German DAX reaches a record high as oil futures slump
As many European markets opened in positive mood, with some analysts suggesting that the Iran nuclear negotiations has helped to boost confidence in the region, the German DAX index has posted a record high in early trading, other European indices also gained ground. Meanwhile, taking a cursory glance at the DJIA equity index future, it suggests that the DJIA will print another record high once the USA market opens this afternoon. Currently the futures index is at circa 16090. However, given the overall market optimism enveloping the markets, we could see 16100 by the end of the day and with no affirmative date for the beginning of the much discussed monetary easing taper likely before the end of 2013, the markets could continue in this bullish phase for some time.
Oil slumps on the news of historic Iran nuclear deal breakthrough.
The Iran pact reached yesterday may face stiff opposition from the USA government. The leaders of both the Democratic and Republican parties are threatening to break with President Barack Obama’s policy whilst enacting new punitive sanctions on Iran, arguing that the interim deal reached in Geneva on Sunday yields too much to the Islamist regime while asking too little.
Leading US banks warned they could charge companies and consumers for deposits if the US Fed cuts the interest it pays on bank reserves. Minutes of the Fed’s October meeting published last week showed officials thought a cut in the interest on bank reserves was an option worth considering in order to add stimulus to counter a taper. Executives at two of the top five US banks said a cut in the 0.25 per cent rate of interest on the $2.4tn in reserves they hold at the Fed would lead them to pass on the cost to depositors.
UK mortgage approvals fail to reach predictions
UK mortgage approvals posted a surprise fall in October from September, British Bankers Association data showed in its publication this morning. October mortgage approvals fell to 42,808 from 43,182 in September. The consensus was for another rise in October to some 45,000 due to increased housing market confidence as a consequence of the help to buy scheme put together by various UK ministers. The data still shows the pick-up in housing market activity lately, as the 42,808 print was still the second highest reading since January 2008, but it ends a run of seven consecutive monthly rises which could be a seasonal issue or suggest that the secular housing market rise (in activity and prices) has reached its organic end for now. Spring 2014 may be the time when activity once again picks up.
Market snapshot at 10:00 am UK time
A further slide in the yen gave a boost to Japanese equities, whilst commodity prices tumbled after Iran reached agreement with six world powers over its nuclear programme. The MSCI Asia Pacific Index of shares climbed 0.3 percent, while Japan’s Topix (TPX) rose 0.9 percent.
The ASX 200 closed up 0.72%, the CSI down 0.39%, the Hang Seng down 0.05%, and the Nikkei up 1.54%. In Europe the stood is up 0.54%, CAC up 0.51%, DAX up 0.61% and the UK FTSE up 0.46%. The DJIA equity index future is up 0.40%, SPX up 0.35% and the NASDAQ up 0.39%.
Forex focus
The yen fell 0.5 percent to 101.76 per dollar early in the London session after touching 101.92, the weakest since May 29th. It declined 0.4 percent to 137.78 per euro after reaching 137.99, a level unseen since October 2009. The dollar added 0.2 percent to $1.3537 versus Europe’s shared currency. The yen slid to the weakest level in almost six months versus the dollar as demand for the safety of the currency waned after an accord was struck to set limits on Iran’s nuclear programme.
The pound was little changed at $1.6212 early in the London session after rising to $1.6240, the highest since Oct. 25th. Sterling traded at 83.52 pence per euro after appreciating to 83.01 pence on Nov. 7th, the strongest level seen since Jan. 17th. The pound rose to its highest level in a month versus the dollar before a report economists said will show a gauge of U.K. mortgage approvals climbed to the highest level in almost four years in October.
Commodities
COMEX gold is down 1.13% at 1$1230.50 per ounce, silver down by 1.01% at $19.70 per ounce. Brent crude, the benchmark for circa half the world’s oil, lost as much as $2.74 a barrel to $108.31, the biggest intraday loss since Nov. 1st. WTI dropped as much as $1.20 to $93.64 a barrel in electronic trading on the New York Mercantile Exchange. Iran’s pledge to restrict its nuclear programmes in return for loosened economic sanctions may have a limited effect on crude prices, said analysts who called today’s 2.5 percent slump in Brent knee-jerk.
Futures in New York have slumped 13 percent since Iranian President Hassan Rouhani took office Aug. 1st, pledging to end the sanctions crippling his country’s economy. Losses in Brent crude were limited to 0.9 percent since the same date as exports from Libya slumped amid unrest in the North African country.
Bonds
In the bond market the benchmark 10-year yield climbed two basis points, or 0.02 percentage point, to 2.76 percent early in London trading. The 2.75 percent security due in November 2023 fell 5/32, or $1.56 per $1,000 face amount, to 99 29/32.
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