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Europe Roundup: Sterling off 20-month lows; euro rallies as German economic sentiment improves, European shares rally - Tuesday, December 11th, 2018

Market Roundup

  • United States Nov 2018 NFIB business Optimism index decrease to 104.8 vs previous 107.4
     
  • Germany Dec 2018 ZEW current conditions decrease to 45.3 balance (forecast 55.8 balance) vs previous 58.2 balance
     
  • Germany Dec 2018 ZEW economic sentiment increase to -17.5 balance (forecast -25 balance) vs previous -24.1 balance
     
  • United Kingdom Oct 2018 average earnings (ex-bonus) increase to 3.3 % (forecast 3.2 %) vs previous 3.2 %
     
  • United Kingdom Oct 2018 employment change increase to 79 person (forecast 25 person) vs previous 23 person
     
  • United Kingdom Oct 2018 average week earnings 3m yy increase to 3.3 % (forecast 3 %) vs previous 3.1 % (revised from 3 %)
     
  • United Kingdom Oct 2018 ILO unemployment rate stays flat at 4.1 % (forecast 4.1 %) vs previous 4.1 %
     
  • United Kingdom Nov 2018 Claimant count unemployment change decrease to 21.9 person vs previous 23.2 person (revised from 20.2 person)
     

Economic Data Ahead

  • (0830 ET/1330 GMT) The U.S. producer price index is likely to have remained unchanged in November, while in the 12 months through the same period, it is expected to have advanced 2.5 percent. PPI excluding food and energy probably edged up 0.1 percent after posting a gain of 0.5 percent in October.
     
  • (1630 ET/2130 GMT) API reports its weekly crude oil stock.

Key Events Ahead

  • No significant event scheduled
     

FX Beat

DXY: The dollar index slumped as dovish comments from Fed officials and soft U.S. economic data reinforced views on a pause in the tightening cycle. The greenback against a basket of currencies trades 0.2 percent down at 96.96, having touched a low of 96.36 on Monday, its lowest since Nov 22. FxWirePro's Hourly Dollar Strength Index stood at 40.60 (Neutral) by 1100 GMT.

EUR/USD: The euro surged after data showed German economic sentiment picked up in December, however, the upside appears limited as investors remain cautious of the risks to exports from Brexit and the international trade dispute. The European currency traded 0.3 percent up at 1.1386, having touched a high of 1.1442 on Monday, its highest since Nov. 20. FxWirePro's Hourly Euro Strength Index stood at 113.78 (Highly Bullish) by 1100 GMT. Immediate resistance is located at 1.1401 (November 29 High), a break above targets 1.1455 (November 2 High). On the downside, support is seen at 1.1324 (November 26 Low), a break below could drag it till 1.1305 (November 30 Low).

USD/JPY: The dollar declined amid speculation the Federal Reserve would pause its rate increases sooner than previously expected. Moreover, uncertainty over Brexit, a China-U.S. trade war, and concerns over violent protests in France against President Emmanuel Macron's economic reform dented investor risk sentiment. The major was trading 0.2 percent down at 113.12, having hit a low of 112.23 on Monday, its lowest since October 29. FxWirePro's Hourly Yen Strength Index stood at -40.08 (Neutral) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. producer price index. Immediate resistance is located at 113.66 (December 4 High), a break above targets 114.03 (November 28 High). On the downside, support is seen at 112.66 (October 23 Low), a break below could take it lower 112.08 (October 24 Low).

GBP/USD: Sterling rebounded from a 20-month touched in the previous session on reports that British Prime Minister Theresa May will seek German Chancellor Angela Merkel's support for changes to the Brexit deal in order to avoid a disorderly exit. The major traded 0.4 percent up at 1.2604, having hit a low of 1.2506 on Monday; it’s lowest since mid-April 2017. FxWirePro's Hourly Sterling Strength Index stood at -97.83 (Slightly Bearish) 1000 GMT. Immediate resistance is located at 1.2664; a break above could take it near 1.2710. On the downside, support is seen at 1.2506 (December 10 Low), a break below targets 1.2460. Against the euro, the pound was trading 0.2 percent down at 90.24 pence, having hit a low of 90.87 on Monday; it’s lowest since August 29.

