FTSE +31 points at 7454 DAX +23 points at 13150 CAC +10 points at 5390 IBEX +18 points at 10110
Asian stocks opened the week on a mixed note, as the US dollar gained against the G10 currencies in the overnight trading session. Hong Kong (+0.25%) and Chinese mainland stocks (+0.30%) advanced with US equity futures and FTSE futures (+23 points). Metals gained.
Alibaba (NYSE:BABA)’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.
Oil markets were steady 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.
Investors continued realizing profit on Nikkei (-1.32%) and Topix (-0.94%) despite strong economic data. 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 USD/JPY was better bid in Tokyo. 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.
The pound depreciated versus all its G10 counterparts in Asia and sold off the most against the US dollar (-0.58%) and the Swiss franc (-0.50%). The 10-year gilt yield rose by 8.1 points on Friday. 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 under these circumstances? 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 British households'earnings face to a rising inflation. GBP/USD offers are eyed at 1.3180/1.3200.
Independence protesters marched for their jailed leaders in Barcelona on Saturday. Spanish stocks could open under pressure, but the index will likely suffer gradually softer losses 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.
The Eurozone yields recovered on Thursday and Friday, allowing the EUR/USD to consolidate above its 200-hour moving average (1.1622). 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 1.1640/20 (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.