Tag: CNH

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A nervous beginning to the start of the week

by admin 22.10.2018

Monday October 22: Five things the markets are talking about

Global equities remain better supported this Monday morning after Chinese stocks surged overnight on senior officials verbal intervention.

The ‘mighty’ U.S dollar has eased a tad along with treasuries, while Italian bonds have rallied.

The EUR had found some early support on the back of a ratings decision by Moody’s Investors Service late last Friday who removed the immediate threat of a downgrade to ‘junk.’ The market now awaits on S&P’s review this Friday.

Nevertheless, risks remain, from tension surrounding the Khashoggi murder and the ongoing Sino-U.S trade showdown to Italian budget fears and President Trump’s unpredictability ahead of U.S midterm elections.

On tap for this week, the Bank of Canada (BoC) is expected to increase its policy rate by +25 bps to +1.75% on Wednesday (Oct 24) despite last Friday’s disappointing inflation and retail sales readings.

Elsewhere, the European Central Bank (ECB) is expected to leave policy unchanged, but questions regarding Italy and its budget issues are expected to be front and center.

In Scandinavia, Sweden’s Riksbank and Norway’s Norges bank take center stage mid-week.

Stateside, earnings season gathers pace with notable highlights including Amazon, Alphabet, Intel, Verizon, Microsoft, Twitter, McDonald’s, and Caterpillar.

1. Stocks in the black

Japan’s Nikkei edged higher, supported by a rally in Chinese stocks on the promise of additional stimulus measures, triggering buying in firms exposed to China. The Nikkei share average rallied +0.37%, moving off a six-week low hit during last Friday’s session. The index is now down around -7.5% since hitting a 27-year high on Oct. 2. The broader Topix edged +0.15% higher.

Down-under, Aussie stocks ended lower on Monday, as political concerns rattled investors after the governing coalition looks set to lose its one-seat majority in parliament following a weekend by-election. The S&P/ASX 200 index closed -0.6% lower. In S. Korea, the Kospi stock index climbed on Monday supported by a strong Chinese market. The index rallied +0.5%.

In China, stocks surged overnight in the wake of coordinated statements of support by senior regulators, and as China prepares to overhaul its income tax law for individuals. The benchmark Shanghai Composite index was +4.2% higher, while the blue-chip CSI300 index jumped +4.4%.

The gains extended to Hong Kong, where the Hang Seng index added +2.3% and the China Enterprises Index ended +2.6% higher.

In Europe, indices trade higher across the board. Italy’s FTSE MIB outperforms after Moody’s cut the countries rating to the lowest investment grade, but put the outlook as stable, helping BTP futures rally.

U.S stocks are set to open in the ‘black’ (+0.1%).

Indices: Stoxx600 +0.22% at 362.02, FTSE +0.26% at 7,066.00, DAX +0.52% at 11,614.01, CAC-40 +0.24% at 5,096.82, IBEX-35 +0.73% at 8,957.30, FTSE MIB +0.66% at 19,205.50, SMI +0.30% at 8,892.50, S&P 500 Futures +0.18%

2. Brent oil back above $80 as Iran sanctions loom

Brent crude oil prices remain better bid as markets are expected to tighten once U.S sanctions against Iran’s crude exports come into effect in November.

Brent crude oil futures are at +$80.26 a barrel, up +48c, or +0.6%, above Friday’s close. U.S West Texas Intermediate (WTI) crude futures are at +$69.60 a barrel, up +48c, or +0.7%.

Note: The U.S sanctions on Iran, the third-largest producer in OPEC, are set to start on Nov. 4.

OPEC agreed in June to boost supply to make up for the expected shortfall in Iranian exports, however, recent data suggests that OPEC is struggling to add barrels as an increase in Saudi supply was offset by declines elsewhere.

Nevertheless, relief may come from the U.S, where offshore drillers added four oilrigs in the week to Oct. 19, bringing the total count to 873, according to Baker Hughes data on Friday. After months of stagnation, U.S crude production is expected to rise.

