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Europe Roundup: Sterling at 2-week low as Brexit worries dampen investor sentiment, dollar index surges amid concerns of new U.S. tariffs on China, European shares trade in red - Wednesday, September 5th, 2018

Market Roundup

  • EUR/USD -0.06%, USD/JPY 0.13%, GBP/USD -0.40%, EUR/GBP 0.32%
     
  • DXY 0.13%, DAX -1.00%, FTSE -0.41%, Brent -1.16%, Gold 0.21%
     
  • Canada to stick to guns at NAFTA talks despite Trump pressure
     
  • EU, U.S. trade chiefs to mend ties after Trump tariff détente
     
  • South African rand tumbles as recession shock spurs sell-off
     
  • Yuan edges up, but sentiment still fragile amid Sino-U.S. trade friction
     
  • Iran rial hits record low around 150,000 against dollar -FX websites
     
  • EZ Aug Markit Composite Final PMI, 54.5, 54.4 forecast, 54.4 previous
     
  • EZ Aug Markit Service Final PMI, 54.4, 54.4 forecast, 54.4 previous
     
  • Germany Aug Markit Composite Final PMI,55.6, 55.7 forecast, 55.7 previous
     
  • Germany Aug Markit Service PMI, 55.0, 55.2 forecast, 55.2 previous
     
  • Great Britain Aug Markit/CIPS Service PMI, 54.3, 53.9 forecast, 53.5 previous
     
  • France Aug Markit Composite PMI, 54.9, 55.1 forecast, 55.1 previous
     
  • EZ Jul Retail Sales YY, 1.1%, 1.3% forecast, 1.2% previous
     
  • EZ Jul Retail Sales MM, -0.2%, -0.2% forecast, 0.3% previous
     
  • Saudi Arabia aims to keep crude in $70 to $80 band – sources
     

Economic Data Ahead

  • (0830 ET/1230 GMT) The United States releases trade balance figures for the month of July. The economy's trade deficit is expected to have widened to $50.1 billion from 46.3 billion in June.
     
  • (0830 ET/1230 GMT) The Statistics Canada is likely to report that international trade deficit expanded to C$1.20 billion in July from C$0.63 billion the month before.
     
  • (0900 ET/1300 GMT) Mexico releases its consumer confidence data for the month of August.
     
  • (0945 ET/1345 GMT) The NAPM-New York releases ISM-New York Index for the month of August. The index stood at 75.0 in the previous month.
     
  • (1000 ET/1400 GMT) Bank of Canada will meet to announce its benchmark interest rate, where it is expected to hold interest rates at 1.50 percent.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • (0920 ET/1320 GMT) St. Louis Fed President James Bullard makes a presentation on the economy and monetary policy at Real Return XII – Euromoney Conferences.
     
  • (1230 ET/1630 GMT) Federal Reserve Bank of New York President John C. Williams visits Buffalo and Niagara Falls, New York., to meet with leaders in business, community development, education, and government.
     
  • (1600 ET/2000 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari participates in a town hall forum hosted by Montana State University, in Bozeman, Montana.
     
  • (1830 ET/2230 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic speaks on the economic outlook and monetary policy before a fireside chat of the Chicago Council on Global Affairs in Chicago
     

FX Beat

DXY: The dollar index steadied near a 2-week peak, supported by upbeat U.S. indicators that underlined the case for further interest rate hikes by the Federal Reserve. The greenback against a basket of currencies trades 0.05 percent up at 95.46, having touched a high of 95.74 the day before, its highest since August 24. FxWirePro's Hourly Dollar Strength Index stood at 112.56 (Highly Bullish) by 1000 GMT.

EUR/USD: The euro surged, rebounding from an over 1-week low touched in the previous session, after data showed Eurozone business activity accelerated slightly last month, extending a period of solid growth. The European currency traded 0.1 percent up at 1.1594, having touched a low of 1.1530 on Tuesday, its lowest since Aug 23. FxWirePro's Hourly Euro Strength Index stood at 92.21 (Slightly Bullish) by 1000 GMT. Immediate resistance is located at 1.1630 (10-DMA), a break above targets 1.1689 (August 31 High). On the downside, support is seen at 1.1529 (August 23 Low), a break below could drag it till 1.1500.

USD/JPY: The dollar rallied to near 1-week peak as investors await a host of speeches from the Federal Open Market Committee (FOMC) members that could provide further clues on the U.S. monetary policy. The major was trading 0.1 percent up at 111.59, having hit a high of 111.71 earlier, its highest since August 30. FxWirePro's Hourly Yen Strength Index stood at -71.89 (Bearish) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of speeches from FOMC members. Immediate resistance is located at 111.82 (August 29 High), a break above targets 112.15 (August 1 High). On the downside, support is seen at 111.15 (10-DMA), a break below could take it lower 110.43 (August 15 Low).

