Market Briefs
- Oil falls 4% on swelling oversupply.
- Iraq says oil production reached record high in December.
- Saudi Aramco chief says not cutting oil and gas investment.
- Brent crude down to $30.72/barrel, from earlier $32.81 peak.
- CAD, NOK sharply lower as oil falls. USD/CAD plays 1.4127 to 1.4220.
- EUR/USD gains to 1.0835 fm 1.0789 but easier into NY.
- USD/JPY back down to 118.18 from 118.85.
- Norway Central Bank Gov: Oil price moves since mid-Dec not fundamentally altered economic situation.
- Norway Central Bank Gov: Fallout from lower oil price gradually becoming visible in economy.
- Spain's Socialists tell Rajoy to form government or move aside.
- S&P raises Greece rating after bank recapitalization, reforms.
- Germany Jan IFO Expectations 102.4 vs previous 104.6 revised. 104.1 expected.
- Germany Jan IFO Current Conditions 112.5 vs previous 112.8. 112.8 expected.
- Germany Jan IFO Business Climate 107.3 vs previous 108.6. 108.4 expected.
- UK Jan CBI Trends - Orders -15 vs previous -7. -10 expected.
Economic Data Preview
- (0900 ET/1400 GMT) The national statistics institute of Mexico is set to release its unemployment data for December, after the index fell to a seven year low the prior month. Also, economic activity data for November will be released, after it notched its weakest showing since July the prior month.
- (1030 ET/1530 GMT) The Federal Reserve Bank of Dallas is scheduled to release its manufacturing business index for January, the index stood at -20.1 in December.
Key Events Ahead
- (1300 ET/1800 GMT) ECB President Draghi's Speech.
- (1330 ET/1830) FedTrade Operation 30-year Ginnie Mae (max $1.175 bn).
Equities Recap
European stocks were broadly weaker as oil prices gave up gains and dropped 4 percent, while Germany's weak business sentiment increased concerns about the outlook for the global economy.
The pan-European FTSEurofirst 300 index fell 0.8 percent in early trade, it climbed 3 percent on Friday to mark its first weekly gain for 2016. Germany's DAX dropped 0.5 percent to 9,717.15 and France's CAC 40 lost 0.7 percent to 4,306.61. Britain's FTSE 100 slipped 0.6 percent to 5,863.96. Greek stocks rose 1.3 percent after Standard & Poor's raised Greece's rating to B- from CCC+ on Friday.
In a quite contrast to European equities, Asian stocks rose 1.5 percent and moved further away from last week's four-year low on stimulus hopes from BoJ and ECB. Shanghai stocks added 1 percent and Tokyo's Nikkei ended up 0.9 percent. HK's Hang Seng Index closed up 1.4 pct at 19,340.14 points.
Commodities Recap
Oil prices plunged 4 percent, lost much of the gains made in last week as Iraq announced record-high oil production feeding into a heavily oversupplied market. Brent crude was down $1.35 at $30.83 a barrel at 0851 GMT, losing more than 4 percent from Friday's closing price, when Brent surged 10 percent. U.S. crude traded $1.15 lower at $31.04 a barrel.
Gold inched higher on expectations that the U.S. Federal Reserve may have fewer chances to raise interest rates this year in the face of a unstable global economy. Spot gold rose 0.2 percent at $1,100.56 an ounce by 0638 GMT, after gaining nearly 1 percent last week. U.S. gold for February delivery gained 0.5 percent to $1,101.30 an ounce.
Treasuries Recap
10-Year U.S. Treasury yield stood at 2.058 percent vs U.S. close of 2.048 percent on Friday.
The 10-year JGB yield fell 1 basis point to 0.220 percent, while the 30-year yield fell 0.5 basis point to 1.175 percent, near one-year low of 1.170 percent touched earlier this month.
UK Gilts opened 8 ticks higher than the settlement of 119.07, as the market opened risk off due oil prices failing to sustain a bounce. Asian equity markets had enjoyed a better start to the week as the US snowstorm fueled thoughts of increased demand.
German bund futures opened 13 ticks lower at 161.18,while Greek 2-year government bond yields fell 9 basis points to 13.48 percent after S&P's rating.
Australian government bond futures were trading softer, with the 3-year bond contract off 1 tick at 98.060. The 10-year contract eased half a tick to 97.2650, while the 20-year contract edged down 1 tick to 96.7600. New Zealand government bonds gained slightly, with yields 1 basis point lower across most of the curve.
FX Beat
USD: The dollar dropped against a basket of currencies as renewed selling in oil markets drove investors to prefer safe havens- the euro and yen. It dropped 0.4 percent to 118.31 yen, moving away from a 2-week high touched on Friday at 118.88.
EUR/USD: The euro firmed 0.3 percent to $1.0825, after losing 0.8 percent on Friday. Technically the pair is facing resistance around 1.0870 and break above will take the pair to next level 1.0950/1.0980/1.100 level. On the downside, support is around 1.0780 and break below targets 1.0710/1.06700 level.
USD/JPY: The pair has broken minor resistance 118 and jumped till 118.85 at the time of writing. It was trading around 118.45. Short term trend is slightly bullish as long as support 117.50 holds. The major support is around 117.50 and break below targets 116.80/116. On the higher side minor resistance is around 118.85 and break above will take the pair till 119.30/120. EUR/JPY remained heavy, traded between 127.86-128.49 so far. Markets eye BoJ's action on Fri, even if BoJ holds the easing expectations could continue through to March.
GBP/USD: Sterling inched lower on Monday, as investors eyed on the risks to the UK economy of a potential "Brexit" from Europe and the prospect of interest rates remaining at their record lows until 2017. It edged down 0.1 percent to $1.4255, taking it back towards a seven-year low of $1.4080 hit last week. Short term trend is weak as long as resistance 1.4365 holds. Any break above 1.4365 will take the pair till 1.4400/1.4500 level. Its upside is capped at 1.43300 (cloud top) and break above 1.4330 will take it till 1.4362 (22nd Jan high)/1.4450 (cloud bottom). Overall bearish invalidation is only above 1.4500. On the lower side minor support is around 1.4250 and break below targets 1.4200/1.4120/1.4070. Against the euro, the pound weakened by 0.2 percent to 75.895 pence, having touched a one-year low of 77.56 pence last week.
USD/CHF: The pair has broken major resistance 1.0150 and jumped till 1.01670. Short term trend is bullish as long as support 1.0500 holds. Any break above 1.0150 confirms minor trend reversal a jump till 1.018/1.0250 is possible. On the lower side major support is around 1.0050 and break below will drag the pair till 1.000/0.9950. Overall bullish invalidation is only below 0.9990.
AUD/USD: The Australian dollar fell 0.4 percent to $0.6975 after touching a 9-day high of $0.7046 on Friday. It rose 2 percent last week, its biggest such gain since October. On the higher side major resistance is around 0.7060 and break above targets 0.7115/0.7170. The pair's minor support is around 0.6960 and break below will drag the it till 0.6900/0.6820. Short term trend is slightly bearish as long as resistance 0.7060 holds. Against the yen, the Aussie held at 83.16, having leapt 3.4 percent last week after it touched its lowest since mid-2012 on Wednesday.
NZD/USD: The New Zealand dollar was steady at $0.6492 as markets looked ahead to the Reserve Bank of New Zealand's rate decision on Thursday.