However, undermining sentiment is weaker China growth data and the ongoing Sino-U.S trade dispute. The full impact of the trade war is expected to hit markets early next year and provide a considerable drag on oil demand.

Ahead of the U.S open, gold prices have edged higher overnight towards their three-month peak hit last week, as the ‘big’ dollar eased and worries over rising political tensions slowing global economic growth lent support to the ‘yellow’ metal. Spot gold is up +0.1% at +$1,226.52 an ounce, while U.S. gold futures are also up +0.1% at +$1,229.50 an ounce.

3. Italian yields drops by most in 4-months on Moody’s decision

Italian sovereign yields dropped across the curve after ratings agency Moody’s kept the country’s sovereign ratings outlook ‘stable’ while delivering an expected downgrade last week. The market was worried that the outlook would be ‘negative.’

Note: S&P’s review is expected this Friday (Oct 26). It now rates the country two notches above junk at BBB.

Italy’s five-year BTP yield dropped -36 bps to a two-week low of +2.63%, while the benchmark 10-year yield was -26.5 bps lower at +3.39%, its biggest daily drop in four-months. The BTP/Bund 10-year yield spread tightened to +284 bps.

Elsewhere, the yield on the U.S 10-year note rose +1 bps to +3.20%, while Germany’s 10-year Bund yield increased + 2bps to +0.48%. In the U.K, the 10-year Gilt yield climbed +1 bps to +1.588%.

4. Dollar quiet across the board

The EUR/USD is a tad lower at €1.1515 after testing a high of €1.1550 overnight on the back of a relief rally in the 10-year BTP/Bund spread. Nevertheless, event risk persists ahead of the deadline for Italy to respond to the E.U Commission’s initial objections over the 2019 budget plan.

Expect Thursday’s ECB meeting to be closely watched, especially Draghi’s press conference, where the market is looking for more color on how the ECB would reinvest maturing QE proceeds post December this year.

GBP/USD is -0.3% lower at £1.3030 as Brexit talks again reached an impasse. However, PM Theresa May believes that +95% of the Brexit withdrawal deal is “now settled.” It’s believed that the PM is facing a rebellion by more than 40 Tory MP’s if she does not back down to fresh demands from Brexiteers’

Note: 48 votes are necessary for a leadership challenge

5. Italy says it’s ready to discuss budget with E.U authorities

The Italian government is ready to sit and discuss its budget targets with E.U, Deputy Prime Minister Luigi Di Maio said this morning, restating that the “populist” coalition had no plan to leave the euro.

Italy has sent a letter to the commission explaining its reasons for sticking to the +2.4% goal, and that the government was ready to “sit at the table”.

Note: Italy wants to hike its budget deficit to +2.4% from this year’s +1.8%. Last week, the E.U Commission labeled Italy’s 2019 draft budget an “unprecedented breach of EU fiscal rules.”

Forex heatmap

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CAD plummets on disappointing retail sales and weak inflation

by admin 19.10.2018

Canadian inflation slowed significantly last month as temporary factors that lifted the cost of gas and air travel dissipated.

Canada’s CPI climbed +2.2% y/y, following a +2.8% increase in August and a +3% climb in July.

The market was looking for a solid +2.7% gain in September.

On a month-over-month basis, CPI declined -0.4%.

Digging deeper, the Bank of Canada (BoC) three preferred measures supporting inflation also weakened - core-inflation prices rose in a range from +1.9% to +2.1% for an average of +2.0%, down from the previous month’s +2.1% average.

Despite this morning miss, the headline annual inflation rate in Canada has come in +2%+ for eight consecutive month.

Canada retail sales miss

Canadian retail sales fell unexpectedly in August, led mostly by gas stations receipts declines.

Canada retail sales fell -0.1% in August, m/m, to a seasonally adjusted +C$50.76B. The market was looking for a +0.3% rise.

