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Europe Roundup: Sterling rises above 1.3000 on Brexit deal hopes, euro gains on France economic growth projections, European shares plunge - Monday, May 13th, 2019

Market Roundup

  • China auto industry association official says U.S. Tariffs to have big impact on china car parts exports
  • Brexit: UK Communities Minister Brokenshire says a Brexit deal with labour is possible
  • Brexit: UK Brexit secretary Barclay says he would choose no-deal Brexit to revoking article 50 divorce notification
  • Brexit: Nigel Farage's Brexit party in first place on 34% ahead of EU parliament election, UK PM May's conservatives in fifth place on 10% - YOUGOV poll for Times
  • Brexit: Britain is at risk of “sleepwalking” into staying in the EU, Brexit Secretary Barclay says - Sun Newspaper

Economic Data Ahead

  • No major economic data releases

Key Events Ahead

  • (0905 ET/1305 GMT) Federal Reserve Bank of Boston President Eric Rosengren speaks at a conference in Boston
  • (0910 ET/1310 GMT) Federal Reserve Board Vice Chair Richard Clarida speaks at a conference in Boston
  • (1255 ET/1655 GMT) Boston Fed President Eric Rosengren and Fed's Clarida give closing remarks at "FedListens - New England Perspectives on Fed Policymaking" conference in Boston

FX Beat

DXY: The dollar eased, extending losses for the third straight session, as trade negotiations between the U.S. and China ended after President Donald Trump raised tariffs on Chinese goods. The greenback against a basket of currencies traded 0.5 percent down at 97.29, having touched a low of 97.13 on Friday, its lowest since April 18 FxWirePro's Hourly Dollar Strength Index stood at -34.36 (Neutral) by 1100 GMT.

EUR/USD: The euro slightly edged higher after the Bank of France projected the French economy should grow 0.3 percent in the second quarter, despite the impact of anti-government protests.  The European currency traded 0.05 percent up at 1.1235, having touched a high of 1.1253 on Friday, its highest since May 1. FxWirePro's Hourly Euro Strength Index stood at -5.40 (Neutral) by 1100 GMT. Immediate resistance is located at 1.1262 (April 22 High), a break above targets 1.1304 (April 18 High). On the downside, support is seen at 1.1187 (May 1 Low) a break below could drag it till 1.1140 (April 24 Low).

USD/JPY: The dollar plunged, hovering towards a 3-month trough hit in the prior session, as investors braced for threatened retaliation by China for Washington's tariff increase on $200 billion worth of Chinese goods, following accusations by U.S. President Donald Trump that Beijing had reneged on earlier commitments. The major was trading 0.3 percent down at 109.66, having hit a low of 109.47 on Friday, its lowest since Feb. 4. FxWirePro's Hourly Yen Strength Index stood at 124.83 (Highly Bullish) by 1100 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of speeches by Fed's Rosengren and Clarida. Immediate resistance is located at 110.32 (38.2% retracement of 111.68 and 109.47), a break above targets 110.84 (61.8% retracement). On the downside, support is seen at 109.47 (May 9 Low), a break below could take it lower at 109.13 (Jan. 29 Low).

GBP/USD: Sterling rose above the 1.3000 handle, after a newspaper report suggested the British parliament might still reach a cross-party deal on Brexit. The major traded 0.2 percent up at 1.3019, having hit a low of 1.2967 on Thursday; it’s lowest since Apr. 30. FxWirePro's Hourly Sterling Strength Index stood at 27.33 (Neutral) 1100 GMT. Immediate resistance is located at 1.3049 (Apr. 30 High), a break above could take it near 1.3102 (May 1 High). On the downside, support is seen at 1.2976 (Mar. 29 Low), a break below targets 1.2923 (Apr. 30 Low). Against the euro, the pound was trading 0.1 percent down at 86.25 pence, having hit a low of 86.48 on Thursday, it’s lowest since Apr. 30.

