Thursday 20th November: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei up 0.10 %, Shanghai Composite down 0.10 %, Hang Seng unchanged, ASX lost 1 %
• Commodities: Gold at $1182 (-1.00 %), Silver at $16.06 (-1.50 %), Crude Oil at $74.52 (unch)
• Rates: US 10 year yield at 2.347, UK 10 year yield at 2.143, German 10 year yield at 0.840

News & Data:

• Japan Trade Balance ¥-710bln, Expected: ¥-1.18trln, Previous: ¥-958bln
• Japan Adjusted Trade Balance ¥-0.98trln, Expected: ¥-1.02trln, Previous: ¥-1.07trln
• Japan Exports 9.6 %, Expected: 4.5 %, Previous: 6.9 %
• Japan Imports 2.7 %, Expected: 3.4 %, Previous: 6.2 %
• Japan Manufacturing PMI 52.1, Expected: 52.7, Previous: 52.8
• China HSBC Manufacturing PMI 50.0, Expected: 50.3, Previous: 50.4
• FOMC: Discussed somewhat weaker outlook in Europe, China, Japan and Stronger Dollar
• FOMC: Participants expected soft inflation in near-term, then rising toward target; a few worried inflation could be below target for quite some time
• All but one FOMC voting member wanted to keep “considerable time” language
• A number of participants thought it could “soon be helpful” to clarify approach to pace of interest rates hikes

Markets Update:

The US Dollar strengthened after the FOMC minutes. Officials were fairly sanguine about the increase in volatility in markets. The statement showed that the participants saw “a somewhat weaker econ outlook and increased downside risk in Europe, China and Japan”, but believed that the impact on the US economy will likely be quite limited. Some members wanted to drop the “considerable time” language in the statement, but the majority wanted to keep it, while stressing that the timing of the first rate hike will be dependent on future labour/inflation data. The Fed also seems to plan to add language clarifying how fast rates may rise after the first hike sometime next year. Overall, the market volatility doesn’t seem have to influenced the officials’ expectations of when the first rate hike will be required next year.

Overnight, it was very quiet in the FX market, with USD/JPY the only pair that saw a larger move. After trading briefly above 118.00 post-FOMC, the pair extended gains towards 118.65 in Asia, driven by demand from Japanese names and US leveraged funds. Not much resistance seen now until the 120.00 area, but offers are likely to be heavy ahead of the level.Looking ahead, we have a series of Manufacturing & Services PMI numbers out of the Euro Zone and the UK, while the focus in the North American session will be on US inflation figures and the Phily Fed Index.

Upcoming Events:

• 07:00 GMT – German PPI (-0.1 % m/m, -1.0 % y/y)
• 08:00 GMT – French Manufacturing PMI (48.9)
• 08:00 GMT – French Services PMI (48.6)
• 08:30 GMT – German Manufacturing PMI (51.5)
• 08:30 GMT – German Services PMI (54.5)
• 09:00 GMT – Euro Zone Manufacturing PMI (50.9)
• 09:00 GMT – Euro Zone Services PMI (52.3)
• 09:30 GMT – UK Retail Sales (0.4 % m/m, 3.8 % y/y)
• 09:30 GMT – UK Core Retail Sales (0.3 % m/m, 3.9 % y/y)
• 13:30 GMT – US CPI (-0.1 % m/m, 1.6 % y/y)
• 13:30 GMT – US Core CPI (0.2 % m/m, 1.8 % y/y)
• 13:30 GMT – Canadian Wholesale Sales (0.7 % m/m)
• 14:45 GMT – US Manufacturing PMI (56.2)
• 15:00 GMT – US Existing Home Sales (-0.3 % m/m, 5.15mln)
• 15:00 GMT – Phily Fed Manufacturing Index (18.5)

Source:: Thursday 20th November: European Open Briefing