In volume terms, retail sales declined by a steeper -0.3% in August.

The previous month’s data were revised downward, and indicated receipts rose +0.2% vs. +0.3% estimate.

On the release, the CAD came under immense, trading at C$1.3030 before the headlines to C$1.3116.

Next up, the BoC monetary policy announcement is next Wednesday (Oct 24). Despite a weaker retail sales and inflation, the market is currently pricing in another +25 bps hike by Governor Poloz.

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ADP Canada: Employment increased in September

by admin 18.10.2018

Employment in Canada increased by 28,800 jobs from August to September according to the September ADP® Canada National Employment Report. Broadly distributed to the public each month, free of charge, the ADP Canada National Employment Report is produced by the ADP Research Institute®. The report, which is derived from actual ADP payroll data, measures the change in total nonfarm payroll employment each month on a seasonally-adjusted basis.

“The labor market was quite strong in the month of September,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Although the goods producing sector struggled this month, we saw significant growth in many industries. Trade, for example, continued its steady growth adding the most jobs the sector has seen all year.”

The August total of jobs added was revised up from 13,600 to 42,700.

Read more Newswire

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Aussie gains as unemployment hits 6-1/2 year low

by admin 18.10.2018

 

Unemployment lowest since 2012

While the headline number of jobs Australia added in September was a disappointment, it was the details and the accompanying unemployment data that stirred Aussie bulls. Australia added a mere 5,600 jobs last month, the least in two months, but the breakdown showed that 20,300 full-time jobs were added versus a loss of 14,700 part-time ones. The unemployment rate fell to 5.0%, the lowest since April 2012, though this could be partly explained by a drop in the participation rate to 65.4% from 65.7%.

AUD/USD Daily Chart

Source: Oanda fxTrade

Nevertheless, investors looked at the more positive aspects of the data stream and bid up the Aussie. AUD/USD rose as much as 0.39% to 0.7137 and is currently sitting at 0.7137. The FX pair faces a couple of resistance points at the 55-day moving average at 0.7226 and a downward-sloping trendline from August 21 at 0.7238. Stochastics momentum indicators are giving bullish signals.

USD/CNH straining at the leash

The fact that the US did not label China as a currency manipulator in its latest currency report has been taken as a green light for yuan bears to re-test the limits. USD/CNH is up 0.29% at 6.9335, nearing last week’s high of 6.9435 with ultimately eyes on August’s 19-month high of 6.9593. Once again, a slight bid tone to the US dollar as yields tick higher can be seen as justification for the firmer USD/CNH rate.

Asia market update: a busy session is unfolding

In other China news, China policy adviser and former PBOC member Fan Gang has said China would never sell off its US Treasury holdings to hit back at the US during the trade tariff war. He cautioned that the trade war would advance into the financial realm if China ever considered doing this, and believes it would hurt China more than the US.

Is weak UK CPI the result of soft retail sales?

The highlight on today’s European data calendar will likely be the UK’s retail sales for September. Recall yesterday consumer prices were below forecast during the same month and could imply slow sales. Estimates are for sales to have fallen by 0.4% m/m last month though are seen rising 3.6% on an annualized basis.

German wholesale prices are also scheduled together with Swiss trade numbers. The US calendar has no tier-1 data listed, with only the Philadelphia Fed index and weekly jobless claims slated. Fed’s Bullard and Quarles are due to speak.

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

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U.S. Treasury said to release currency policy report today

by admin 17.10.2018

The U.S. Treasury Department is poised to release its much-awaited foreign-exchange policy report to Congress on Wednesday afternoon, according to an administration official.

The semi-annual review of currency regimes of the U.S.’s 12 major trade partners and Switzerland will be released on Treasury’s website late in the day in Washington, the official said, declining to provide timing. The person spoke on the condition of anonymity.

