Markets
European breakfast trading centered around “Bread” and “Butter” this morning. The two turkeys who were granted a presidential pardon by US President Trump ahead of tomorrow’s Thanksgiving holiday grabbed most headlines. It underscores the trading environment we’re stuck in for the past weeks. Core bonds oscillated near opening levels while EUR/USD almost flatlined just north of 1.10. Sentiment on European stock markets remained bullish, but less outspoken than in previous days. The Euro Stoxx 50 is testing the 3719/3733 resistance area. The EMU eco calendar only contained diverging regional consumer confidence in France (stronger-than-expected and improving) and Italy (weaker-than-forecast and deteriorating). Trading dynamics luckily changed as US investors entered dealings. The first batch of US eco data (weekly claims, Q3 GDP revision & durable goods orders) positively surprised friend and foe, pulling core bonds lower. US Treasuries obviously underperform German Bunds, also taking into account tonight’s 7-yr Note auction. US yields add 2 to 2.5 bps across the curve. Changes on the German yield curve are more modest and limited to 1 bp. 10-yr yield spread changes vs Germany are negligible.
The dollar benefited from the US eco data on FX markets. The trade-weighted greenback (DXY) is close to testing 98.45 short term resistance. USD/JPY is knocking on the 109.32/49 door and EUR/USD is flirting with 1.10/1.0989 support. EUR/GBP changes hands in the familiar zone between 0.8550 and 0.86 ahead of tonight’s release of YouGov’s eagerly awaited Multilevel Regression and Post-stratification (MRP). This election poll is based on a huge sample, around 50 000 people, and was the only one to correctly predict that Theresa May would lose her Conservative majority back in 2017. The MPR predicts the outcome of the Dec 12 election seat by seat. MRP tries to identify different types of voters and makes assumptions on how many of each type lives in each constituency.
News Headlines
US early morning data printed strong today. US Q3 growth was upwardly revised to 2.1% Q/Q from 1.9% reported in a first estimate last month. The upward revision was mainly due to a higher inventory build-up and a less pronounced decline in business investment. Regarding investment, the US durable goods orders for October also printed well above market expectations. Overall orders rose 0.6% M/M while a monthly decline of 0.9% was expected. ‘Core’ orders’ measures ex transportation (+0.6% M/M) and capital goods orders non-defense ex aircraft (1.2%) were strong. The latter was the strongest since January. Shipments (0.8% M/M), if confirmed, also suggested a positive contribution to Q4 growth. Finally, US jobless claims declined after a few weeks of slightly more elevated levels. Claims in the week up to Nov 23 declined from 228 000 to 213 000.
French consumer confidence unexpectedly jumped higher in November from 104 to 106. The market expected a slight easing to 103. The November reading is the highest level since June 2017. French consumers became less concerned about unemployment and their assessment on the general economic outlook improved.
According to Russian and OPEC sources, Russia is likely to ask OPEC+ oil producers to change the way its oil production is measured at the December meeting in Vienna. Russian wants an alternative measure for its condensate production, a light type of crude which is mainly the result of gas production. Russia starting production of gas fields might cause the country to surpass the production quota reached under pact with OPEC and non-OPEC measures.
