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Europe Roundup: Sterling steadies as investors await parliamentary debate on Brexit deal, euro gains on upbeat retail sales, European shares plunge - Monday, January 7th, 2019

Market Roundup

  • Eurozone Nov 2018 retail sales yy decrease to 1.1 % vs previous 2.3 % (revised from 1.7 %)
     
  • Eurozone Nov 2018 retail sales mm stays flat at 0.6 % (forecast 0.1 %) vs previous 0.6 % (revised from 0.3 %)
     
  • United Kingdom Dec 2018 new passenger cars registration decrease to 144089 no. of vs previous 158639 no. of
     
  • Eurozone Jan 2019 Sentix index decrease to -1.5 diff.idx (forecast -2.8 diff.idx) vs previous -0.3 diff.idx
     
  • Italy Q3 2018 ISTAT public Deficit/GDP decrease to -1.7 % vs previous -0.6 % (revised from 0.5 %)
     

Economic Data Ahead

  • (1000 ET/1500 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. non-manufacturing Purchasing Managers' index eased to a final reading of 59.0 in December from 60.7 in November.
     
  • (1000 ET/1500 GMT) The United States is likely to report that factory orders increased 0.7 percent in November, after posting a fall of 2.1 percent in the prior month.
     
  • (1000 ET/1500 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of December. The index posted a reading of 57.2 in the prior month.
     

Key Events Ahead

  • (1240 ET/1740 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic speaks on the economic outlook and monetary policy before a fireside chat hosted by the Rotary Club of Atlanta.

FX Beat

DXY: The dollar index slumped as investors believe the U.S. economy is losing momentum with Federal Reserve chair Jerome Powell's comments adding to expectations the central bank may adopt a more cautious outlook. The greenback against a basket of currencies trades 0.3 percent down at 95.93, having touched a low of 95.86 earlier, its lowest since Dec. 2. FxWirePro's Hourly Dollar Strength Index stood at -120.11 (Highly Bearish) by 1000 GMT.

EUR/USD: The euro rose, extending gains for the third straight session after data showed Eurozone sales rose more than expected in November for a second consecutive month. The bloc's retail sales in were up 0.6 percent month-on-month, much more than the 0.1 percent rise forecast by economists. The European currency traded 0.4 percent up at 1.1436, having touched a high of 1.1496 on Wednesday, its highest since Nov. 7. FxWirePro's Hourly Euro Strength Index stood at -36.58 (Neutral) by 1000 GMT.  Immediate resistance is located at 1.1454 (December 27 High), a break above targets 1.1485 (December 20 High). On the downside, support is seen at 1.1360 (December 7 Low), a break below could drag it till 1.1327 (November 23 Low).

USD/JPY: The dollar edged lower on growing speculation the U.S. Federal Reserve will pause its rate hike cycle in the coming months. The major was trading 0.1 percent down at 108.35, having hit a low of 104.65 on Thursday, its lowest since March 26. FxWirePro's Hourly Yen Strength Index stood at -2.38 (Neutral) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. ISM non-manufacturing PMI, factory orders and speech from FOMC member Bostic. Immediate resistance is located at 108.89 (January 3 High), a break above targets 109.46 (April 26 High). On the downside, support is seen at 107.65 (April 23 Low), a break below could take it lower 106.98 (April 18 Low).

GBP/USD: Sterling surged, hovering towards a 5-day peak, as markets awaited the British parliament to reconvene this week and debate Prime Minister Theresa May's Brexit withdrawal agreement.  The major traded 0.1 percent up at 1.2735, having hit a low of 1.2373 on Thursday; it’s lowest since April 2017. FxWirePro's Hourly Sterling Strength Index stood at 65.94 (Bullish) 1000 GMT. Immediate resistance is located at 1.2815 (December 31 High), a break above could take it near 1.2884 (November 19 High). On the downside, support is seen at 1.2661 (August 15 Low), a break below targets 1.2600. Against the euro, the pound was trading 0.3 percent down at 89.79 pence, having hit a low of 90.92 on Thursday, it’s lowest since August 18.