Treasury is poised to render a verdict on President Donald Trump’s claim that China is manipulating its currency. While the U.S. hasn’t designated China as a currency manipulator since 1994, Wall Street is bracing for the prospect that Treasury will do so this week. Such a move wouldn’t trigger penalties, but it would likely escalate tensions between the world’s two largest economies.

Bloomberg

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Canada: Monthly Survey of Manufacturing, August 2018

by admin 17.10.2018

Manufacturing sales fell 0.4% to $58.6 billion in August, following three consecutive monthly increases.

The decline was mainly due to lower motor vehicle sales. Excluding this industry, manufacturing sales rose 0.4% in August.

After taking price changes into account, the volume of sales in the manufacturing sector edged down 0.3% in August.

Motor vehicle industry posts the largest decrease

Sales of motor vehicles fell 8.3% to $4.9 billion in August, following two consecutive monthly increases. The decline was mostly attributable to lower production due to atypical shutdowns in some assembly plants in August. In constant dollars, motor vehicle sales fell 8.4%, which shows that the decrease in current dollars mainly reflected a drop in sales volumes rather than lower prices in the industry.

Primary metal industry sales fell 2.9% to $4.4 billion in August, a third consecutive monthy decline. The decrease in August reflected lower sales in the non-ferrous metal (except aluminum) production and processing industry. Conversely, seasonally adjusted sales in the iron and steel mills and ferro-alloy manufacturing, steel product manufacturing, and alumina and aluminum production and processing industries grew in August.

Sales in the wood product (-3.4%) and food (-0.6%) industries also fell in August.

These decreases in current dollars were partially offset by increases in the aerospace product and parts (+13.5%), plastic and rubber product (+3.8%), machinery (+2.0%) and chemical product (+1.1%) industries.

Sales down in three provinces

Sales were down in three provinces in August, with Ontario posting the largest dollar decrease.

After two straight monthly increases, sales in Ontario fell 2.0% to $26.6 billion. The decline was mainly attributable to lower sales in the motor vehicle (-8.9%), primary metal (-8.4%) and motor vehicle parts (-1.8%) industries.

In Alberta, sales fell 0.8% to $6.6 billion, following three consecutive monthly increases. Most of the decrease stemmed from lower sales in the petroleum and coal products (-3.5%), electrical equipment, appliance and component (-24.6%) and primary metal (-9.2%) industries.

The largest monthly increase was in Quebec, where sales rose 1.3% to $14.2 billion. The gain was mainly attributable to an 18.9% increase in the aerospace product and parts industry and, to a lesser extent, gains in the plastic and rubber product (+8.6%), computer and electronic product (+12.2%) and petroleum and coal product (+3.4%) industries.

Inventory levels rise

Inventory levels rose 1.1% to $83.9 billion in August. Inventory increased in 14 of 21 industries, with the largest gains in transportation equipment (+3.4%), food (+1.9%) and plastic and rubber product (+5.6%).

These increases were partially offset by lower inventory levels in the primary metal (-1.4%) and wood products (-2.3%) industries.

The inventory-to-sales ratio rose from 1.41 in July to 1.43 in August. The ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Unfilled orders increase

In August, unfilled orders rose 0.8% to $94.8 billion, after edging down 0.2% in July. Most of the gain came from a 0.8% increase in the aerospace product and parts industry. Unfilled orders were also up in the computer and electronic product and the fabricated metal product industries.

After two consecutive monthly decreases, new orders were up 1.1% to $59.3 billion in August. An increase in new orders in the aerospace product and parts and machinery industries were behind this gain.

The capacity utilization rate edges up

The capacity utilization rate (not seasonally adjusted) of the manufacturing sector edged up 0.7 percentage points, from 79.5% in July to 80.2% in August. Following a 14.6 percentage point decline in July, the capacity utilization rate for the transportation industry increased from 73.4% in July to 81.5% in August. Shutdowns at several auto manufacturing plants were responsible for the decrease in July.

The capacity utilization rate of food manufacturers fell 2.2 percentage points to 81.0% in August. This decrease was attributable to lower production in most food industries.

