Here are the latest developments in global markets:
- FOREX: Although the British Cabinet approved the EU-UK divorce terms agreed between the sides on Tuesday, the deal threw British politics into chaos as Theresa May faces a possible vote of no confidence. Opposition to May’s Brexit plans is growing as the Brexit Secretary Dominique Raab as well as a few other ministers decided to resign on Thursday, expressing in that way their opposition to the deal struck. The news fuelled strong doubts about whether the UK PM could ever pass the withdrawal bill through Parliament and if she could eventually survive this political risk, with pound/dollar experiencing a sharp sell-off towards a two-week low of 1.2749 before inching up to 1.2804 (-1.45%). Pound/yen posted a deeper decline of 1.57%, while euro/pound surged by 1.40%. Retail sales out of the UK disappointed as well in October despite an upward revision in September’s readings. The euro did not perform much better as apart from Brexit, the Italian budget proposals were also threatening eurozone finances as Rome decided to stick to its plans, while the trade standoff with the US over potential import tariffs on EU cars was another headache. Euro/dollar touched an intra-day low of 1.1269 before approaching the 1.1300 level (-0.02%). Euro/yen pulled back by 0.17%. The dollar index recovered by 0.35% as investors were selling the euro and the pound which account for around 70% of the weigh in the index, while dollar/yen eased further to 113.43 (-0.16%). Meanwhile on the trade front, reports stated on Wednesday that the Chinese government offered some concessions to the US to help negotiations to move forward, adding evidence to speculation that the two nations are still willing to solve their trade dispute diplomatically. The antipodean currencies were in the green after an encouraging Australian employment report, with aussie/dollar and kiwi/dollar up by 0.43% and 0.18% respectively. Dollar/loonie held flat at 1.3230.
- STOCKS: At 1240 GMT, the pan-European STOXX and the blue-chip Eurostoxx 50 retreated by 0.38% and 0.12% respectively with financials and consumer cyclicals losing the most. The German DAX 30 rose by 0.22%, the French CAC 40 declined by 0.13% and the Italian FTSE MIB weakened by 0.30%. In the UK, FTSE 100, benefitted on the back of a falling pound, inching up by 0.18%. In Asia, most of equities closed higher apart Japanese stocks which finished the session with small losses. In the US, futures tracking the S&P 500, Dow Jones and Nasdaq 100 were trading marginally lower.
- COMMODITIES: Crude prices were on recovery but still near one-year lows. WTI crude and the London-based Brent turned higher to $56.41/barrel (+0.28%) and $66.72 (+0.91%) respectively. In previous metals, gold was flattening around $1,210/ounce after a respectful rally on Wednesday.
Day Ahead: Eyes on Brexit deal; US retail sales and initial jobless claims on the calendar
Brexit is the major headline of the day as a row of ministers quit in protest to the draft plan the UK PM and the EU have agreed, raising serious concerns about May’s future as a leader. The resignation of the British Brexit negotiator Dominic Raab, who replaced David Davis in July, was the trigger behind the pound’s sharp sell off today. Raab expressed through his notice letter that he cannot support the deal as the regulatory regime proposed for Ireland presents a threat to the integrity for the country and the EU holds a veto over the ability to exit. Hitten by four Cabinet departures so far today, May seems to be close to face a no-confidence vote as the letters against the UK PM seem to be increasing, with the Parliamentory member, Jacob Rees Mog said to be ready to submit his own letter on Thursday. Note that it needs 48 letters in total for a no-confidence vote to be called. Sources stated that May will meet the head of the 1922 Conservative party committee later today.
Turning to the economic calendar, weekly jobless claims – initial and continued – will come out of the US at 1330 GMT. The number of people claiming unemployment benefits for the first time in the week ending November 10 is anticipated to be 212k, little changed from the preceding week’s 214k. The world’s largest economy will also see the release of October retail sales at the same time. According to the predictions, sales will tick higher by 0.5% m/m, faster than in the previous month when the figure printed a 0.1% increase. Excluding automobiles, core retail sales will inch up by 0.5% m/m, after declining by 0.1% in the prior month.
In energy markets, investors will look through the EIA report on US crude oil inventories. Analysts forecast that crude inventories have jumped by 3.182 million barrels in the week ending November 9 compared to a rise of 5.783 million in the prior week.
As for public appearances today, several speeches are scheduled in the day, starting with the ECB Chief Economist Peter Praet at 1310 GMT. Later, at 1630 GMT Federal Reserve Chairman Jerome Powell will be participating in a listening session, while Atlanta and Minneapolis Fed Presidents, Raphael Bostic and Neel Kashkari, will be commenting at 1800 GMT and 2000 GMT respectively.
