The news week kicked off with a really active day of trading that saw a number of new highs, new lows and reversals across major world markets. Political developments in Europe and economic news in the US were the main drivers of trading.
European markets staged a major relief rally Monday. The Euro started out sliding after Italian voters rejected their establishments reform proposals with by a 59.1%-40.1% margin even more decisive than polls had been suggesting. This led the opposition Five Star Movement to call for national elections. The Euroskeptics were dealt a setback in Austria, however where the establishment candidate won the Presidential Election. The news from Austria indicated that thinks aren’t totally flying apart sparking a big rally for the Euro and sending the Dax
up 1.6% on the day. The news, which eased political risk fears in Europe initially sent capital out of defensive havens and gold sharply lower but the yellow metal managed to finish nearly flat on the day, well off its lows.
In the US, the Dow reached a new all-time high while the NASDAQ staged a big catch-up rally gaining over 1.0%. Non-manufacturing PMI came in well above expectations, continuing a series of positive US reports that a lot of activity had been postponed until after the US election indicate a post-election has kicked off in the post vote honeymoon. The US Dollar sold off on the last day of Fed speakers before the usual pre-meeting blackout. NY fed President Dudley indicated he favours gradual increases while St. Louis Fed President Bullard is still thinking one and done for a while. Either way, today’s Fedspeak had traders thinking the recent US Dollar rally may have priced in a more hawkish Fed and more 2017 increases than we are actually likely to see.
Crude oil broke out to its highest level since the summer of 2015 today as traders look ahead to this week’s meeting on production between OPEC and non-OPEC countries looking to nail down a deal. Oil currencies like CAD rallied in tandem while NZD and AUD have also been climbing.
AUD could be active around today’s RBA meeting. The central bank is expected to finish the year on hold. Forecasts for the Australian economy for 2017 and any comments Governor Lowe may have on the value of the Dollar could attract attention ahead. AUD may remain active with more Australian economic reports due through the week including GDP tomorrow.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US ISM non-manufacturing PMI street 57.2 vs 55.5
US Markit service PMI 54.6 vs street 54.8
UK service PMI 55.2 vs street 54.0
Germany service PMI 55.1 vs street 55.0
France service PMI 51.6 vs street 52.6
Italy service PMI 53.4 vs street 51.6
Spain service PMI 55.1 vs street 55.0
Sweden service PMI 59.8 vs previous 57.6
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
1:30 pm AEDT Australia RBA cash rate 1.50% no change expected
7:00 am GMT Germany factory orders street 1.6%
10:00 am GMT Eurozone GDP street 1.6%
8:30 am EST US trade balance street ($42.0B)
8:30 am EST Canada trade balance street ($2.0B) vs previous ($4.1B)
10:00 am EST US factory orders street 2.6%
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