GBP/USD: Sterling slumped to an over 2-week low amid doubts over Prime Minister Theresa May's leadership, while Brexit worries dampened investment plans and confidence for the year ahead. The major traded 0.2 percent down at 1.2822, having hit a low of 1.2785 earlier; it’s lowest since August 20. FxWirePro's Hourly Sterling Strength Index stood at -153.62 (Highly Bearish) 1000 GMT. Immediate resistance is located at 1.2903 (10-DMA), a break above could take it near 1.2941 (5-DMA). On the downside, support is seen at 1.2755, a break below targets 1.2700. Against the euro, the pound was trading 0.3 percent down at 90.38 pence, having hit a high of 89.38 on Friday, it’s highest since August 17.

USD/CHF: The Swiss franc edged up after falling to a 6-day low in the previous session, as tensions grew that U.S. President Donald Trump may soon impose tariffs on more Chinese. The major trades 0.05 percent down at 0.9741, having touched a high of 0.9767 on Tuesday, it’s highest since August 29. FxWirePro's Hourly Swiss Franc Strength Index stood at -12.88 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9760 (50.0% retracement of 0.9866 and0.9652) and any break above will take the pair to next level till 0.9821 (78.6% retracement). The near-term support is around 0.9700 and any close below that level will drag it till 0.9665.

Equities Recap

European shares plunged as global trade tensions and growing worries about emerging market currencies dented investor appetite for risky assets.

The pan-European STOXX 600 index declined 0.7 percent at 377.23 points, while the FTSEurofirst 300 index eased 0.6 percent to 1,475.42 points.

Britain's FTSE 100 trades 0.4 percent down at 7,426.34 points, while mid-cap FTSE 250 declined 0.3 percent to 20,496.12 points.

Germany's DAX fell 0.6 percent at 12,137.36 points; France's CAC 40 trades 1.01 percent lower at 5,288.80 points.

Commodities Recap

Crude oil eased, extending previous session losses, as a tropical storm hitting the U.S. Gulf coast weakened. International benchmark Brent crude was trading 0.6 percent down at $77.31 per barrel by 1042 GMT, having hit a high of $79.70 on Tuesday, its highest since July 11. U.S. West Texas Intermediate was trading 0.7 percent lower at $68.88 a barrel, after rising as high as $71.37 on Tuesday, its highest since August 8.

Gold prices surged amid worries over inflation in emerging markets and heightened concerns about international trade conflicts. Spot gold was up 0.3 percent at $1,194.37, as of 1047 GMT, having touched a low of $1,189.55 on Tuesday, its lowest since August 24. U.S. gold futures were mostly steady at $1,198.40 an ounce.

Treasuries Recap

The U.S. Treasuries steadied as investors await a host of speeches from the Federal Open Market Committee (FOMC) members – Bullard, Williams, Kashkari and Bostic’s speech, due later in the day. The yield on the benchmark 10-year Treasuries hovered around 2.899 percent, the super-long 30-year bond yields slipped 1/2 basis point to 3.064 percent and the yield on the short-term 2-year traded flat at 2.653 percent.

The United Kingdom’s gilts climbed during European session even as the country’s services PMI for the month of August cheered market expectations, also higher than the previous reading in July. The yield on the benchmark 10-year gilts, fell nearly 2 basis points to 1.413 percent, the super-long 30-year bond yields slipped 1-1/2 basis points to 1.770 percent while the yield on the short-term 2-year traded nearly 2 basis points lower at 0.726 percent.

The New Zealand bonds plunged at the time of closing despite a fall in global dairy prices at the GlobalDairyTrade (GDT) price auction, held in the overnight session. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped nearly 4 basis points to 2.578 percent, the yield on the long-term 20-year note surged close to 3-1/2 basis points to 2.900 percent and the yield on short-term 2-year remained tad higher at 1.658 percent.

The Japanese government bonds traded flat amid a muted session that witnessed data of little economic significance. The yield on the benchmark 10-year JGB note, which moves inversely to its price, traded flat at 0.116 percent, the yield on the long-term 30-year note also remained steady at 0.857 percent and the yield on short-term 2-year too hovered around -0.113 percent.

The Australian bonds plunged during the Asian session, tracking a similar movement in the United States Treasuries, after yields of the latter surged to a 3-week high in the overnight session, after the U.S. manufacturing activity expanded to over 14-year high during the month of August, and on heavy corporate debt supply. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 4-1/2 basis points to 2.571 percent, the yield on the long-term 30-year bond surged 4 basis points to 3.077 percent and the yield on short-term 2-year traded 3 basis points higher at 2.019 percent.

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