FTSE -22 points at 7392 DAX -62 points at 12971 CAC -14 points at 5301 IBEX -60 points at 9930
The preliminary data showed that the Japanese GDP growth slowed more than analysts expected in 3Q. Japan’s gross domestic product expanded by 0.3% in the third quarter. This is equal to 1.4% on annualized basis, down from 2.5% at the previous read and softer than 1.5% expected. Japanese stocks sold off. Nikkei (-1.32%) and Topix (-1.76%) edged lower on the back of soft growth figures and a stronger yen. The USD/JPY tested 113.00 mark (lower Bollinger band on daily basis), the broad-based USD weakness has been a major catalyzer.
The US 10-year yield eased to 2.35% and the US stocks retreated on the US’ complex tax reform debate. Latest news suggest that Republicans would add the repeal of Obamacare’s individual mandate to their legislation. The goal of adding the Obamacare repeal into the mix is to propose a financing solution for the major tax reforms, but of course the joint-proposal on two controversial subjects could also decrease the chances of success. The US economic calendar is busy today. The US headline inflation may have slowed to 0.1% on month to October from 0.5% printed a month earlier; the consensus for October retail sales is 0.0% month-on-month versus 1.6% previously. Soft data could keep the USD-bulls on the sidelines, a subdued inflation read will unlikely impact odds for the Federal Reserve (Fed) rate hike by the end of the year. The probability of a December rate hike stands at a solid 92.3% and is mostly priced in.
The upswing in the EUR/USD convinced traders to jump on the back of a bull after the pair surpassed the 1.17 level. The euro’s rise was supported by solid German and Italian GDP data and the oversold reversal in EUR/USD. The pair advanced to 1.1802, clearing the resistance near its 100-day moving average (1.1793). The upside correction could continue despite the low-rate pressure. If the euro gains enough in value to compensate the opportunity cost of holding it despite low yields, new long positions could join the market. The next resistances are eyed at 1.1822 and 1.1886 (major 50% and 61.8% retracement on September – November pullback). Support to the positive reversal stands at 1.1760 (major 38.2% retrace).
The AUD/USD extended losses to 0.7580 target (lower Bollinger band on daily chart) and daily relative strength index approaches the oversold threshold (30%). Softer wage price index weighed on the sentiment. Meanwhile, the downside pressures remain in place with declining Australian yields and falling iron ore prices. The 10-year AU yield fell 6.9 points in Sydney, as iron ore futures cheapened by 3.76% in the overnight session. However, a sell-off below 0.7580 could encourage some traders to take profit. On the topside, sellers should show up by 0.7708/0.7712 (minor 23.6% retrace on Sep – Oct decline / 200-day moving average).
Gold is trapped within the narrowing Bollinger bands (1,267/1,288) on daily chart. The bias is marginally positive on declining US yields.
Bloomberg’s commodity index recorded the biggest slide in six months, the FTSE rolling index slipped below 7400p, warning of a soft open in London.
The GBP/USD eased on Tuesday after the October data showed a steady headline inflation at 3.0% versus 3.1% as expected by analysts. Cable dipped to 1.3074, before a broad-based USD sell-off sent it to 1.3187 in New York. The UK wages data is due today. The average weekly earnings growth could have eased to 2.1% from 2.2%. Soft wages growth means that Bank of England (BoE) will need to stay accommodative for longer. Dovish BoE expectations could weigh on the pound along with the Brexit shenanigans. Offers are touted at 1.3180-1.3200. The pound bears continue watching the 1.3040 (November support).
The EUR/GBP hit 0.8970 level (100-day moving average) and is preparing to test the 0.90 mark.
The IBEX 35 slipped below the 10000 mark. Losses were mostly due to the sell-off in mining (-3.86%) and energy stocks (-2.00%).
WTI crude fell to $55/barrel as API data showed that US oil inventories increased by 6.51 million barrels last week. More official EIA data is due today. Analysts have penciled in a 2.2-million-contraction in last week’s stockpiles versus +2.2 million positive surprise printed a week earlier. A second consecutive week of positive surprise could encourage a deeper correction in oil, given that all oil-positive news, such as OPEC’s plans to extend production cut and tighter market forecasts, have already been priced in. In addition, the EIA cut its demand estimate for 2018, which could give an extra motivation for the sellers to join the market. Support to October-November positive trend stands at $54.66.