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Europe Opens Mixed; UK Wage Data in Focus

Netflix soars 10% sending Nasdaq and S&P to fresh closing highs

The S&P 500 and the Nasdaq once more shot to fresh record closing highs overnight, mainly thanks to 10% gains from Netflix, a day after its blowout earnings. The Dow failed to join the duo, ending the day lower after consumer giants Johnson & Johnson and Proctor & Gamble weighed on the index, with disappointing earnings.


The S&P closed up 0.25 at 2839, the Nasdaq rallied to close 0.7% higher at 7460. Meanwhile the Dow dropped 3 points lower to finish the day at 26,210. However, this hasn’t been sufficient to ensure a positive open in Europe, which is looking mixed as we move towards the open


Dollar slips to 3 year low

Demand for the dollar is still hard to come by and the greenback slipped to a 3-year low, below 90 versus a basket of currencies, in the Asian session overnight. The dollar is weakening ahead of the European Central Bank rate decision on Thursday and as dollar bears look towards the prospect of worsening Sino – US trade relations potentially escalating into a trade row between the world’s largest two economic.

USD/JPY has been particularly hard hit by the worsening Sino-US trade relations, in addition to a slightly hawkish BOJ. The pair reached a 19-week low of 109.8, although is seen recovering moving to towards the European open.


Eurozone PMI data & ECB policy meeting eyed

The euro continues to trade well ahead of the ECB meeting on Thursday. Strong ZEW sentiment data in the previous session, shows that economic improvement is overshadowing political troubles and strength in the euro. This shows a solid start to the year and bodes well for the PMI data due today. The ECB is likely to consider the same issue on Thursday at the ECB meeting, of whether eurozone economic strength is enough to offset the rise in the euro. With traders expecting less hawkish sounds from the ECB a sell off in the euro could be on the cards towards the end of the day.


The ER/USD is trading up 0.2% at $1.2325. Despite a cautious mood ahead of Thursday’s ECB announcement, a meaningful move through this level (last week’s high) could see the gates open to $1.24. Failure to hold these levels would open the door to $1.22.


Sterling hits new post-Brexit high after UK unemployment data

UK labour market figures for the 3 months through November have come in slightly ahead of expectations. Unemployment has remained steady at 4.3% but the big news is that average earnings are still at 2.5% y/y. With the unemployment rate at 30-year lows, the average earnings figures has more weight for markets. Inflation fell last month so wage growth only needs to hold steady to reduce the pinch on consumer pockets. Although UK jobless claims rose more than expected at 8.6k, employment also rose 102k which handily beat expectations


GBPUSD has hit a new post-Brexit high of 1.41 after the data. The relentless rise in Sterling, which has seen it jump over 3% in the last 10 days is looking durable. The good news for the economy is that more people are working with rising wages despite any uncertainty associated with leaving the European Union. Lord Jim O’Neil looks vindicated so far in his belief that strong domestic and global growth will overcome Brexit headwinds.


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