Tuesday 20th January: European Open Briefing

Global Markets:

• Asian stock markets: Nikkei up 1.80 %, Shanghai Composite gained 0.90 %, Hang Seng rose 0.25 %, ASX declined 0.05 %
• Commodities: Gold at $1277 (0.00 %), Silver at $17.69 (-0.30 %), WTI Oil at $47.90 (-2.50 %), Brent Oil at $48.80 (-0.25 %)
• Rates: US 10 year yield at 1.814, UK 10 year yield at 1.529, German 10 year yield at 0.441

News & Data:

• China GDP q/q 1.5 %, Expected: 1.7 %, Previous: 1.9 %
• China GDP y/y 7.3 %, Expected: 7.2 %, Previous: 7.3 %
• China Industrial Production 7.9 %, Expected: 7.4 %, Previous: 7.2 %
• China Retail Sales y/y 11.9 %, Expected: 11.7 %, Previous: 11.7 %
• Japanese EconMin Amari: Up to BOJ to decide how to respond if they judge meeting their price target will be difficult
• Amari: Joint statement between BOJ and Government doesn’t mention specific deadline for achieving 2% inflation
• Japanese FinMin Aso: Wants to pass FY2015 budget before April
• Aso: Low interest rates, weak Jpy and lower oil price are positive for Japan
• IMF: Cuts 2015 global growth forecast to 3.5% from 3.8%
• IMF: Raises US growth forecast to 3.6% from 3.1%
• IMF: Trims Canada growth forecast to 2.3% from 2.4%
• IMF: Cuts 2015 growth forecasts most for Russia, Nigeria and Saudi Arabia
• Emerging Stocks End Two-Day Loss After China GDP Data; Won Drops (BBG)
• Yen Falls Third Day as China Growth Beats Forecast; Aussie Drops (BBG)

Markets Update:

Asian stock indices are mostly higher this morning, boosted by better than expected Chinese GDP data. The year-on-year figure arrived at 7.3 % vs 7.2 % expected, though the quarter-on-quarter number was 1.5 % against expectations of a 1.7 % print. Gold and Silver remain very well bid, despite the USD regaining some strength in the past 24 hours. The next bull target in Gold is $1344 and key short-term support is now seen in the $1250 area. Meanwhile, both WTI and Brent are again under pressure, declining more than 2 % on the day.

In FX, EUR selling interest remains high. The pair hit a high of 1.1630 in yesterday’s NY session, but failed to sustain momentum and quickly fell back sub-1.16. The pair is likely to consolidate ahead of the ECB meeting on Thursday, when the bank is expected by most analysts to introduce a quantitative easing (QE) programme. GBP/USD followed the Euro lower and may test the pivotal 1.50 level soon. The next key event is tomorrow, in form of the Bank of England minutes. We will also see UK employment data for December.

The commodity currencies weakened again in the past two sessions, with AUD/USD falling back below 0.82 and NZD/USD slowly heading towards the lower part of the 0.76-0.7850 range. Dealers reported decent demand for AUD/NZD from leveraged names. A daily close above 1.06 could lead to further short covering in the pair, which certainly does look oversold on the daily chart.

Upcoming Events:

• 07:00 GMT – German PPI (-0.4 % m/m, -1.4 % y/y)
• 09:00 GMT – Italian Trade Balance (€4.32bln)
• 10:00 GMT – German ZEW Economic Sentiment (40.0)
• 10:00 GMT – German ZEW Current Conditions (14.8)
• 10:00 GMT – Euro Zone Economic Sentiment (37.6)
• 13:30 GMT – Canadian Manufacturing Sales (-0.5 % m/m)
• 15:00 GMT – US NAHB Housing Market Index (58.0)
• 21:45 GMT – New Zealand CPI (0.0 % q/q, 0.9 % y/y)

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