The capacity utilization rate of the primary metal industry, which includes aluminum and steel, edged down 0.3 percentage points to 77.8% in August.

StatsCanada

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U.S. Housing Starts Fell in September Amid Hurricane Florence

by admin 17.10.2018

U.S. new-home construction fell in September on a decline in the South that may reflect disruptions from Hurricane Florence, government figures showed Wednesday.

Highlights of Housing Starts (September)

  • Residential starts dropped 5.3% to 1.201m annualized rate (est. 1.21m) after downwardly revised 1.268m pace in prior month
  • Multifamily home starts fell 15.2%; single-family declined 0.9%
  • Permits, a proxy for future construction of all types of homes, slipped 0.6% to 1.241m rate (est. 1.275m) after 1.249m pace; reflects decline in multifamily permits

    • Key Takeaways

    Analysts had forecast a decline in housing starts after Hurricane Florence, which made landfall in North Carolina on Sept. 14, caused damage and flooding throughout the Carolinas. Those states are part of the report’s South region, which accounts for about half of starts and showed a 13.7 percent drop from the prior month. Hurricane Michael, which struck Florida and other southeastern states last week, will probably affect activity in October.

    While the impact of the storms on housing data is likely to be temporary, the decline in starts largely reflected slower construction in multifamily housing, a category that tends to be volatile. In addition, permits for single-family homes rose 2.9 percent last month, the most in a year, on gains in the Northeast and West, indicating builders have a steady pipeline of construction.

    That indicates housing could contribute to the economy toward the end of the year as consumer demand, helped by a solid job market, lower taxes and post-storm rebuilding, overshadows headwinds including rising mortgage rates and property prices.

    A decline in lumber prices from a record earlier this year may also be providing some comfort to developers. A gauge of homebuilders’ confidence rose in October for the first time in five months, according to a National Association of Home Builders/Wells Fargo report released Tuesday.

    Other Details

  • Single-family home starts fell to a 871,000 rate from 879,000 the prior month
  • Groundbreaking on multifamily homes, such as apartment buildings and condominiums, dropped to an annual rate of 330,000
  • Midwest region also posted a decline in starts, while they rose in Northeast and West to highest levels since March
  • Report shows wide margin of error, with a 90 percent chance that the September figure on housing starts ranged from a 16.6 percent drop to a 6 percent gain
  • Report released jointly by the Census Bureau and Department of Housing and Urban Development in Washington

    • Bloomberg Quint

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    Dollar in holding pattern; Asian equities follow Wall Street

    by admin 17.10.2018

    A public holiday in Hong Kong ensured that today’s Asia session was a slow and steady one. Equity markets mostly took their cues from the strong Wall Street close, while the US dollar held near two-week lows, though it looks set for its second weekly decline in a row. In the G-10 space, the kiwi outperformed its peers versus the US dollar and the Swedish Kroner was the worst performer, according to data compiled by Bloomberg.

     

    China confident of Q3 growth

    Ahead of the release of China’s Q3 GDP data on Friday, Chinese Premier Li said today that Q3 growth would be at a “reasonable range” and he felt confident that economic goals would be reached this year.

     

    Asia market update: Focus on Yuan

     

    The dollar/yuan fix this morning was slightly below what the market had expected but, after the initial knee-jerk reaction sending USD/CNH through 6.91, the pair soon edged higher to above 6.92. The 55-day moving average is still sitting below at 6.8672.

     

    USD/CNH Daily Chart

    Source: Oanda fxTrade

     

    Aussie wage growth still slow, RBA says

    RBA Deputy Governor Guy Debelle said in a speech today that it is possible the country’s jobless rate would have to fall further than on previous occasions before wage growth would increase at a faster pace. The current unemployment rate is at 5.3%, 30 basis points above what is considered to be the full employment rate.

