Market Roundup
- Euro steady despite destabilizing Spanish election result. Drifts 1.0883/1.0850.
- Dollar index below two-week highs touched last week. 98.819/98.580 range.
- EUR/CHF lifts back above 1.0800 after last week's fall. Plays 1.0773/1.0817.
- Brent crude skids to lowest since 2004. $36.05 per barrel.
- Spanish IBEX index -2.85% on uncertainty following Sunday's splintered election vote.
- Splintered Spanish vote heralds arduous coalition talks.
- Germany Nov Producer prices -0.2% m/m, -2.5% y/y vs previous -0.4%/-2.3%. -0.2%/-2.5% expected.
- UK Dec CBI Distributive trades + 19 vs previous 7. 21 expected.
- Swiss domestic sight deposits rise to 406.130bln in w/e Dec 18 vs previous 401.399bln.
- BoE MPC Weale - Tighter policy need less immediate - Daily Telegraph.
- ECB Vasiliauskas: Doesn't see need for additional intervention.
- China will keep monetary and fiscal policy accommodative in 2016 - Source.
Economic Data Ahead
- (0730 ET/1230 GMT) Brazil's current account balance for November is expected to show a deficit of $4.20 bln vs a deficit of $4.166 bln in October.
- (0730 ET/1230 GMT) Brazil's central bank to relase data on Foreign Direct Investment for Nov, which likely dropped to $5.00 bln from $6.712 bln in the previous month.
- (0830 ET/1330 GMT) Federal Reserve Bank of Chicago releases it National Activity Index for November.
- (0900 ET/1400 GMT) Mexico's Retail Sales for Oct likely rose 4.69 pct anually after gaining 4.90 pct in September.
- (1000 ET/1500 GMT) Eurozone Consumer Confidence for Dec is expected to have fallen to 5.85 after dropping to 6.00 in the previous month.
Key Events Ahead
- (1045 ET/1545 GMT) FedTrade Operation 30-Yr Fannie Mae/Freddie Mac (max $2.025 bn).
FX Beat
USD: The dollar inched higher in a thin trade to 98.775 against a basket of currencies, and it rose 0.2 percent against the yen to 121.42 yen.
EUR/USD: The de-stabilising Spanish election result could not do much to weaken euro, it slipped 0.1 percent to $1.0850. The pair recovered till 1.08882 and started to slightly decline from that level. Intraday trend is slighty bullish as long support 1.080 holds. Any break above 1.08830 will take the pair to 1.09557/1.100 level. On the downside major support is around 1.0800 and break below targets 1.0720/1. minor support is around 1.0840.
USD/JPY: The pair has declined till 121.05 on Friday and slightly recovered from that level. It was trading around 121.35 at the time of writing. Intraday trend is still weak as long as resistance 122.25 holds. On the higher side any break above122.25 targets 123/123.65. Minor support is at 121 and break below targets 120.60/120.
GBP/USD: Cable is facing strong resistance around 1.4950 and any short term bullishness can be seen only above 1.4950. It is currently trading around 1.48898. On the lower side major support is around 1.4850 and break below targets 1.4800 level. It is facing minor resistance around 1.4950 and break above will take the pair to next level around 1.5010/1.5060. Overall bullish invalidation is only above 1.5100.
USD/CHF: The pair is struggling to break above 1.000 level and break above confirms minor trend reversal a jump till 1.1003/1.0550 is possible. It is currently trading at 0.9951. On the lower side support is at 0.9935 (55 day 4H EMA) and break below will drag the pair down till 0.9900/0.9870/0.9850 is possible. Overall bullish invalidation is only below 0.9800.
AUD/USD: The Australian dollar was a quarter of a percent weaker at $0.7164. It has broken major support 0.7150 and declined till 0.7096 from that level. It was trading around 0.7162. The pair's major intraday resistance is around 0.7200 and break above targets 0.7240/0.7285. On the lower side major support is around 0.7080 and any break below will target 0.7050/0.7220. Aussie touched a one-month trough of $0.7097 last week and was down 12 percent for the year. Aussie held its ground against a battered Canadian dollar at C$0.9990, having briefly popped above parity on Friday.
NZD/USD: New Zealand dollar gained 0.3 percent to $0.6751. It continued to consolidate at 0.6722 and is benefiting after its U.S. counterpart wasweighed down by disappointing economic news.
Equities Recap
European shares inched higher in early trade, taking the cue from Asian equity gains. The FTSEuroFirst 300 Index surged 0.7 pct at 1,429 points, with Germany's DAX rising 1.6 pct and Britain's FTSE 100 and France's CAC40 climbing 0.8 pct. Spain's IBEX was down 2.2 pct, hitting its lowest since Sept. 29
Earlier in Asia, Japan's Nikkei 225 fell 0.4 percent, MSCI's broadest index of Asia-Pacific shares outside Japan went up 0.3 pct. China's CSI300 index rose 2.6 pct, HK's Hang Seng Index ended up 0.2 pct at 21,791.68 points and Shanghai Composite Index finished up 1.8 pct at 3,642.47 points.
Commodities Recap
Brent crude dropped to its lowest in 11 years, pushed by a rise in global oversupply, which is set to continue in 2016. Brent futures dropped by 2 pct to $36.05 per barrel, weakest since July 2004. U.S. WTI futures slipped 33 cents to $34.40 a barrel, lowest since 2009.
Gold saw a rebound from some of last week's initial drop following U.S. Fed's first interest rate hike since 2006. It was up 0.6 pct at $1,072 an ounce, building on the 1.4 pct gain of the last session.
Treasuries Recap
The 10-year US Treasury yield was up 2 basis points. The gap between 2-year and 10-year paper had shrunk to 122 basis points last week, the smallest since early February, but on Monday was back out to around 125 bps.
Spain's 10-year government bond yield climbed almost 20 bps to 1.89 pct, its highest in over a month. The spread over the benchmark German 10-year Bund yield widened to 130 bps, also the highest in over a month.
JGB prices ended the day unchanged to modestly higher, pushing yields down by 0.5bp to 1bp from yesterday's afternoon close.
UK Gilts started 20 touches lower than the close, as expected, as external core markets reacted to a slight bounce in S&P futures.
New Zealand government bonds earned, pushing yields 4 bps lower at the long end and 3 bps lower at the short end. Australian government bond futures were floating near multi-week highs, with the 3-year bond contract unchanged at 97.930. The 10-year contract inched higher half a touch to 97.1800, while the 20-year contract gained 1.5 touches to 96.6850.
