Markets
Today, global markets show no clear, unequivocal directional trend at the start of the new trading week. Asian equities traded mixed. European equities opened in negative territory after the UK orders tourists from Spain returning to the UK to adopt a 14 day quarantine. However, a rise in corona cases in several regions suggests that the reopening of the economy might also be scaled back in other regions of the EU. In line with the EMU PMI’s published on Friday, the July German IFO business climate index came out strong (cf infra), pointing to a solid rebound of activity. The report helped to put a floor for European equities, but regional indices still struggle to reverse initial losses. US equities opened in positive territory, an attempt to reverse at least part of last week’s decline with the Nasdaq again taking the lead. US June (Preliminary) durable goods orders were solid with most subseries printing even slightly above consensus (headline +7.3% M/M after a rise of 15.1% in May). Still the impact on trading was limited.
On the interest rate markets, the Bund future contract tried a test of Friday’s low in near the 176 level early this morning. However, the downside for core bonds again proved well protected. Despite a solid German IFO release, German yields reversed most of Friday’s rise. The German yield curve bull flattens with the 2-y yield 1.5 bp lower, but the 30-y declining 4 bp. US yields also decline marginally further as investors are counting down to Wednesday’s Fed meeting. On intra-EMU government bond markets, peripheral spreads finally showed a corrective widening after trading resilient last week. (Spain and Portugal +4bp; Italy & Greece +5bp). At a regular auction Belgium sold 805 mln of 2025 bonds at a yield of -0.547% (bid-to-cover cover 2.24) and 1.2 bln of 2029 bonds at a yield of -0.28% (Bid-to-cover 2.27). Later today; the US Treasury will sell $ 48 bln 2-year bonds and $49 bln 5-y bonds.
The intraday trading pattern in EUR/USD (and the dollar in general) was quite similar to what was often seen last week. The EUR/USD rally took pause during the European morning session, but USD selling resumed in the run-up to the start of US dealings. The EUR/USD ascent even accelerated with the pair meeting offers in the 1.1760 area, touching the highest level since September 2018. The trade-weighted dollar also accelerates its decline below the key 94.65 support, currently trading at around 93.65. USD/JPY is also holding below the 106 MT range bottom (currently 105.40 area). Gold ($1935 p/ounce) is holding within reach of the all-time record level touched this morning. Silver also jumped sharply higher after a pause on Friday. Ultra-low real rates combined with ample fiscal and monetary conditions world-wide continue to support scarce assets like gold and silver, with the USD decline also supporting the move.
There were no important data in the UK today. Cable is trending higher in the 1.28 big figure on broad USD weakness. At same time EUR/GBP drifted further north in the 0.91 big figure as the euro is also well bid across the board. EUR/GBP currently trades in the 0.9135 area. The 0.9176 range top is again coming with reach.
News Headlines
According to the German Ifo survey sentiment among German Business improved further in July. The business climate index rose from 86.3 to 90.5 in July, the third rise in a row. Both companies current situations’ assessment (84.5 from 81.3) and the expectations index (97.0 from 91.6) showed a further rise. The improvement was also visible in all subsectors including manufacturing, services and construction.
