Here are the latest developments in global markets:
- FOREX: During the early European session, the US dollar was slightly weaker against the yen near 112.00 (-0.04%), with investors trading cautiously as the US President Donald Trump is said to announce new levies on China later today. The Eurozone Harmonized Consumer Price Index (HCPI) for the month of August released earlier today, confirmed the preliminary estimates. The yearly headline inflation remained the same as in the previous month at 2.0%, while the monthly gauge increased by 0.2% from -0.3% previously. Euro/dollar was moving higher by 0.21% at 1.1655 after the HCPI announcement. Pound/dollar was struggling to cross above 1.31, last seen at 1.3095 (+0.18%). In Brexit-related news, the London mayor Sadiq Khan called for another referendum on Britain’s European Union membership. Turning to the antipodean currencies, aussie/dollar traded higher by 0.34% on the day, though it held near 2 ½ -year lows as trade concerns continued to linger in the background, while kiwi/dollar was also up by 0.32% at 0.6568. Dollar/loonie was fluctuating around 1.3022, near its opening level.
- STOCKS: Most of the European stocks were in the red at 1045 GMT as investors resumed risk-off sentiment in speculation of additional US import tariffs on Chinese goods. The pan-European STOXX 600 fell by 0.13%, while the blue-chip Euro STOXX declined by 0.26%. The export-oriented German DAX 30 dropped by 0.46%, the French CAC 40 fell by 0.29%, whilst the Italian FTSE MIB rose by 0.51%. The British FTSE 100 decreased by 0.38%, while the Spanish IBEX 35 went up by 0.37% led by consumer non-cyclicals. In the US, indices tracking futures such as Nasdaq 100, S&P 500 and Dow Jones were poised to open lower but only modestly so.
- COMMODITIES: Oil prices edged higher on Monday despite the US Energy Secretary saying in Moscow on Friday that the US, Saudi Arabia, and Russia could raise global output in the next 18 months to mitigate supply shortfalls in Iran and other regions. Note that the NAFTA talks with Canada also made no progress so far. West Texas Intermediate (WTI) crude oil climbed by 0.68% to $69.46 per barrel and Brent advanced by 0.64% to $78.59 per barrel. In precious metals, gold is developing in a narrow range around $1195, adding 0.34% to its performance today.
Day ahead: Trade fears to weigh on sentiment; RBA meeting minutes awaited
In the remainder of the day, investors will be eagerly waiting for further updates regarding the US-Sino trade war as worries about tensions tightening even more between the nations resurfaced on Sunday. Particularly the Wall Street Journal reported on Sunday that Washington will activate import tariffs on Chinese goods as soon as today, though the size of the tariffs might be around 10% compared to 25% considered earlier. China is ready to take countermeasures in case Washington proceeds with its protectionist plans, with the Chinese foreign ministry also claiming today that talks between the countries on September 20 “should take place in on an equal footing”. The latter could be a signal that China will not hesitate to cancel talks if the US refuses to back down from additional frictions.
Brexit will be another topic in focus following negative comments by the IMF chief Christine Langarde today. The IMF chairwoman argued that the Institute is finalizing its forecasts for a reduction of UK economic growth in case of a no-deal Brexit while expecting many adverse effects as a result of the divorce. Moreover, she stressed that fiscal stimulus will not be helpful after the exit from the EU. Meanwhile, the Times newspaper stated that the EU Brexit negotiator is working on plans aiming to use technology to limit checks in the Irish border.
In terms of data releases, the New York Empire State Manufacturing Index published by the New York Federal Reserve Bank will be the main highlight in the calendar later in the day. Forecasts hint that manufacturing business conditions in the state have slowed down in September, with the index projected to drop by 2.4 points to 23.20.
Early on Tuesday at 0130 GMT, the Reserve Bank of Australia will publish minutes from its latest policy meeting on September 4 to give a detailed explanation about its decision to keep interest rates unchanged at a record low of 1.5% for the 24th consecutive month. Investors will be carefully reading the records of the meeting to identify any changes in the language that could indicate adjustments in policymakers’ appetite for further rate hikes in the future. Although the central bank reiterated that growth in the Australian economy will average a bit above 3.0% in 2018 and 2019, it maintained a cautious stance against US trade policy, characterizing it as a risk to the global growth outlook. Subdued household income remained a concern as well.
As for public appearances, at 1200 GMT, ECB Executive Board Member Yves Mersch will step up to the rostrum for the unveiling of the new €100 and €200 banknote at the ECB headquarters in Frankfurt.
