FTSE -16 points at 7311
DAX -20 points at 11535
CAC -12 points at 4870
Euro Stoxx -9 points at 3285
Asian markets traded with a limited risk appetite ahead of the UK PM Theresa May’s Brexit speech due today and Donald Trump’s inauguration due on January 20th.
Most Asian markets traded down. Nikkei (-1.48%) and Topix (-1.41%) led losses, as the cash flew into the yen. The USD/JPY consolidated at 113.35/114.28.
Chinese stocks sold off for the sixth consecutive session. Shanghai Composite (-0.16%) recorded the longest falling streak since Dec 2013, before turning positive toward the end of the session (+0.17%), Hang Seng Index (+0.55%) outperformed; HSBC (NYSE:HSBC) (+1.82%), China Mobile (NYSE:CHL) (+1.07%) and Tencent (OTC:TCEHY) (+0.61%) added about 80 points to the index. Still, rising anxiety regarding the US-China relations enhance the level of discomfort in China’s financial assets, keeping the upside potential limited for now.
The Aussie (+0.54%) rallied to a two-month high against the greenback, as iron ore prices traded at their highest level in two years. Also, easing US yields become attractive for carry traders. The AUD/USD is testing a critical mid-term resistance at 0.7510 (major 61.8% retracement on Nov 7th to Dec 22nd decline), if surpassed, could encourage a further rise to 0.7630 (minor 76.4% retrace) before 0.7800 level.
Gold extended gains to $1213. Trend and momentum indicators are supportive of further upside correction. The key mid-term resistance stands at $1219 (major 38.2% retracement on Jul-Dec decline). Support is building above $1200 level. Decent $1200 call expiry is due tomorrow.
The UK takes the center stage today. The inflation data and PM Theresa May’s speech will be closely monitored.
The UK will release the December inflation figures today. The headline inflation is expected to have accelerated to 1.4% year-on-year, from 1.2% printed a month earlier. The core CPI is expected to have steadied at 1.4%y/y. The output prices may have recorded a significant 2.9%y/y rise in December due to a cheaper pound. Any sign of overheating in the UK's inflation would bring forward the Bank of England (BoE) hawks and temper the recent depreciation in the pound. Earlier this week, we heard rumours about the possibility of an abrupt halt in the BoE’s asset purchases program to prevent an exceeding change in consumer prices.
On the other hand, PM Theresa May is due to speak today and unveil much expected details on her Brexit vision. The speech is rumoured to take place at around 11am GMT. According to the extracts of the speech released by her office, May has no interest in a 'half-in, half-out' approach while exiting the European Union. The UK’s sovereign and the currency markets have been pricing in a hard Brexit since a week, therefore the surprise effect could be limited unless May brings up fresh, un-priced thoughts.
Cable tanked to 1.1983 on Monday before correcting to 1.1236 in Asia. The key support stands at 1.1825 (October 7th flash crash low). Light option barriers trail down 1.2085/1.2100 for today’s expiry, as the recent rush in pound put options hint that there may be a further downside potential if the Brexit is set to happen too ‘hard’. Breaking the 1.1825 should bring the 1.15 mark on radar.
The UK stocks continued surfing on cheaper pound yesterday. The FTSE 100 hit the fresh record high of 7354.14p before starting a downside correction to close yesterday's session at 7327.13p. The FTSE rolling index further slid to 7303p at the overnight trading session, the FTSE futures (-0.21%) softened along with the Euro Stoxx futures (-0.30%).
The FTSE is called 16 points lower at 7311p.