Market Roundup
- German flash PMI worse than expected in September
- Corbyn faces a showdown with party members over Brexit
- Oil declines as source say Saudis near full output restart
- Gold prices steady amid Gulf tensions
Economic Data Ahead
- (0830 ET/1230 GMT) The Federal Reserve Bank of Chicago will release its Chicago Fed National Activity Index (CFNAI) for the month of August. The index stood at -0.36 in the prior month.
- (0830 ET/1230 GMT) Statistics Canada is expected to reports that wholesale trade rose 0.3 percent in July, after gaining 0.6 percent in June.
- (0945 ET/1345 GMT) Financial firm Markit Economics is likely to report that preliminary U.S. service PMI business activity index rose to 51.5 in September after printing a final reading of 50.7 in August.
- (0945 ET/1345 GMT) Markit Economics will release preliminary U.S. composite PMI for the month of September. The index posted a final reading of 50.7 in the prior month.
- (0945 ET/1345 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of September. The index is likely edged up to 53.3 after posted a similar reading in the previous month.
Key Events Ahead
- (0900 ET/1300 GMT) European Central Bank (ECB) President Mario Draghi gives a speech
- (0930 ET/1350 GMT Federal Reserve Bank of New York President John C. Williams gives a speech
FX Beat
DXY: The dollar index rallied to an over 1-week peak as markets still remain unconvinced about the possibility of an imminent deal and awaited more clarity on U.S.- China trade talks. The greenback against a basket of currencies traded 0.3 percent up at 98.72, having touched a high of 98.83 earlier, its highest since September 12.
EUR/USD: The euro slumped to a 1-1/2 week low after a survey showed that German private sector activity shrank for the first time in 6-1/2 years in September as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum. The European currency traded 0.3 percent down at 1.0988, having touched a low of 1.0966 earlier, its lowest since September 12. Immediate resistance is located at 1.1084 (September 5 High), a break above targets 1.1109 (September 13 High). On the downside, support is seen at 1.0957 (September 2 High), a break below could drag it below 1.0927 (September 12 High).
USD/JPY: The dollar plunged to a near 2-week trough as a U.S.-China trade breakthrough seemed unlikely after President Donald Trump stated that he was not looking for a partial deal, and Chinese officials cancelled goodwill visits to U.S. farmers. The major was trading 0.1 percent up at 107.43, having hit a low of 107.31 earlier, its lowest since September 12. Investors’ will continue to track the broad-based market sentiment, ahead of U.S. Markit flash PMI's and New York Fed President John Williams speech. Immediate resistance is located at 108.04 (5-DMA), a break above targets 108.63 (July 5 High). On the downside, support is seen at 107.18 (September 10 Low), a break below could take it lower at 107.01 (21-DMA).
GBP/USD: Sterling tumbled to a near 1-week low after British Prime Minister Boris Johnson cautioned that there would be no Brexit breakthrough at talks with European leaders in New York. The major traded 0.3 percent down at 1.2436, having hit a low of 1.2423 earlier, it’s lowest since September 10. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2526 (September 17 High), a break above could take it near 1.2605 (June 17 High). On the downside, support is seen at 1.2392 (September 17 High), a break below targets 1.2312 (21-DMA). Against the euro, the pound was trading flat at 88.32 pence, having hit a high of 88.29 on Friday, it’s highest since May 22.
USD/CHF: The Swiss franc rose, extending gains for the third straight session, as tensions remained elevated in the Middle East after Washington ordered more troops to the Gulf region to strengthen Saudi Arabia’s air and missile defences, following an attack on the kingdom’s oil facilities. The major trades 0.05 percent down at 0.9909, having touched a low of 0.9889 on Friday, it’s lowest since September 16. On the higher side, near-term resistance is around 0.9999 (June 17 High) and any break above will take the pair to next level till 1.0042 (May 24 High). The near-term support is around 0.9878 (21-DMA), and any close below that level will drag it till 0.9854 (September 13 Low).
Equities Recap
European shares declined as weaker than expected business activity readings from across the eurozone raised more fears about the health of the economy.
The pan-European STOXX 600 index tumbled 0.9 percent at 389.55 points, while the FTSEurofirst 300 slumped 0.9 percent to 1,531.17 points.
Britain's FTSE 100 trades 0.4 percent down at 7,316.82 points, while mid-cap FTSE 250 eased 0.8 to 20,013.57 points.
Germany's DAX fell 1.2 percent at 12,324.04 points; France's CAC 40 trades 0.9 percent lower at 5,636.03 points.
Commodities Recap
Crude oil prices declined, reversing early session gains after a source said Saudi Arabia would fully restore oil output lost after attacks on its facilities faster than some traders expected. International benchmark Brent crude was trading 1.1 percent down at $63.88 per barrel by 1039 GMT, having hit a high of $69.64 last week, its highest since May 30. U.S. West Texas Intermediate was trading 1.3 percent lower at $57.73 a barrel, after rising as high as $63.33 last week, its highest since May 21.
Gold prices rallied to 1-1/2 week peak as investors sought more clarity on U.S.-China trade negotiations, while escalating tensions in the Middle East provided support upside. Spot gold was trading 0.2 percent up to $1,519.19 per ounce at 1041 GMT, having touched a high of $1,521.16 earlier, its highest since September 12. U.S. gold futures rose 0.7 percent to $1,525.00 per ounce.
Treasuries Recap
The U.S. Treasuries surged during Monday’s afternoon session ahead of a host of speeches by members of the Federal Open Market Committee (FOMC) – Williams, Bullard and Daly scheduled to be delivered today by 13:50GMT, 17:00GMT and 18:30GMT respectively. The yield on the benchmark 10-year Treasury yield slumped 6-1/2 basis points to 1.689 percent, the super-long 30-year bond yield plunged 7 percent to 2.127 percent and the yield on the short-term 2-year traded nearly 5 basis points down at 1.665 percent.
The United Kingdom’s gilt yields plunged during European trading hours ahead of the country’s super-long 30-year auction, scheduled to be held on September 24 by 09:45GMT amid a slew of external uncertainties concerning Brexit. The yield on the benchmark 10-year gilts, plunged 7-1/2 basis points to 0.554 percent, the 30-year yield slumped 7 basis points to 0.977 percent and the yield on the short-term 2-year plummeted 6 basis points to 0.473 percent.
The German bunds pumped up during European trading session after the country’s manufacturing PMI for the month of September came in lower than market expectations, diving further into contraction territory. Investors will now keep a close eye on Germany’s Ifo business climate index for the month of September, scheduled to be released tomorrow by 08:00GMT and the 10-year auction, due on September 25 by 09:40GMT for further direction in the debt market. The German 10-year bond yield, which move inversely to its price, remained tad 1/2 basis point down at -0.507 percent, the yield on 30-year note slipped 1 basis point to 0.020 percent and the yield on short-term 2-year hovered around -0.703 percent.
The Australian government bonds jumped during Asian session of the first trading day of the week amid a muted session that witnessed data of little economic significance ahead of the Reserve Bank of Australia’s (RBA) Governor Philip Lowe’s speech, scheduled to be delivered on September 24 by 09:55GMT amid a wave of global geopolitical tensions. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 7 basis points to 0.986 percent, the yield on the long-term 30-year bond slumped nearly 6 basis points to 1.580 percent and the yield on short-term 2-year suffered nearly 3 basis points to 0.752 percent.