USD/CHF: The Swiss franc extended previous session gains, as uncertainties stemming from a U.S.-China trade war weighed on investor risk sentiment. The major trades 0.4 percent down at 0.9826, having touched a high of 0.9920 on Wednesday; it’s highest since December 27. FxWirePro's Hourly Swiss Franc Strength Index stood at 36.64 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9906 (January 3 High) and any break above will take the pair to next level till 0.9980 (November 23 High). The near-term support is around 0.9797 (Oct. 1 Low), and any close below that level will drag it till 0.9737 (September 28 Low).

Equities Recap

European shares tumbled amid growing doubts that Washington and Beijing will make progress towards ending a prolonged trade dispute that has rattled global markets.

The pan-European STOXX 600 index plunged 0.3 percent at 342.38 points, while the FTSEurofirst 300 index declined 0.4 percent to 1,350.45 points.

Britain's FTSE 100 trades 0.4 percent down at 6,808.57 points, while mid-cap FTSE 250 rose 0.5 to 17,888.55 points.

Germany's DAX declined 0.3 percent at 10,735.53 points; France's CAC 40 trades 0.3 percent lower at 4,720.40 points.

Commodities Recap

Crude oil prices surged by more than 2.0 percent on supply cuts by major producers and hopes that talks in Beijing can resolve a trade war between the United States and China. International benchmark Brent crude was trading 2.4 percent up at $58.73 per barrel by 1037 GMT, having hit a high of $58.87 earlier, its highest since December 18. U.S. West Texas Intermediate was trading 2.4 percent up at $49.40 a barrel, after rising as high as $49.44, its highest since the December 18.

Gold prices surged, supported by a weaker dollar on expectations that the U.S. Federal Reserve might pause its monetary tightening cycle this year. Spot gold was up about 0.5 percent at $1,290.58 per ounce as of 1043 GMT, having touched a high of $1,298.42 on Friday, its highest level since June 15. U.S. gold futures gained 0.5 percent to $1,291.90 per ounce.

Treasuries Recap

The U.S. Treasuries remained mixed during late afternoon session amid an otherwise quiet trading session, looking ahead to FOMC member Bostic’s speech and the ISM manufacturing PMI for the month of December, both scheduled for later today. The yield on the benchmark 10-year Treasuries fell nearly 1-1/2 basis points to 2.646 percent, the super-long 30-year bond yields plunged 3-1/2 basis points to 2.940 percent while the yield on the short-term 2-year remained tad higher at 2.490 percent.

The United Kingdom’s gilts climbed during the afternoon session, ahead of the country’s 10-year auction, scheduled to be held on January 8 by 10:45GMT and Bank of England (BoE) Governor Mark Carney’s speech, due to be held on the following day at 15:30GMT. The yield on the benchmark 10-year gilts, plunged nearly 4 basis points to 1.240 percent, the super-long 30-year bond yields slumped 3-1/2 basis points to 1. 773 percent and the yield on the short-term 2-year traded 1 basis point lower at 0.738 percent.

The German bunds remained tad higher during European session amid a muted trading session that lacked data of major economic significance; also, the rise in the country’s retail sales for the month of November failed to create an impact. The German 10-year bond yields, which move inversely to its price, fell nearly 1-1/2 basis points to 0.195 percent, the yield on 30-year note also suffered nearly 1-1/2 basis points to 0.849 percent while the yield on short-term 2-year hovered around -0.600 percent.

The Japanese government bonds remained mixed on the first trading day of the week ahead of the country’s 10-year auction and November household spending data, scheduled to be released on January 8 and 10 by 03:35GMT and 23:30GMT respectively. The yield on the benchmark 10-year JGB note, which moves inversely to its price, fell 1-1/2 basis points to -0.016 percent, the yield on the long-term 30-year note jumped 2-1/2 basis points to 0.683 percent and the yield on short-term 2-year traded lower by 16-1/2 basis points at -0.164 percent.

The Australian government bonds slumped across the curve during early Asian session as investors remained optimistic about progress in the US-China trade talks. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 6-1/2 basis points to 2.279 percent, the yield on the long-term 30-year bond also jumped 6 basis points to 2.782 percent and the yield on short-term 2-year up 4 basis points to 1.877 percent.

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February 22 20:00 UTC Released

USFCOJ Stock

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0.548 Pounds B

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0.529 Pounds B

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495.624 Pounds M

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514.72 Pounds M

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-1541 %

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2016 bln ARS

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