Europe is starting the week on an upbeat note. And the safe-haven Swissy apparently didn’t like that since it got sold off across the board. Despite the risk-on vibes, however, the safe-haven yen managed to stage a broad-based recovery after getting a good beating during the earlier Asian session.
- German trade balance: €20.3 vs. €28.1B expected, €28.4B previous
- Euro Zone Sentix investor confidence: 28.3 vs. 28.1 expected, 28.4 previous
Last week’s commodities rout was apparently extended during today’s morning London session.
Precious metals were down.
- Gold was down by 0.03% to $1,209.35 per troy ounce
- Silver was down by 1.23% to $15.236 per troy ounce
Base metals were also in negative territory.
- Copper was down by 0.30% to $2.639 per pound
- Zinc was down by 0.47% to $2,774.00 per dry metric ton
Oil benchmarks were hit the hardest.
- U.S. WTI crude oil was down by 1.20% to $43.70 per barrel
- Brent crude oil was down by 1.16% to $46.17 per barrel
The U.S. dollar index was up by 0.14% to 95.91 for the day when the session ended.
And that may have weighed down on commodities since a stronger Greenback means that commodities are relatively more expensive.
As for the extra hard slide in oil prices, market analysts blamed that on renewed oversupply jitters after U.S. oil output and the number of U.S. oil rigs both increased last week.
Some risk-taking to start the week
The risk-on vibes from the earlier Asian session was sustained during the morning London session.
- The pan-European FTSEurofirst 300 was up by 0.31% to 1,499.09
- Germany’s DAX was up by 0.32% to 12,428.25
- The blue-chip Euro Stoxx 50 was up by 0.27% to 3,470.50
U.S. equity futures were also in an upbeat mood, signaling that the risk-on vibes may carry over into the U.S. session.
- S&P 500 futures were up by 0.04% to 2,423.25
- Nasdaq futures were up by 0.24% to 5,669.12
Aside from risk sentiment spillover, market analysts attributed the risk-on vibes to deal-making in the European banking and utilities sectors, as well as German shares getting a broad boost from positive data, which then caused overall risk sentiment to improve.
Global bond yields tumble
Bonds were in demand during the session, which cause bond yields to dive lower, even though there were signs of risk-taking during the session.
- French 10-year bond yield up by 3.29% to 0.904%
- German 10-year bond yield up by 5.98% to 0.535%
- U.K. 10-year bond yield up by 2.98% to 1.270%
- Canadian 10-year bond yield up by 1.96% to 1.847%
- U.S. 10-year bond yield up by 0.99% to 2.369%
Most market analysts attributed the drop in global bond yields to an earlier Bloomberg report which showed that Japanese investors were buying up U.S. and European government bonds.
However, some market analysts also said that the slide in bond yields (European bond yields in particular) was due to expectations of a future ECB tapering beginning to fade away or run out of steam.
Major Market Mover(s):
The safe-haven Swissy was the worst-performing currency, very likely because of the risk-on vibes during the morning London session. Although SNB meddling is always a possibility.
USD/CHF was up by 31 pips (+0.32%) to 0.9667, EUR/CHF was up by 15 pips (+0.14%) to 1.1010, GBP/CHF was up by 32 pips (+0.26%) to 1.2452
The yen is a considered as a safe-haven currency as well. However, the yen just shrugged off the risk-on vibes and staged a broad-based recovery, probably because global bond yields were falling during the session.
USD/JPY was down by 6 pips (-0.05%) to 114.15, CAD/JPY was down by 28 pips (-0.32%) to 88.33, CHF/JPY was down by 37 pips (-0.33%) to 118.07
The Greenback was the second best-performing currency after the yen. There was no apparent catalyst for the Greenback’s strength, but some market analysts pointed to continued optimism after last Friday’s net positive NFP report caused odds for a December rate hike to rise, as well as speculation that Fed Head Yellen will give a hawkish message when she testifies this week.
EUR/USD was down by 20 pips (-0.18%) to 1.1388, GBP/USD was down by 24 pips (-0.19%) to 1.2880, AUD/USD was down by 16 pips (-0.21%) to 0.7591
Watch Out For:
- 2:00 pm GMT: U.S. labor market conditions index (2.3 previous)
- 7:00 pm GMT: U.S. consumer credit ($12.1B expected, 8.2B previous)
- 1:00 pm GMT: BRC’s U.K. retail sales monitor (-0.4% previous)