Asian stocks opened the week on a mixed note. The US dollar gained against the G10 currencies in the overnight trading session. Hong Kong (+0.21%) and Chinese mainland stocks (+0.44%) advanced with US equity futures. Metals gained.
Alibaba’s single day generated $25 billion, 39% more than a year earlier. Call it an immense marketing success story or an ecological disaster, retailers in China are benefiting from a steady growth in middle class revenues, giving a decent support to the Chinese recovery theme.
FTSE 100 opened mixed. Financials (-0.28%) and industrials (-0.44%) lagged, while mining (+1.11%) and energy stocks (+0.92%) led gains.
Oil steadied on Monday; WTI crude traded near $57/barrel, Brent crude consolidated at $63/barrel. Precious metals were marginally positive. Gold traded between $1’274/1’278.
The pound depreciated versus all its G10 counterparts and sold off the most against the Japanese yen (-0.83%), the US dollar (-0.80%) and the Swiss franc (-0.71%). Rising pressures on PM Theresa May and fruitless Brexit talks were the major negative catalyzers. Sunday Times reported that forty Conservative MPs agreed to sign a letter of no confidence in Theresa May, ‘almost enough to trigger a leadership challenge’. On top, EU’s chief negotiator Michel Barnier hinted that the Brexit talks may not lead to an agreement by the end of the year. Businesses and banks are increasingly impatient and worried. Investors are leaving the pound due to the chaotic political environment inside and outside the UK. Tuesday’s inflation figures are important. The UK’s headline CPI may have advanced to 3.1% year-on-year in October from 3.0% printed a month earlier. Could a strong inflation read revive the Bank of England (BoE) hawks? We are not so sure. According to Visa, UK shoppers curbed spending by most in more than four years and Wednesday’s wages data could confirm stagnant improvement in earnings face to a rising inflation. As a result, there are decent odds for a further slide in Cable toward 1.3040, November support. Offers are eyed at 1.3180/1.3200.
For traders who are willing to avoid the USD-noise, the EURGBP could be another option to trade the pound weakness. The pair is testing the 0.89 offers, if surpassed, the positive breakout could encourage a further advance to 0.8970 (100-day moving average) before the 0.90 mark.
EURUSD challenged by 1.1680-offers The Eurozone yields declined at the start of the trading week. The EURUSD weakened. Trend and momentum indicators remain comfortably negative. Resistance is eyed at 1.1680 (minor 23.6% retrace on September – October decline). The key mid-term support stands at 1.1509 (major 38.2% retrace on April – September rise). Intermediate supports could be found at 1.1640/22 (200-hour moving average / 50-day moving average) and 1.1550 (last week’s support). Put options at 1.1600 and 1.1550 are due to expire today.
Independence protesters marched for their jailed leaders in Barcelona on Saturday. Spanish stocks opened flat and the IBEX will likely suffer gradually less due to the Catalan crisis. 2’400 companies have already moved their legal base outside Catalonia to avoid being impacted by political uncertainties and guarantee the future of their businesses within the Spanish and EU framework.
Nikkei 225 closed 1.32% lower Investors continued realizing profit on Nikkei (-1.32%) and Topix (-0.94%) despite strong economic data. Nikkei lost 4.28% in three sessions after having topped at 23382.15 on November 9. There hasn't been a precise reason behind the move. The profit taking is suspected to be the main motivation.
The data was encouraging. Japanese producer prices rose by 3.4% year-on-year in October, rising expectations that higher producer prices could improve the consumer price inflation and boost economic activity. The USDJPY was better bid in Tokyo, yet the upside potential appears limited due to light risk-off inflows. The daily Ichimoku cloud cover should provide support at 113.58/113.38. The US 10-year yield is testing the 2.40% on the upside. Improved US yields are also supportive of a stronger US dollar versus the yen.
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