Action Insight · Asia Pacific · Econochat · Economic Outlook · Europe · Global Economy · Markets Commentary · Uncategorized

Markets Update, Jan 18

 

  • Uncertain Markets react to the tune of Trump comments
  • Stocks, dollar rebound after Trump-led dip
  • Emerging-market stocks gained.

 

European shares decline led by a plunge in Pearson shares, S&P futures were modestly in the green as Asian and EM stocks gained.

The dollar rebounded against most major currencies after retreating 1.3% on Tuesday to the lowest in a month following Trump’s “strong dollar” comments and halted a seven-day drop against the yen.

Asian traders said shares were helped by hopes that the concerns about a stronger dollar expressed by the U.S. President-elect at the weekend, would be beneficial to emerging markets where companies have borrowed heavily in dollars.

European stock markets were fractionally in the red steady after a choppy start, banking shares under pressure as investors chewed over details of the impact of regulatory fines on Deutsche Bank.

The Yen and gold retreated for the first time in eight days. Bonds edged lower before Thursday’s ECB meeting, where few surprises are expected. Oil reversed course after earlier gains, slipping below $52 a barrel. Sterling, which soared more than 3 percent on Tuesday after Prime Minister Theresa May’s Brexit speech, fell back 0.7 percent.

The rise in German and eurozone December inflation was confirmed, and some expect the hawks at the ECB to push against the asset purchase program at tomorrow’s meeting. Having just secured the nine-month extension (of 60 bln euros rather than the current 80 bln euros) at the December meeting, it is too early to expect a change in either direction.

Draghi will likely note that the core CPI of 0.9% remains near the trough of 0.6% seen in early 2015. That implies the increase in the headline is mostly energy. In addition, yesterday’s bank lending survey for Q4 suggested that credit growth appeared to stall in Q4.

The euro’s rally yesterday met the 38.2% retracement of its losses since the US election a little below $1.0710. Support is now seen in the $1.0635-$1.0665 band. It may require a break of $1.06 to turn the technical indicators (MACD, Slow Stochastics) lower to boost confidence that a top is in place.

Global Assets gauges now:

gmm-18jan

 

Currencies The Bloomberg Dollar Spot Index added 0.4 percent at 11 a.m. London time, after retreating 1.3 percent on Tuesday to the lowest in a month.
The pound dropped 0.8 percent to $1.2311 after surging 3.1 percent on Tuesday. The euro slipped 0.3 percent to $1.0684 while the Russian ruble gained 0.3 percent.
The yen weakened 0.7 percent to 113.35 per dollar, after soaring 3.9 percent over the previous seven days.
Stocks The Stoxx Europe 600 Index fell 0.2 percent. Pearson Plc plunged 27 percent to the lowest since 2009 after cutting its profit forecast for this year.
Futures on the S&P 500 added 0.1 percent. The underlying gauge lost 0.3 percent on Tuesday.
The MSCI Emerging Markets Index rose 0.3 percent, poised for the highest closing level since Nov. 8.
Commodities The Bloomberg Commodity Index halted a five-day rally, retreating 0.4 percent.
West Texas Intermediate crude slumped 1.5 percent to $51.67 a barrel, the most in a week.
Gold lost 0.3 percent, snapping a seven-day winning streak that was the longest since November.
Iron ore futures slid 0.6 percent on the Dalian Commodities Exchange, also ending a seven-day stretch of gains
Zinc led industrial metals higher in London, climbing as much as 1.7 percent for the first daily advance this week. S&P Global raised 2017 price assumptions for zinc, copper and iron ore.
BondsYields on 10-year Treasuries climbed three basis points to 2.36 percent, after falling seven basis points on Tuesday.
Gilts yields rose, with the 10-year benchmark trading one basis point higher at 1.32 percent.

 

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