    The central bank uses the unemployment rate as a key metric in its quest to stoke inflation to justify a potential first interest-rate increase since 2010. The RBA has kept the cash rate at a record low for almost two years to encourage growth, hiring and ultimately higher wages. September’s jobs data is due tomorrow and expected to show no change to the unemployment rate of 5.3%, with a further 15,000 jobs added during the month.

    AUD/USD is little changed on the day, marginally lower on the back of slight US dollar gains. As it stands now, the pair may snap a two-day rising trend ahead of technical resistance points at 0.7223 and 0.7230, trendline resistance and the 55-day moving average, respectively.

     

    AUD/USD Daily Chart

    Source: Oanda fxTrade

     

    Will higher UK wages filter through to prices?

    The highlight on the data calendar will be the release of the minutes of the last FOMC meeting where the Fed hiked rates by 25bps. Minutes will be scrutinized regarding the discussions about the future trajectory of interest rates and any concerns about the economy that are being considered.

    The European calendar also has some key data events with UK’s CPI/PPI/RPI for September on tap. Recall August’s average earnings were at their highest in almost a decade and this may filter through to prices in September. Estimates are for a 0.5% increase month-on-month and a 2.8% annualized gain. We also get to see Euro-zone CPI numbers, which are seen holding steady at +2.1% y/y.

     

    You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

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    Asia market update : Focus on Yuan

    by admin 17.10.2018

    Asia market update: Focus on Yuan

     

    Surprising busy start even with the absence of Hong Kong in the mix

    The hawkish warm-up ahead of tonight’s FOMC minutes delivered by San Francisco’s new President Daly is creating some noise today after she said late in the NY session she does think it’s a balance between hiking too fast and getting behind the curve but her remarks on the economy are strong. On inflation, the Fed is “effectively at the 2.0% target.” For potential tailwinds, however, she does name three: financial conditions, global growth, and fiscal stimulus. Indeed there will be an intense focus on the new FOMC members to gauge the hawkish vs dovish composition of the new FOMC and this is weighing across the regional sentiment as she is camped on the hawkish end of the scale.

    The Yuan fix

    USDCNY fixed at 6.9103 today, -16 pips from last fixing and -83 pips from the previous closing at 6.9186 on 16:30 Beijing time. The fix is much lower than market expectations triggering a sell-off below 6.91, while the usual assortment of bids was absent on the fix, but the buy on dip mentality should prevail until a definite solution on the US-China trade front is offered up. The current playbook remains intact.

    Via Deutsche Bank

    Going over some market notes today: Sameer Goel at Deutsche bank suggests the divergence in trend between China’s estimated intervention activities and its holding of US Treasuries is increasingly notable as Deutsche bank has rated roughly US 17 billion in FX markets intervention was offset by US 18 billion in US Treasury sales. So, this is different to my morning thoughts that the Pboc were adding to their intervention war chest, but instead, they are selling US Treasuries for currency smoothing policy.

    Oil prices

    Oil prices came off at the Shanghai open on profit-taking, but Brent crude remains well bid after a test of the downside for the third consecutive day on Tuesday, given the bulls some room on stops likely layered between 79.50 and 79. Geopolitical tensions amidst reports that Iranian crude oil exports have continued to decline helped support the price. But again, local Asia sentiment is wobbly as Asia equity dealers can’t shake the overhang from US-China trade tensions. But given the prevailing bullish market lean we should expect these dips to be well supported.

    Gold Prices

    A case of the nervous Nellies is impacting freshly minted long gold positions as US equity futures continued to move higher in early trade. Indeed, there is still some overhanging sentiment that Golds strongest correlation is a communication of the overall health of the US economy as the SPX /XAUUSD correlation should carry. So, if the US economy is doing well as transmitted through the SPX bullishness, gold will sell off. But absent in this argument is the US midterm elections which will pose a significant risk to both equity and USD sentiment.

    But perhaps the hawkish warm-up ahead of tonight’s FOMC minutes delivered by San Francisco’s new President Daly is weighing on Gold market sentiment.

