EU MID-SESSION UPDATE: Equities supported as US Senate pass budget blueprint


Equities: Material and tech stocks are supporting European equities this morning after a resolutely weaker day yesterday, and earnings are the main focus with Volvo shares hitting a record high after its earnings beat estimates. Swedish firms are among the best performers with Ericsson also gaining 4.8%  after its earnings. Meanwhile the IBEX is lagging peers as investors exercise caution ahead of a potential triggering of Article 155 this weekend.


USD: The dollar index saw a recovery ahead of the 93.00 level, finding a bid following the US Senate’s decision to pass the budget blueprint, which is key to President Trump’s tax effort. EUR/USD failed to test October’s high, with the daily candle ‘head and shoulders’ formation, now evident, bears will look for a break through 1.1671 to indicate a change in direction in the pair, with eyes on the ECB next week. EUR/USD sees around 3bln worth of expires today between 1.1800 – 1.1850.

USD/JPY has followed the vast majority of USD crosses in finding some greenback buying, however, has run into some resistance, with touted offers between 113.30/50.

GBP: Subdued data, and economical concerning commentary from BoE members Ramsden, Teneryo and Cunliffe this week has seen the percentage of a November hike from the BoE fall from 80% to around 70%.  Cable has seen a bearish week, coming back to trade in the post Brexit range, a long term support trendline continues to act as a support, with bears likely to look for a break through 1.3. Brexit talk continues, with May, Davis and Merkel all weighing in yesterday; with Davis telling officials to step up planning for a potential no-deal in Brexit discussions.

CAD: The Loonie will be in focus today, with inflation and retail sales due at 13.30. Excluding Canada’s latest employment report, where the focus was on part-time employment moving to full-time employment, data has been a concern for the BoC following their unexpected hike, as likelihood of another move in 2017 lessens.

USD/CAD trades in consolidation of late, stuck in this October 1.2450 – 1.2600 range, with many awaiting for the aforementioned data to possibly give the pair some monthly direction.

Fixed Income: A bit more downside for debt futures in wake of the latest public sector deficit figures, despite some smaller than expected shortfalls. An 80% of GDP ex-banks/BoE headline is eye-catching and of course the Government’s financing position is just as contingent on the Brexit outcome in the longer run as the economy overall. Gilts remain on the backfoot within a 124.75-50 range, but in truth more in line with the general tone following a downturn in US Treasuries after Thursday’s European close.

Indeed, Bunds are just a few ticks off a marginal new 161.54 Eurex session low, and 10 year US T-notes are just above their 124-29+ nadir at 125-00. To recap, the catalysts for softer bonds – Washington passing the 2018 budget resolution and Fed chair favourites said to be Powell and Taylor.

Spanish 10 year Bono yield back up around 1.65% ahead of the anticipated Article 155 activation against Catalonia over the weekend.


Commodities: WTI and Brent crude futures hovering at the lows amid the upside seen in the greenback, with WTI pushing through yesterday lows. Similarly selling pressure has been observed in the precious metal complex due to the strength in the aforementioned USD.

20 Oct 2017 - 10:02- Research Sheet- Source: RANsquawk

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