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Higher-yielders got back on their feet as New York session traders were in a much better mood thanks to upbeat earnings and economic data. Because of that, the lower-yielding yen found itself behind the pack.

Sterling also pared some of its intraday gains as the spotlight returned to Brexit, with a lot of uncertainty still in play ahead of the EU Summit.

  • U.S. industrial production up 0.3% vs. 0.2% forecast, 0.4% previous
  • U.S. capacity utilization rate steady at 78.1% vs. 78.2% consensus
  • New Zealand GDT dairy auction yielded 0.3% drop in prices
  • U.S. JOLTS job openings up from 7.08M to 7.14M in Aug vs. 6.90M forecast
  • EU to offer Brexit transition extension of one year?
  • Tusk: No grounds for optimism in Brexit talks before EU Summit
  • Trump: “My biggest threat is the Fed”
  • U.S. equity indices post more than 2% in gains

Major Events/Reports:

Return of risk-taking?

Wall Street traders woke up on the right side of the bed, greeted by positive earnings figures from the likes of Goldman Sachs and Netflix, as well as stronger than expected economic data.

  • Dow 30 index is up 547.87 points to 25,798.42 (+2.17%)
  • S&P 500 index is up 59.13 points to 2,809.92 (+2.15%)
  • Nasdaq is up 214.75 points to 7,645.49 (+2.89%)

The JOLTS jobs report also got some credit for putting investors in good spirits, as the August reading came in at 7.14 million versus the estimated dip to 6.90 million. Note that the July figure also enjoyed an upgrade from 6.94 million to 7.08 million, reflecting employment opportunities abound and hinting at sustained hiring gains in the months ahead.

The U.S. industrial production figure also came in slightly better than expected at 0.3% versus the estimated 0.2% uptick while capacity utilization held steady at 78.1%. Meanwhile, the housing market also reported an improvement with the NAHB index up from 67 to 68 as expected to signal stronger builder confidence.

With this shift in sentiment, gold returned its previous gains while crude oil advanced, also getting a boost from expectations of supply constraints. Keep in mind that there is tension brewing between the U.S. and Saudi Arabia on the disappearance of journalist Jamal Khashoggi, so the latter might not be willing to give in to Trump’s demands to increase output.

  • Gold fell to $1,224.08 per troy ounce (-0.27%)
  • WTI crude oil ticked higher to $71.86 per barrel (+0.10%)

Brexit extension buzz

According to a report on Financial Times, EU negotiator Barnier might be willing to extend the Brexit transition period by a year to accommodate a “two-tier backstop” solution.

Citing remarks from EU diplomats, the report revealed that Barnier told officials from 27 member states that they are ready with new proposals to reach a Brexit deal by next month. One of these is an extension of the transition period by a year, which would give the parties more time to iron out the customs checks in Northern Ireland.

According to one of its sources, these concessions would be offered only if all the other parts of the Withdrawal Agreement are reached. Another diplomat stated that the extension is an indication of how the EU can be flexible to help the U.K.

Meanwhile, a separate report from German newspaper Frankfurter Allgemeine Zeitung also suggested that the EU is offering to let the U.K. stay in the bloc beyond the transition period.

On a less upbeat note, European Council President Tusk said that there are “no grounds for optimism” on Brexit talks leading up to the EU Summit. He reiterated that he will press U.K. PM May for “concrete proposals to break the impasse” since goodwill won’t be enough to secure a deal.

Major Market Mover(s):

JPY

The Japanese currency slumped across the board as traders dumped their lower-yielding holdings to chase riskier assets.

USD/JPY rose from 111.99 to a high of 112.26; EUR/JPY climbed from 129.67 to 130.29 then retreated to 129.85; CAD/JPY is up from 86.38 to 86.90; AUD/JPY rallied to 80.19, and NZD/JPY rose to the 74.00 handle.

GBP

Sterling erased most of its intraday gains as Brexit pessimism returned ahead of the EU Summit this week. It didn’t help that there are also rumors that the November special Brexit Summit might be canceled.

GBP/USD retreated from 1.3231 to 1.3170; EUR/GBP bounced back to the .8800 area; GBP/AUD dipped from 1.8565 to 1.8441; GBP/NZD is down to 2.0035, and GBP/CAD fell to 1.7057.

Watch Out For:

  • 11:30 am GMT: Australia’s MI leading index m/m (0.1% previous)