Equities and high-yielding currencies got a boost at the start of the week thanks to traders picking up “bargains” in the markets.
The pound missed the bus, however, as Brexit-related headlines popped up over the weekend and inspired uncertainty among investors.
- Japan’s PPI (y/y) increased by 2.9% vs. 2.8% expected, 3.0% previous
- Brexit uncertainty weighs on GBP
- Japan PM Shinzo Abe calls for more fiscal stimulus
- Oil prices jump on Saudi Arabia decision to cut December supply
GBP gaps lower on Brexit uncertainty
With less than five months to go before Britain officially leaves the European Union, investors are getting jittery over the lack of progress on a Brexit deal.
Word around the hood is that the EU had rejected Theresa May’s plan for an independent mechanism that would oversee Britain’s departure from any temporary customs arrangement.
It also didn’t help that a report from Sunday Times over the weekend implied that as many as four anti-Brexit ministers are on the verge of quitting the government over the issue.
Last but not the least, May canceled a Monday cabinet meeting that many had expected to lead to a Tuesday deal being signed.
Overall, the weekend’s headlines reduced the odds of a November deal and caused more uncertainty among pound traders.
Shinzo Abe calls for more fiscal stimulus
In his speech before the Council on Economic and Fiscal Policy (CEFP), Prime Minister Shinzo Abe called for a new public works spending program by H1 2019.
The program, which is expected to kick in at the first half of the fiscal year, is expected to help offset a slowdown in consumer spending when the sales tax hike kicks in in October.
Abe didn’t mention a specific amount for the program, though he remarked that the program would help strengthen infrastructure to withstand earthquakes and frequent flooding.
At the end of the event Economy Minister Toshimitsu Motegi shared that Abe has asked him to take “firm measures” to ensure economic recovery.
Saudi Arabia to cut supply in December
Saudi Arabia’s Energy Minister Khalid-al-Falih shared that Saudi Aramco’s customer crude oil nominations will decline by 500,000 barrels per day in December due to “seasonal lower demand.”
Market geeks estimate the decision to represent a reduction of about 0.5% in global oil supply.
The decision, which came after declines in Black Crack prices, helped boost the commodity higher across the board today.
Bargain-hunting pushes equities higher
The Asian bourses started on a weak note as traders took cues from Wall Street’s weak performance. However, the tides changed as soon as bargain hunters stepped in.
- Nikkei is up by 0.10% to 22,273.4
- A SX 200 is up by 0.82% to 5,930.3
- Hang Seng is up by 0.31% to $25,681.3
- Shanghai index is up by 0.67% to 2,616.292
Commodity prices also recovered, with gold taking a breather from the dollar’s post-FOMC gains while crude oil benchmarks rocketed on the back of Saudi Arabia’s supply announcement.
- Gold is up by 0.04% to $1,210.10 per troy ounce
- Brent crude oil is up by 2.14% to $71.11 per barrel
- U.S. WTI is up by 1.69% to $60.82 per barrel
Major Market Mover(s):
JPY and CHF
Not surprisingly, safe havens like the franc and the yen took hits amidst the risk-friendly trading environment.
USD/JPY is up by 21 pips (+0.19%) to 114.01; EUR/JPY is up by 12 pips (+0.10%) to 128.11; NZD/JPY is up by 24 pips (+0.31%) to 76.88; AUD/JPY is up by 21 pips (+0.25%) to 82.42, and CHF/JPY is up by 12 pips (+0.11%) to 113.27.
USD/CHF is up by 12 pips (+0.12%) to 1.0065; AUD/CHF is up by 12 pips (+0.17%) to .7276; NZD/CHF is up by 16 pips (+0.23%) to .6787, and CAD/CHF is up by 23 pips (+0.30%) to .7633.
The pound traded lower across the board as weekend headlines did little to clear up Brexit-related uncertainties.
GBP/USD is down by 42 pips (-0.32%) to 1.2931; GBP/JPY is down by 19 pips (-0.13%) to 147.43; GBP/CHF is down by 26 pips (-0.20%) to 1.3015; GBP/CAD is down by 81 pips (-0.48%) to 1.7051; GBP/NZD is down by 67 pips (-0.35%) to 1.9177, GBP/AUD is down by 61 pips (-0.34%) to 1.7887, and EUR/GBP is up by 23 pips (+0.26%) to .8757.
Watch Out For:
- 6:00 am GMT: Japan’s preliminary machine tool orders (y/y)
- 9:00 am GMT: Italy’s industrial production (-0.5% expected, 1.7% previous)
- U.S. and Canadian banks on holiday today