EU MID-SESSION UPDATE: Fixed Income markets taking hit early on, while oil rises as API data shows largest drawdown in 3-months

Equities: European stocks are relatively directionless with the EuroStoxx 50 trading flat. Newsflow has also been on the lighter side ahead of the UK Autumn Budget. Among the biggest movers is Thomas Cook, slipping some 13% after its earnings report. Although, profit figures had come in-line or ahead of analyst estimates, focus was on the tighter margins and aggressive discounts, signalling potential warnings over heightened competition. On a sector basis, basic materials and oil names are faring better, with the latter bolstered by the rise in oil prices, in which WTI is now at fresh 2-yr highs.

 

FX

DXY: The Index is back below 94.000 yet again on broad Usd losses ahead of Thanksgiving, with comments from outgoing Fed Chair Yellen weighing as she expresses serious doubts about inflation reaching target due to factors that may not be transitory. The DXY is holding around 93.770, but in danger of revisiting recent multi-week lows under 93.500 if the Greenback succumbs to more selling pressure in holiday-thinned volumes.

EUR: Eur/Usd has rebounded strongly from sub-1.1720 lows, and through key tech resistance around 1.1750, just, as residual offers from 1.1780-1.1800 continue to obstruct re-tests of the highs above 1.1800. Option expiries could exert more direction influence as Thanksgiving approaches and nearest strikes to watch in decent size are at 1.1750-75 (1.2 bn) then 1.1800-30 (2.4 bn). Eur/Gbp also firmer and just under 0.8900, with potential for volatility around the Frankfurt fix (385 mn expiry at the figure too).

JPY: Firmest of the G10 vs the Dollar, with the pair testing lows just south of 112.00 (1.4 bn expiry), and a market contact also noting selling in the Gbp/Jpy cross through 148.50 (program offers reportedly) and key chart support at 147.50.

AUD/NZD: Narrowly mixed vs the Usd, as the Aud/Nzd cross dips sub-1.1100 again and as the Aud only garnered brief support from strong data overnight.

Fixed Income Yet again the big figures are proving tough handles to keep hold of, and following the latest efforts to build a firm base at/over 163.00 and 125.00 for the respective 10 year EU benchmarks were thwarted, sellers have regained the initiative to send both back below and into negative territory for the day. Bunds just reversed to 162.68 (-40 ticks vs +22 ticks at the Eurex peak), breaching chart support at 163.07 (50% retrace of Tuesday’s move) on the way and with little difficulty it appears. 163.02 saw more stops filled and the 162.86-7 area has given way. Contacts suggest further sell-orders were housed sub-162.82, looking for 162.65-68 and then 162.50-54. Turning to Liffe, Gilts are a tick or so above 124.80 (-27 ticks vs +19 ticks at best), and could be conceding some room for the Budget, but nobody really expects any fiscal largesse from the statement. 30 year auction set-ups may be impacting Bunds as mentioned previously, and oil remains on the boil, but again not figured in the mix for fixed bulls for a while. 

 

Commodities: Brent and WTI crude futures are firmer this morning, with sentiment bolstered by the sizeable drawdown in last nights API crude report (largest drawdown in 3-months). As such, WTI rose to a fresh 2-yr high, however did fail to push through USD 58. Elsewhere, gold prices are modestly higher amid the support from the softer greenback.

 

22 Nov 2017 - 09:57- Research Sheet- Source: RANsquawk

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