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Europe Roundup: Sterling steadies on upbeat Q2 GDP figures, euro tumbles on ECB Draghi's comments, European shares nudge higher - September 30th, 2019

Market Roundup

  • Eurozone unemployment in surprise fall to the lowest rate in more than a decade
     
  • UK economy shrank in second-quarter - ONS
     
  • German labour market and shopping resilient despite manufacturing slump
     
  • Merkel's conservatives to stick to 'black zero' policy of no new debt
     

Economic Data Ahead

  • (0800 ET/1200 GMT) Germany reports its preliminary consumer price index for the month of September. The index is expected to edge up 1.9 percent, after falling 0.2 percent in the previous month. On an annualized basis, it's likely to rise 1.4 percent after posting similar gains in August.
     
  • (0830 ET/1230 GMT) Statistics Canada releases its Raw Material Price Index for the month of August. The index posted a rise of 1.2 percent in July.
     
  • (0830 ET/1230 GMT) Statistics Canada will report its industrial producer prices for the month of August. The indicator fell 0.3 percent in the prior month.
     
  • (0945 ET/1345 GMT) Chicago Purchasing Managers' Index is likely to show that business conditions rose to 50.5 in September from 50.4 last month.
     
  • (1030 ET/1430 GMT) The Dallas Fed releases its Manufacturing Business Index for the month of September. The index posted a rise of 2.7 percent in the previous month.
     

Key Events Ahead

  • No Significant Events Scheduled

FX Beat

DXY: The dollar index rose, reversing most of its previous session gains, amid persisting global political uncertainty and fears over widening of the U.S -China trade war. The greenback against a basket of currencies traded 0.1 percent up at 99.22, having touched a high of 99.31 on Friday, its highest since September 3.

EUR/USD: The euro plunged after European Central Bank President Mario Draghi stressed the need for fiscal policy to support the bloc’s long-term growth prospects. The European currency traded 0.2 percent down at 1.0921, having touched a low of 1.0904 on Friday, its lowest since May 2017. Immediate resistance is located at 1.0953 (23.6% retracement of 1.1055 and 1.0904), a break above targets 1.0983 (38.2% retracement). On the downside, support is seen at 1.0885, a break below could drag it below 1.0830.

USD/JPY: The dollar eased against the safe-haven Japanese yen as risk sentiment weakened on news that the United States might limit Chinese company listings on its stock exchanges, ahead of critical negotiations next week. The major was trading down at 107.90, having hit a high of 108.18 on Friday, its highest since September 19. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. Chicago Purchasing Managers' Index and Dallas Fed Manufacturing Business Index. Immediate resistance is located at 108.25 (September 13 High), a break above targets 108.53 (July 1 High). On the downside, support is seen at 107.41 (21-DMA), a break below could take it near at 106.76 (September 6 Low).

GBP/USD: Sterling steadied, halting a 3-day losing streak after data showed Britain’s economy grew by 1.3 percent in the year to the end of June, revised up from an earlier estimate of 1.2 percent. The major traded 0.1 percent up at 1.2300, having hit a low of 1.2284 on Friday, it’s lowest since September 19. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2371 (5-DMA), a break above could take it near 1.2423 (10-DMA). On the downside, support is seen at 1.2233 (September 9 Low), a break below targets 1.2210 (September 5 Low). Against the euro, the pound was trading 0.2 percent up at 88.76 pence, having hit a low of 89.03 on Friday, it’s lowest since Sept. 13.

USD/CHF: The Swiss franc slumped to a 1-1/2 week low as the greenback rallied against a basket of currencies. The major trades 0.5 percent up at 0.9950, having touched a high of 0.9956 earlier, it’s highest since September 19. On the higher side, near-term resistance is around 0.9968 and any break above will take the pair to next level till 0.9999 (June 17 High). The near-term support is around 0.9890 (September 23 Low), and any close below that level will drag it till 0.9865 (September 16 Low).

Equities Recap

European shares consolidated within narrow ranges as investors shrugged off fresh concerns about U.S.-China trade negotiations and looming U.S. tariffs on European imports.

The pan-European STOXX 600 index surged 0.05percent at 391.83 points, while the FTSEurofirst 300 eased 0.2 percent to 1,540.98 points.

Britain's FTSE 100 trades 0.2 percent down at 7,409.01 points, while mid-cap FTSE 250 declined 0.3 to 19,918.91 points.

Germany's DAX rose 0.1 percent at 12,383.20 points; France's CAC 40 trades 0.1 percent higher at 5,645.30 points.

Commodities Recap

Crude oil prices declined as China’s economic outlook remained weak even as manufacturing data improved, while the world’s top oil exporter Saudi Arabia restored capacity to 11.3 million barrels per day.  International benchmark Brent crude was trading 2.3 percent down at $60.40 per barrel by 1042 GMT, having hit a low of $60.07 earlier, its lowest since September 16. U.S. West Texas Intermediate was trading 1.4 percent lower at $55.29 a barrel, after falling as low as $54.73 on Friday, its lowest since September 13.

Gold prices declined to a 1-1/2 week low as uncertainties around the U.S.-China trade war drove some investors to the safety of the greenback. Spot gold was trading 0.6 percent down to $1,487.39 per ounce by 1044 GMT, having touched a low of $1,485.39 earlier, its lowest since September 18. U.S. gold futures dipped 0.6 percent to $1,496.60 per ounce.

Treasuries Recap

The U.S. Treasuries suffered ahead of the country’s manufacturing and non-manufacturing ISM PMIs for the month of September on Tuesday and Thursday respectively, amid an otherwise, muted trading session today, that is scheduled to only witness an OPEC meeting in the day. The yield on the benchmark 10-year Treasury yield jumped 2 basis points to 1.692 percent, the super-long 30-year bond yield surged 2 basis points to 2.146 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 1.640 percent.

 The United Kingdom’s gilts remained mixed during European trading hours as investors turned optimistic following the release of the country’s gross domestic product (GDP) for the second quarter of this year. Market participants will now be eyeing Britain’s manufacturing PMI for the month of September, scheduled to be released on October 1 by 08:30GMT for further direction in the debt market. The yield on the benchmark 10-year gilts, traded tad higher at 0.503 percent, the 30-year yield jumped 2-1/2 basis points to 0.993 percent while the yield on the short-term 2-year slipped 1 basis point to 0.383 percent.

The German bunds slid during European trading session after the country’s employment data for the month of September cheered market investors, while the unemployment rate held steady at 5.0 percent, slightly above the record-low of 4.9 percent reached earlier this year. The German 10-year bond yield, which move inversely to its price, surged nearly 1-1/2 basis points to -0.563 percent, the yield on 30-year note jumped 3-1/2 basis points to -0.085 percent while the yield on short-term 2-year traded nearly flat at -0.762 percent.

The Japanese government bonds closed mixed ahead of the country’s Tankan manufacturers’ index for the third quarter of this year, scheduled to be released today by 23:50GMT and the 10-year auction, due to be held on October 1 by 03:35GMT for further direction in the debt market. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, plunged 21-1/2 basis points to -0.216 percent, the yield on the long-term 30-year jumped 3 basis points to 0.350 percent and the yield on short-term 2-year hovered around -0.319 percent

The Australian government bonds suffered during Asian session of the first trading day of the week as investors await the Reserve Bank of Australia’s (RBA) monetary policy meeting, scheduled to be held on October 1 by 04:30GMT for further direction in the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, climbed 1 basis point to 0.970 percent, the yield on the long-term 30-year bond also jumped nearly 2-1/2 basis points to 1.589 percent while the yield on short-term 2-year hovered around 0.738 percent   

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