Markets – The Mixed, the High and the Low
GOOD MORNING CMTRADING
Asian equities trade mixed in the wake of a weak Wall St lead amid Fed rate hike concerns and the latest ECB source reports
• Sources suggested the ECB are near consensus in order to tape QE and scenarios could involve lowering the QE monthly program by EUR 10bln/month
• Looking ahead, highlights include Services and Composite PMI's from UK, Germany, France and US, US ADP Employment Change, US Factory orders, DOE's and BoE's Broadbent Speaks
Asia equity markets traded mixed following the weak lead from Wall St. where Fed rate hike concerns and unsubstantiated reports of the ECB near a consensus on tapering QE pressured sentiment. ASX 200 (-0.4%) was dragged by miners after declines across the metals complex which saw gold prices slump over USD 43/oz to its lowest levels since the Brexit vote. Nikkei 225 (+0.6%) outperformed on a weaker JPY after USD/JPY tested 103.00 to the upside. Hang Seng (+0.6%) saw choppy trade amid a lack of drivers with China away from market.
Sources suggested the ECB are near consensus in order to tape QE and scenarios could involve lowering the QE monthly program by EUR 10bln/month to a total of EUR 70bln. However, reports also suggested that the program could extend beyond its current deadline of March 2017. Furthermore, reports also suggested the ECB will extend their economic projection horizon by 1 year in December to 2019. However, this was later with reports stating the ECB will not comment on the speculation and that Draghi has made it clear that the council has not discussed this. Of note the ECB QE program is currently at EUR 80bln/month. Ahead of last month's ECB meeting, analysts had suggested the central bank may announce an expansion of their ECB program, however this did not materialize.
UK BRC Shop Price Index (Sep) (Y/Y) -1.80% (Prev. -2.00%).
TheCityUK lobby group warned that Britain leaving the EU’s single market could cost banks and associated businesses in the UK close to GBP 40bln in lost revenue. Furthermore, they state that almost 70,000 jobs and GBP 10bln of tax revenue are at risk from a hard Brexit, according to sources.
UKIP's Diane James quit after just 18 days as the party leader.
Commodity linked currencies recovered from yesterday’s lows as USD pared some of its recent gains, coupled with support in oil prices after a significant API drawdown. This benefitted AUD and CAD, while NZD/USD failed to capitalize and remained at a sub-0.7200 level following the decline in milk prices at the GDT auction. The remainder of currencies were uneventful in Asia trade with the US VP Debate also failing to spur price action, which saw USD/JPY hold on to yesterday’s advances and stay in proximity to retest 103.00, while GBP/USD took a breather from its latest sell-off in which the pair dropped to a 31-year low.
WTI crude futures traded higher and reclaimed USD 49.00/bbl, with prices supported by a drawdown in US API Crude Inventories. Gold (+0.5%) was marginally higher during Asia trade as the precious metal attempted to salvage some of yesterday’s collapse in which futures declined by the most since 2013 and broke below the key USD 1300/oz level to finish lower by USD 43.00/oz, as markets priced in prospects of a December Fed hike. Copper prices remained near yesterday’s lows alongside cautious risk sentiment across the metals complex.
US API Crude Oil Inventories (Sep 30) W/W -7600K (Prev. -752K).
Fed's Evans (Non-Voter, Dove) Fed's Evans says he is less concerned about the timing of the next rate move, although there should be a very shallow path of rate hikes. Evans also commented he sees downside risks to the inflation outlook and would like to see core inflation move towards 2%.
US VP candidates Senator Kaine and Indiana Governor Mike Pence went head to head at the VP debate in which topics such as foreign policy and Donald Trump’s taxes were discussed. Republican candidate Pence was seen by some to have been the stronger candidate at the debate and maintained a calm demeanor throughout.
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