USA main equity markets slip, U.S. dollar advances versus certain peers, sterling slips on further Brexit chaos

Dec 7 • Morning Roll Call • 28 Views • No Comments

The USA main equity markets slipped back during Wednesday’s trading sessions, the reasons given by the majority of analysts, was profit taking and institutional level traders not being prepared to open new positions, for fear that they may book a loss, which could affect their yearly results and bonus. Calendar economic news for the USA was thin on the ground; mortgage approvals beat forecast by some distance, coming in up 4.7% last week, whilst the ADP employment change registered 190k for November. The ADP reading is a metric which is often regarded as a precursor to the NFP jobs data, which will be revealed this coming Friday. Canada’s central bank, as predicted by the economists polled, kept the Canadian interest rate at 1.00%.

The SPX closed down 0.01% and the DJIA down 0.16%. Global markets, particularly emerging markets, have also succumbed to this recent sell off and bout of profit taking; Japan’s Nikkei 225 Stock Average decreased by 2% to a three week low, the largest slump witnessed in circa seven months, whilst the MSCI Asia Pacific Index fell by 1.3% to the lowest in approx. six weeks. The MSCI Emerging Market Index fell back 1.5%. The U.S. dollar fell versus yen, but advanced versus the majority of its peers, closing the day out up circa 0.3%, versus the U.K. pound and the euro.

Brexit chaos (from the U.K. side) continued on Wednesday, as various members of the Tory government delivered inconsistent statements to various parliamentary panels and committees, as the government also failed to solve the Irish border issue with its DUP partners. The situation has been made worse by Michel Barnier, the leading E.U. Brexit negotiator stating that the U.K. now has 48 hours to agree a potential deal, on the four outstanding issues, or Brexit talks cannot progress to the trade talks phase.

Sterling didn’t sell off significantly during the day, or fall further in the evening after Barnier’s statement, lending support to the theory that sterling may have reached a level of market support, until such time the U.K. bails on the process and chooses some form of chaotic hard Brexit, involving trade through the mechanism of WTO tariffs. During Wednesday the U.K. pound fell by approx. 0.3% versus the U.S. dollar and rose by only approx 0.1%, versus the euro. The FTSE 100 closed up by 0.28%.

Eurozone indices experienced the selloff contagion witnessed earlier in the trading day in emerging and Asian markets, with both Germany’s DAX and France’s CAC index both selling off. In terms of economic calendar news Markit PMIs for: Germany, France and the wider Eurozone came in mainly ahead of forecasts. Germany’s factory orders for October beat the negative forecast, by coming in at 0.5% growth MoM, whilst Swiss CPI came in as forecast at 0.8% annual growth. The euro made gains only versus the Canadian and Australian dollars, as did the vast majority of other currencies throughout the day.

The Australian economy delivered disappointing GBP figures of 2.8% early in the morning, falling from the previous reading of 3%, damping expectations of a forthcoming interest rate rise, in the short to medium term, and thereby causing the Aussie dollar to sell off. The lack of hawkish sentiment from the Canadian central bank the BOC, accompanying the rate rise announcement, failed to support the Canadian dollar’s value. Yen also appreciated across the board versus its peers, as its safe haven appeal reappeared, due to emerging markets and Asian markets selling off sharply.

U.S.DOLLAR

USD/JPY traded in a wide bearish range during Wednesday’s sessions, falling through S2 to then recover ending the day at 112.0, down circa 0.4% on the day, close to S1 and still unable to fully escape the gravity of both 100 and 200 DMAs, sited at 111.5. USD/CHF operated in a bullish range during the day’s trading sessions, breaching R1 to gain circa 0.5% at one stage, before closing the day out up circa 0.3%, at approx. 0.998. USD/CAD ended the day at 1.279.

EURO

EUR/USD ended the day down circa 0.3% at 1.179, close to the first level of support. EUR/GBP ended the day down 0.1%, resting just below the daily PP, after initially rising through R1 earlier in the day. Similar to other currencies the euro fell versus yen; EUR/JPY ended the day down circa 0.6% at 132.6, close to S2.

STERLING

GBP/USD fell by circa 0.3% on the day, to close out at circa 1.338, close to the first level of support. GBP rose versus AUD, CAD, CHF and fell versus JPY; GBP/JPY falling by circa 0.5% on the day, to close out at approx. 150.4.

GOLD

XAU/USD traded in a smaller bearish range than witnessed over recent days, without generating safe haven appeal, whilst limiting its fall to approx 0.3% on the day, closing out at circa $1262 per ounce, now significantly priced below the 200 DMA, which is currently sited at 1267.

EQUITY INDICES SNAPSHOT FOR DECEMBER 6th.

• DJIA closed down 0.16%.
• SPX closed down 0.01%.
• FTSE 100 closed up 0.28%.
• DAX closed down 0.38%.
• CAC closed down 0.02%.

KEY ECONOMIC CALENDAR EVENTS FOR DECEMBER 7th.

• EUR German Industrial Production n.s.a. and w.d.a. (YoY) (OCT).

• EUR Euro-Zone Gross Domestic Product s.a. (YoY) (3Q F).

• USD Challenger Job Cuts (YoY) (NOV).

• USD Initial Jobless Claims (DEC 02).

• EUR Draghi holds conference as GHOS chair in Frankfurt.

• USD Consumer Credit (OCT).

• JPY Trade Balance – BOP Basis (Yen) (OCT).

• JPY Gross Domestic Product annualised s.a. (QoQ) (3Q F).

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