    Asia equities

    Perhaps a bit surprising is that local equity markets are not exactly knocking it out of the park this morning. I suspected they would take their lead from the US equity froth. But again, local dealers remain a better seller of risk until a definitive shift in US-China trade tensions is offered up.

    You just know that something good is going to happen, maybe not!

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    The buck cannot find a bid

    by admin 16.10.2018

    Tuesday October 16: Five things the markets are talking about

    The ‘big’ dollar came under pressure yesterday and is finding it difficult to gain much traction this morning as investors taking profit on U.S assets outweighs concerns about Italy, Brexit and a Sino-U.S trade war. Furthermore, twin U.S deficits and prospects of a halt in Fed’s rate hike cycle are also weighing on the dollar.

    Elsewhere, it has been mixed picture across regional stock markets overnight as investors await the next wave of corporate earnings and further developments across the aforementioned geopolitical issues.

    Note: Any hint of a slowdown or stronger growth could affect the pace of Fed’s rate hikes.

    Oil prices continue to fluctuate within striking distance of recent highs amid tensions between Saudi Arabia and the U.S over the disappearance of Jamal Khashoggi, a prominent journalist with U.S citizenship, while the precious ‘yellow’ metal holds its gains.

    On tap: FOMC minutes are due Wednesday (02:00 pm EDT), with investors focused on projections for further interest rate rises.

    1. Stocks mixed results

    In Japan, the Nikkei rebounded overnight, supported by short covering in index heavyweights (automakers and SoftBank), but retailers came under pressure on worries about domestic personal consumption and slowing demand from China. The Nikkei share average closed +1.3% higher, after tumbling -1.8% yesterday. The broader Topix rallied +0.7%.

    Down-under, Aussie shares rebounded overnight, as mining and financials bounced back from Monday’s -1% drop and six-month low, but rising tensions between Saudi Arabia and the West and weaker PPI data in China capped broader market gains. The S&P/ASX 200 index rose +0.6%. In S. Korea, the Kospi stock index closed flat on Tuesday as global uncertainties capped gains during the day.

    In China, stocks ended lower overnight, after data showed factory-gate inflation had cooled for a third consecutive month in September amid lean domestic demand. The blue-chip CSI300 index ended -0.8% weaker, while the Shanghai Composite Index also closed -0.8% lower. In Hong Kong, the Hang Seng was up +0.1%.

    Note: Chinese inflation was boosted by food while prices were mostly subdued elsewhere. China Sept CPI y/y came in as expected at +2.5% vs. +2.5%e (a seven-month high): PPI y/y was +3.6% vs. +3.5%e.

    In Europe, regional bourses trade mostly higher across the board with the Italian FTSE MIB outperforming following the submission of its draft budget to the E.C, while the U.K’s FTSE underperforms on Brexit uncertainty.

    U.S stocks are set to open in the ‘black’ (+0.3%).

    Indices: Stoxx600 +0.4% at 361, FTSE -0.2% at 7012, DAX +0.2% at 11638, CAC-40 +0.1% at 5099, IBEX-35 +0.9% at 9004, FTSE MIB +1.1% at 19500, SMI +0.3% at 8678, S&P 500 Futures +0.3%

    2. Oil dips on expectations of higher U.S stocks, gold unchanged

    Oil prices have eased a tad amid expectations of an increase in U.S crude inventories, but signs of a fall in Iranian oil exports for October are limiting losses.

    Brent crude for December delivery has fallen -6c, or -0.07%, to +$80.72 per barrel, while U.S West Texas Intermediate (WTI) crude for November delivery is down -14c at +$71.64 a barrel.

    U.S crude stockpiles are forecasted to have risen last week for the fourth consecutive week, by about +1.1M barrels, ahead of reports from the API (data is due at 4:30 pm today) and the U.S DoE’s EIA (will be released at 10:30 am EDT tomorrow).