USD/CHF: The Swiss franc rallied to a near 2-month peak as increasing uncertainty over Brexit, a U.S.-Chia trade war, and French protests hurt investor risk-appetite. The major trades 0.2 percent down at 0.9882, having touched a low of 0.9863; it’s lowest since Oct. 16. FxWirePro's Hourly Swiss Franc Strength Index stood at 79.87 (Slightly Bullish) by 1100 GMT. On the higher side, near-term resistance is around 0.9955 (Oct. 5 High) and any break above will take the pair to next level till 0.9980 (Nov. 23 High). The near-term support is around 0.9847 (Oct. 15 Low), and any close below that level will drag it till 0.9800.

Equities Recap

European shares advanced, supported by optimism over the U.S.-China trade dispute, while sterling bounced back from 20-month lows as traders awaited some clarity on Brexit developments.

The pan-European STOXX 600 index gained 1.4 percent at 343.79 points, while the FTSEurofirst 300 index rallied 1.4 percent to 1,357.32 points.

Britain's FTSE 100 trades 1.0 percent up at 6,788.76 points, while mid-cap FTSE 250 rose 0.6 to 17,603.42 points.

Germany's DAX surged 1.4 percent at 10,770.80 points; France's CAC 40 trades 1.6 percent higher at 4,816.03 points.

Commodities Recap

Crude oil prices surged, despite doubts that planned output cuts led by producer cartel OPEC will be enough to rein in oversupply. International benchmark Brent crude was trading 0.7 percent up at $60.25 per barrel by 1027 GMT, having hit a high of $63.67 on Friday, its highest since November 22. U.S. West Texas Intermediate was trading 0.9 percent up at $51.37 a barrel, after rising as high as $54.20 on Friday, its highest since the December 5.

Gold prices rose, supported by hopes that the U.S. Federal Reserve could pause its rate hike cycle sooner than expected. Spot gold was trading 0.3 percent up at $1,247.94 per ounce by 1039 GMT, having touched a high of $1,250.46 on Monday, its highest level since July 11. U.S. gold futures were 0.3 percent higher at $1,252.6 per ounce.

Treasuries Recap

The U.S. Treasuries traded down during late afternoon session ahead of the country’s producer price index (PPI) data for the month of November, scheduled to be released today by 13:30GMT. The yield on the benchmark 10-year Treasuries jumped nearly 3-1/2 basis points to 2.888 percent, the super-long 30-year bond yields surged nearly 2-1/2 basis points to 3.151 percent and the yield on the short-term 1-year remained 3 basis points higher at 2.756 percent.

The United Kingdom’s gilts plunged during afternoon session after the country’s average earnings for the month of October, not only surpassed market expectations, but also rose compared to the previous reading in September, recording its fastest pace in a decade, followed by a rise in the employment change for the similar period. The yield on the benchmark 10-year gilts, jumped 4 basis points to 1.237 percent, the super-long 30-year bond yields surged nearly 6 basis points to 1.765 percent and the yield on the short-term 2-year traded 4-1/2 basis points higher at 0.735 percent.

The German bunds suffered during European session following a better-than-expected recovery in the country’s ZEW economic sentiment index for the month of December, released today. The German 10-year bond yields, which move inversely to its price, jumped nearly 3 basis points to 0.268 percent, the yield on 30-year note also climbed closely 3 basis points to 0.864 percent and the yield on short-term 2-year traded nearly 1-1/2 basis points higher at -0.567 percent.

The Australian bond yields recovered from previous lows during Asian session as investors engaged in short-selling amid a muted trading session that witnessed data of little economic significance. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped nearly 2-1/2 basis points to 2.458 percent, the yield on the long-term 30-year bond also rose closely by 2-1/2 basis points to 2.990 percent and the yield on short-term 2-year traded 1 basis point higher at 1.951 percent.

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2019-01-23 15:02:27
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