remained flat at 1.288 percent and the yield on the short-term 2-year edged tad 1 basis point down to 0.576 percent.

The German bunds fell during European session after the country’s services PMI for the month of October surpassed market expectations, also higher than the previous reading in September. All eyes will now remain on Germany’s trade balance data for the month of September, scheduled to be released on November 8 by 07:00GMT for further direction in the debt market. The German 10-year bond yield, which move inversely to its price, gained 1 basis point to -0.308 percent, the yield on 30-year note also climbed 1 basis point to 0.207 percent while the yield on short-term 2-year traded nearly flat at -0.645 percent.

The Australian government bonds continued to down trend during Asian session tracking a similar movement in the United States’ Treasuries after optimism struck over the U.S.-China trade deal, urging investors to shift towards riskier assets. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 3-1/2 basis points to 1.251 percent, the yield on the long-term 30-year bond surged 3 basis points to 1.826 percent while the yield on short-term 2-year remained flat at 0.897 percent.   

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