    In the first two weeks of October, Iran has exported +1.33M bpd of crude to countries including India, China and Turkey. That is down from +1.6M bpd during the same period in September.

    Note: October exports are a sharp drop from the +2.5M bpd in April before President Trump withdrew from a multilateral nuclear deal with Iran. In May Trump ordered the re-imposition of economic sanctions on the country. The sanctions will come into force on Nov. 4.

    Also supporting prices is today’s comments from OPEC’s Secretary General Barkindo who said, “global spare oil capacity was shrinking,” adding “producers and companies should increase their production capacities and invest more to meet current demand.”

    Ahead of the U.S open, gold prices are holding steady near yesterday’s three-month high as a number of risk-averse investors seek refuge in the metal amid rising political tensions and economic uncertainty.

    Spot gold was little changed at +$1,226.71 an ounce - it touched +$1,233.26 yesterday, its highest print since mid July, as global equities slid on rising tensions between the Saudi’s and the West. U.S gold futures are flat at +$1,230.40 an ounce.

    3. German Bund yields edge higher

    A cautious, risk-on mood currently prevails in eurozone sovereign bond markets so far this morning, with yields of German Bunds and of other core eurozone bonds up, and Italian bond yields down.

    This would suggest that market risk sentiment may be improving following last week’s sudden correction, but the balance remains a tad precarious in the current political environment. German 10-year Bund yield has backed up +1.4 bps to +0.51%.

    Note: The +0.50% level in Bund yields remains pivotal and with more debt product coming to market today (Germany offers +€4B in the September 2020-dated Schatz) should be able to back up sovereign yields a tad more.

    Elsewhere, the yield on 10-year Treasuries has backed up +1 bps to +3.17%, the highest in a week. In the U.K, the 10-year Gilt yield has decreased -1 bps to +1.603%, the lowest in almost two-weeks, while in Italy, the 10-year BTP yield has declined -2 bps to +3.522%.

    4. G7 currency pairs are little changed

    Major currencies (€, £, ¥ and C$) are relatively unchanged ahead of the U.S open.

    Dealers and investors have little technical or fundamental data to work with at current levels. In fact, the market is looking for guidance, which may come in the shape of the U.S Treasury forex report, which is likely to be released this week and where the U.S could name China a currency manipulator.

    If the U.S were to name China a currency manipulator it would further pressure China on trade and add to the Sino-U.S trade tensions.

    EUR/USD is flat at €1.1579 and other major currency pairs are not moving by much either. GBP/USD is up slightly at £1.3163 as leaders struck a conciliatory tone a day after Brexit negotiations broke down and USD/JPY is up +0.3% at ¥112.07

    Elsewhere, the performance of several petro-forex (NOK, CAD, RUB) has been held back due to various unique factors that have not translated into a growth boost for these currencies. The ruble has been driven by U.S sanctions, and the Canadian dollar has been held back by NAFTA re-negotiations.

    TRY (-0.20% at $5.7865) has retreated after seven days of gains after the country released U.S pastor Andrew Brunson on Friday.

    5. U.K wage growth fastest in a decade

    U.K data this morning showed that wage growth quickened over the summer at the fastest pace in almost a decade, adding to signs of inflationary pressure.

    The ONS said that average weekly earnings in Britain, ex-bonuses, grew +3.1% in the three-months through August.

    The figures will likely reinforce market expectations that the BoE remains on course tighten monetary policy over the next 24-months to keep overall price-growth in check, assuming the U.K.’s exit from the E.U goes well.

    Other data showed that U.K unemployment in the three-months through August was unchanged on the previous three-months at +4%, while the number of people in work, +32.4M, remained close to its record high.

    Note: The BoE hiked interest rate in August and signalled that they expect to do so again two or more times over the next couple of years to bring inflation back to their +2% annual goal.

    A weaker pound since the Brexit referendum has to push up the price of imports, squeezing U.K citizens’ purchasing power.

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