Here are the latest developments in global markets:
- FOREX: Growth in British average earnings (excluding bonuses) in August came in stronger than expected at 3.1% y/y versus forecasts of 2.9%, helping pound/dollar to rally as high as 1.3227 early in the European session before slipping back to 1.3219 (+0.51%). Employment declined, though, by 5k missing forecasts of a 11k rise and the unemployment rate matched expectations, remaining unchanged at 4.0%. Optimistic comments by a German government official who said that a Brexit deal could be achieved by November added to the positive sentiment. Yet, another EU speaker claimed that December’s EU summit could work better for Brexit. Pound/yen surged by 0.62%, while euro/pound retreated by 0.44%. Euro/dollar eased marginally by 0.04% on Tuesday as the ZEW Indicator of Economic Sentiment for Germany dropped to a level of -24.7 in October from -10.6 previously and the Eurozone trade balance ticked lower to 11.7 billion euros in August from 17.6 billion in July. Dollar/yen was trading slightly above the 112.00 round number, paring yesterday’s losses and adding 0.30% to its performance today. In the antipodean sphere, kiwi/dollar was standing higher at 0.6579 (+0.45%), slowly approaching the two-week high of 0.6595 it marked earlier today in the wake of upbeat CPI figures. On the other hand, aussie/dollar was consolidating around 0.7128. Meanwhile, dollar/loonie continued to lose ground, slipping below 1.3000 (-0.24%) after a quarterly business survey by the Bank of Canada raised stakes for a rate hike as soon as next week.
- STOCKS: European stocks were moving higher at 1115 GMT except for the British FTSE 100 which was losing 0.33% on the back of a rising pound. The pan-European STOXX 600 was up by 0.62%, while the blue-chip Euro STOXX 50 increased by 0.19%. The German DAX 30 rose by 0.39% and the Spanish IBEX 35 ticked significantly higher by 1.0% led by utilities and industrials. Also, the French CAC 40 rose by 0.30% and the Italian FTSE MIB advanced by 0.96%. US stocks are poised to open higher according to US mini futures after a strong negative session on Monday.
- COMMODITIES: Oil prices declined during the early European session on Tuesday on expectations of an increase in US crude inventories. Furthermore, Iran’s oil minister said earlier that Trump cannot bring oil prices down with threats. WTI crude slipped by 0.88% to $71.15 per barrel and Brent moved down by 0.82% near $80.12. Gold extended north to $1229.34, near yesterday’s 2 ½-month highs.
Day Ahead: Brexit closely watched; US industrial production & JOLTS Job openings pending
Brexit developments are likely to keep investors busy in the next couple of days, while US-Saudi Arabia geopolitical tensions will remain under the spotlight as the disappearance of the Saudi Washington Post columnist remains a puzzle. The latter, however, could have a smaller weight on the sentiment following headlines stating that Saudi Arabia is set to admit that the death of the missing journalist is a result of interrogation that went wrong. Meanwhile the US Secretary of State Mike Pompeo will be visiting the Saudi King Salman to discuss the case, which created frictions between the nations.
In Brussels, Eurozone leaders prepare for a two-day summit starting on Wednesday, with Brexit being ranked high in the agenda. While the pound has been recovering swiftly after Monday’s downside opening, the British currency could easily give up gains in the coming days if the EU summit produces no breakthrough, putting November’s 17-18 gathering into question. If talks fail this week, governments may judge that November’s meeting should be abandoned and talks should resume in December when another scheduled summit will take place. Yet any delay to secure an agreement and the lack of progress would raise the prospect of a no-deal exit.
Comments regarding the Italian budget will be closely monitored. The Italian government approved and submitted to the European Commission a budget plan which aims for a deficit of 2.4% of GDP in 2019 and promises to reduce public debt from the current 131% to 126.7% by 2021. Yet remarks from the President of the European Commission, Jean-Claude Junker today indicate that Italy’s fiscal demands are not so welcome; Junker argued that some countries in the union would use a disrespectful stance against the EU if the budget overshoot gets a green light.
Turning to economic releases due later today, at 1315 GMT industrial production out of the US is anticipated to slow down in September, posting a monthly growth of 0.2% compared to 0.4% in August. A few minutes later at 1400 GMT, the JOLTS Job openings are projected to show that new positions increased by 6,945 in August from 6,939 in the preceding month, while the housing market index surveyed by the National Association of Home Builders is expected to steady in October.
In New Zealand, the outcome of milk auctions will likely add further volatility to the kiwi which found substantial support from upbeat CPI readings early in the Asian session. The time of delivery is tentative.
In energy markets, the API weekly report on US crude inventories will be awaited at 2030 GMT.
In equities, the earnings season continues, with Netflix reporting its Q3 results after the US Open.
As of today’s, public appearances, San Francisco Fed President Mary Daly (voting FOMC member in 2018), will be giving a lecture at 2015 GMT at Wellesley College, while RBA Deputy Governor Guy Debelle will be speaking at the 2018 Citi Conference at 2120 GMT. Elsewhere, Asia-Pacific Economic Cooperation (APEC) finance ministers will be meeting in Papua New Guinea.
