Fundamental Analysis

Brexit Bears Lead Pound; Stocks Continue Declining; BOC Rate Decision Pending

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Here are the latest developments in global markets:

Forex: Sterling stretched toward a fresh one-week low of 1.3360 (-0.61%) as fears over a potential impasse in Brexit talks, which could postpone negotiations until February and therefore scale back business investments, lingered in the background. The dollar steadied versus the yen near one-week lows as concerns over a government shutdown offset positive sentiment related to the delivery of tax reforms. The euro was trading flat against the greenback at 1.1824, while versus sterling it managed to reverse earlier losses, picking up to a session high of 0.8852 (+0.47%). The aussie was moving sideways around one-week lows of 0.7580 after a miss in GDP growth readings (-0.21%). Dollar/loonie inched down to 1.2667 (-0.17%).

Stocks: A strong selloff in tech shares and basic metals continued to lead the drag in European stocks on Wednesday. The benchmark STOXX 600 was down by 0.56% at 1130GMT with all sectors trading down. The Spanish IBEX 35 declined by 0.93%, the German DAX 30 lost 0.92% and the French CAC 40 fell by 0.40%. The British FTSE 100 rebounded on the back of a weaker pound.

Commodities: Oil prices continued to fall as markets perceived the rise in US refinery inventories in the API weekly report as a weakness in demand. WTI crude tumbled by 1.27% to $56.90 per barrel and Brent slipped by 1.0% to $62.18. Gold was steady at $1,267.50 per ounce, trading near four-month low levels.

Day ahead: ADP employment might slow; BOC rates expected steady

The release of the ADP nonfarm employment report out of the US and a final settling of interest rates for this year by the Bank of Canada are expected to be the main highlights on Wednesday.

At 1315GMT, the US-based ADP Research Institute will publish readings on nonfarm employment, indicating the number of jobs added to the private sector in November. The report, which provides a snapshot of US nonfarm payrolls due on Friday, is expected to show a smaller increase of 185,000 positions compared to a six-month high of 235,000 seen in October.

Next in focus would be the Bank of Canada's rate announcement at 1500GMT. Despite November's impressive employment readings, the central bank will likely keep rates on hold as the annualized GDP growth seems to be slowing down, while consumers are struggling to meet their debt obligations as wage growth remains subdued. However, the monetary policy statement following the decision could bring some volatility to the loonie if policymakers use a different language to express their views on the economic outlook.

In energy markets, investors will look through the EIA report on US crude oil inventories. According to forecasts, crude inventories will drop by 3.40 million barrels in the week ending December 1 compared to a fall of 3.42 million in the preceding week. On the other hand, gasoline inventories and distillate stocks are anticipated to increase though not by much.

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