USD/CHF: The Swiss franc rallied to a 3-1/2 week peak as a deadlock in U.S.-China trade talks and uncertainty over a deal sent investors seeking safety in safe-haven assets. The major trades 0.4 percent down at 1.0180, having touched a low of 1.0077 earlier; it’s lowest since Apr. 17. FxWirePro's Hourly Swiss Franc Strength Index stood at 164.74 (Highly Bullish) by 1100 GMT. On the higher side, near-term resistance is around 1.0159 (Apr. 18 High) and any break above will take the pair to next level till 1.0196 (May 6 High). The near-term support is around 1.0032 (Apr. 16 Low), and any close below that level will drag it till 1.0000.

Equities Recap

European shares declined, extending previous session losses as the U.S.-China deadlock quelled hopes that both the economies will be able to resolve their trade dispute anytime soon.

The pan-European STOXX 600 index plunged 0.5 percent at 375.03 points, while the FTSEurofirst 300 index eased 0.5 percent to 1,474.60 points.

Britain's FTSE 100 trades 0.1 percent down at 7,196.77 points, while mid-cap FTSE 250 fell 0.6 to 19,257.39 points.

Germany's DAX declined 0.8 percent at 11,964.94 points; France's CAC 40 trades 0.6 percent lower at 5,296.99 points.

Commodities Recap

Crude oil prices rose by more than 1 percent amid increasing concerns about supply disruptions in the Middle East, however, investors fears over global economic growth prospects limited upside. International benchmark Brent crude was trading 1.4 percent higher at $71.69 per barrel by 1039 GMT, having hit a low of $68.82 last week, its lowest since Apr, 3. U.S. West Texas Intermediate was trading 1.2 percent up at $62.46 a barrel, after falling as low as $60.02 last week, its lowest since the Mar, 29.

Gold prices declined as the greenback steadied against a basket of currencies. Spot gold was down 0.3 percent at $1,283.53 per ounce by 1043 GMT, having touched a high of $1,291.36 on Wednesday, its highest since Apr. 15. U.S. gold futures slipped 0.2 percent to $1,283.40 an ounce.

Treasuries Recap

The U.S. Treasury yields continued to suffer during the afternoon session, as tensions over trade tariffs with China remained on the upfront, while there had been hopes of a more conciliatory resolution, after the US’ action to raise tariffs from 10-25 percent on USD200 billion worth of Chinese imports. The yield on the benchmark 10-year Treasury yield plunged 3 basis points to 2.425 percent, the super-long 30-year bond yields edged 1-1/2 basis points lower to 2.858 percent and the yield on the short-term 2-year also slumped 3-1/2 basis points to 2.217 percent.

The United Kingdom’s gilts gained during European session ahead of today’s resumption of Brexit talks between the government and Labour Party; polls conducted over the weekend have already showed a possibility of further rise in support for the Brexit Party and the Conservatives in fourth place in terms of voting intentions for next week’s European Parliament elections. Investors will also be focussing on the country’s employment report for the month of March, scheduled to be released on May 14 by 08:30GMT for further direction in the debt market. 1The yield on the benchmark 10-year gilts, slipped 1 basis point to 1.126 percent, the super-long 30-year bond yields suffered nearly 1-1/2 basis points to 1.666 percent and the yield on the short-term 2-year traded tad lower at 0.735 percent

The Japanese government bonds ended the Asian session on a flat note ahead of the country’s super-long 30-year auction, scheduled to be held on May 14 by 03:35GMT, amid an otherwise silent day that witnessed data of little economic significance. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, remained tad lower at -0.047 percent, the yield on the long-term 30-year hovered around 0.540 percent and the yield on short-term 2-year traded nearly flat at -0.159 percent

The Australian government bonds jumped during Asian session of the first trading day of the week after the trade war between the United States and China worsened, with the former raising the tariffs on Chinese imports, with burgeoning threat of a further imposition if no agreement is reached within a month. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2 basis points to 1.719 percent, the yield on the long-term 30-year bond slipped 1-1/2 basis points to 2.340 percent and the yield on short-term 2-year also traded 1-1/2 basis points lower at 1.314 percent.

  • Market Data

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