Thursday 8th January: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei up 2.00 %, Shanghai Composite declined 1.75 %, Hang Seng rose 0.50 %, ASX gained 0.40 %
• Commodities: Gold at $1207 (-0.30 %), Silver at $16.48 (-0.40 %), WTI Oil at $49.15 (+1.00 %), Brent Oil at $51.50 (+0.75 %)
• Rates: US 10 year yield at 1.99, UK 10 year yield at 1.609, German 10 year yield at 0.472

News & Data:

• Australia Building Approvals 7.5 %, Expected: -3.5 %, Previous: 11.5 %
• Fed officials saw rate rise unlikely before April
• FOMC saw patient guidance as giving more policy flexibility; patience means no rate rise “next couple of meetings”
• FOMC might raise rates with core inflation near current level
• FOMC stressed timing of first rate hike depend on new data
• FOMC saw downside risks nearly balanced with upside risks
• FOMC saw economy expanding at moderate pace, solid job gains
• Asian Stocks Rise; U.S. Futures, Ringgit Advance With Oil (BBG)
• Oil Export Plunge Signals Canada Economy Running on Empty (BBG)
• Euro-Area Deflation Risks Mount With Falling Consumer Prices (BBG)

Markets Update:

It was a quiet trading session in Asia with no major data releases or news. Most of the major APAC stock indices are up this morning and Crude Oil has been able to recover somewhat after hitting a low of $46.80 yesterday. Brent Oil briefly traded below $50 yesterday (the first time since 2009), but bounced as well, trading around $51.35 now. Gold and Silver retraced some of their previous gains after hitting into decent resistance above $1220 and $16.60 respectively.

The FOMC minutes were released in yesterday’s late NY session, but there were no surprises in them. The officials do not see a rate rise in the next couple of meetings and stressed again that a rate hike will be dependent on future economic data. Meanwhile, the latest CPI data out of the Euro Zone showed that the risk of deflation has increased significantly. Pressure on the ECB to act has increased and the next meeting is scheduled for January 22^nd.

Option-related demand ahead of 1.18 kept the EUR/USD supported in yesterday’s NY session, but bounces have been weak and selling interest remains high, so it is unlikely to hold much longer. Next major tech support eyed at 1.1640 (2005 low). To the topside, immediate resistance seen at 1.1860 and then 1.19. Pivotal short-term resistance noted at 1.1960, with stops resting above in good size. GBP/USD followed the Euro lower and a test of the 1.50 level seems imminent. No major data releases out of the UK today. The Bank of England is expected to hold rates unchanged and keep the QE at £375bln.

USD/JPY bounced along with equities. Offers at 119.80 have capped the topside so far and dealers report better selling interest from leveraged names & corporate names ahead of 120.50. To the downside, support noted at 119.20 and 118.60, with 118.00 the pivotal s/t level now. The Aussie Dollar gained from improved risk appetite, while the Kiwi Dollar is retesting the 0.78 level.

Upcoming Events:

• 07:00 GMT – German Factory Orders (-0.7 m/m)
• 10:00 GMT – Euro Zone PPI (-0.2 % m/m, -1.4 % y/y)
• 10:00 GMT – Euro Zone Retail Sales (0.1 % m/m, 0.2 % y/y)
• 12:00 GMT – Bank of England Rate Decision (0.50 %)
• 13:30 GMT – US Initial Jobless Claims (290k)

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