Global stock markets are mostly positive after a wrath of European economic data showed the eurozone had strong rebounds in the service sector. The S&P 500 futures are 0.5% higher, while the yield on the 10-year US Treasuries is 7.5 basis points higher at 2.513%. Risk appetite also benefited from optimism that the next round of trade talks in Washington DC will bring the US and China closer to a deal. Safe-haven currencies gave back most of their gains from the start of the trading week
- EUR – 1.12 holds after better than expected data
- Brexit – May to meet Corbyn
- Oil – Awaiting DOE inventory data
- Gold – Hovers near $1,300
- Bitcoin – Makes new 2019 high as volatility returns
Euro
The euro is staying in its tight range and rallied above the 1.12 level after a round of service sector data painted a picture that Europe could be showing signs of stabilization. Spain, Italy, Germany and the eurozone all had better than expected readings, while France confirmed the move back into contraction.
The German 10-year bund also turned positive on the renewed recovery expectations. The rebound in China still remains key for Germany and that is expected to show signs of improvement if we continue signs progress with China-US trade talks.
Brexit
PM May is expected to meet Labour leader Jeremy today. The first time they scheduled a meeting, Corbyn walked out, but this one should go differently. PM May appears she is willing to do anything now to break the impasse on the withdrawal agreement. A short or long extension is what appears to be the likely outcome since PM May will struggle to get Labour and her Conservatives to agree on all aspects of a new deal. Corbyn has been supportive of the customs union and it appears PM May will consider Labour’s wish list as she tries to get any deal done now.
The outcome of the Corbyn meeting could be more political gamesmanship or we could see the Labour leader call a general election.
Oil
The oil rally is slowing down, but that could be temporary. Yesterday, the API weekly reading showed a slight build and that really just triggered some profit taking in the short term. If we do not see a major build with the DOE crude oil inventories later today, we could the bullish move reassert itself.
Expectations are for the DOE inventories is for a draw of 591K barrels. Once we get passed the inventory data, markets will focus more on the growing belief that the Trump administration will renew the sanction waiver on Iranian crude for China and India, and this should be the next key catalyst for higher oil. The production cuts by OPEC + are providing a nice backdrop here for higher prices until we see US production ramp up again.
Brent has not traded above $70 a barrel since November 12th and we may need to see a positive update on the trade front to help trigger the move higher today.
Gold
Gold prices are slightly firmer on the day, despite today’s general upbeat tone in markets. Trade talks between China and the US resume in Washington DC today and we could see positive updates continue to weigh on the precious metal.
Bitcoin
Bitcoin is back in the headlines after making a new high for 2019, this followed yesterday’s out of nowhere surge. The virtual currency has recently benefited from a decline in volatility, which was supported for a slow steady climb higher. If roller-coaster conditions return, we could see that remain negative for the cryptocurrency. Cryptos have failed to gain traction in getting an ETF established and until we see that, we may see institutional money remain on the sidelines.
