US Open Preview – Dollar bears retake control amid trade risks; European equities dragged by automakers
March 2, 2018 1:26 pm
Here are the latest developments in global markets:
FOREX: Dollar bears remained in charge during early European trading afternoon amid trade uncertainties spurred by the US President, Donald Trump, yesterday, who said that he would impose new hefty tariffs on steel (25%) and aluminum (10%) imports. Fears that these measures could trigger a trade war between the US and the rest of the global economy including the biggest world exporter China, who responded today saying that it will safeguard its interests if harmed by the tariffs, pressured the dollar index to 89.89 (-0.44%) and sent dollar/yen to a fresh 15-month low of 105.26 (-0.78%). Comments from the BoJ Governor, Haruhiko Kuroda earlier today, were also supporting the yen, as Kuroda said that he would consider removing the ultra-accommodative monetary policy if inflation hits 2.0% by March 2020. Pound/dollar was moving sideways around 1.3787 (+0.10%) with investors being cautious ahead of May’s Brexit speech later today, while euro/dollar was extending gains, slightly above the 1.23 key level (+0.41%) ahead of the Italian elections on Sunday, which could strengthen Eurosceptic parties, including the far-right Five Star Movement. This could be a headwind to euro pairs next week. Euro/pound jumped to a three-month high of 0.8932 (+0.22%). Dollar/loonie changed hands higher at 1.2861 (+0.21%).
STOCKS: European equities were on track to end the week in the red as hawkish monetary prospects in the US and trade concerns weighed on the market. The pan-European STOXX 600 and the blue-chip Euro STOXX 50 were down by 1.56% and 1.76% respectively at 1200 GMT, with the automobile sectors losing the most as investors were worried that Trump’s potential tariffs on steel and aluminum would hurt automakers. The German DAX 30 was one of the worst performers, losing 2.20% to trade near six-month lows, the Italian FTSE MIB dived by an equivalent amount, while the French CAC 40 tumbled by 1.88%. UK’s FTSE 100 retreated by 1.0%. Germany’s Volkswagen, Daimler, BMW, and France’s Peugeot fell more than 2 percent. US stock futures were on the back foot as well.
COMMODITIES: Oil prices were set for a weekly loss for the first time in two weeks. WTI crude was last seen steady at $60.93/barrel (-0.10%) and Brent was flat at $63.89/barrel (-0.03%). In precious metals, gold was gaining momentum, trading at $1321.76/ounce (+0.40%).
Day ahead: Canadian GDP growth eyed; Theresa May comments on Brexit
Looking forward in the day, the focus will turn to Canada and the release of GDP growth figures, which have the potential to shake the loonie in times when the government faces trade headwinds arising from the US.
At 1330 GMT, the Canadian annualized GDP growth is expected to rise by 2.0% on a quarterly basis in the final quarter of 2017, surpassing the previous print of 1.7% and signaling that the economy ended the year on a strong foot. For the month of December, though, analysts believe that the country’s economic performance slowed down, predicting a growth of 0.1% in monthly terms compared to 0.4% seen in November. An upward surprise in the data could push the loonie higher if the numbers approve stronger enough to convince investors to buy the currency despite Trump’s announcement on steep tariffs on steel and aluminum which are likely to complicate the already subdued NAFTA talks even further. Note that Canada is the largest steel importer in the US, holding 16% of the product’s volume.
In the US, data releases will include the final estimate of the Michigan consumer confidence index for the month of February and the Baker Hughes oil rig count for the week ending February 23 due at 1500 GMT and 1800 GMT respectively.
Political developments in Eurozone will be in the highlights during the weekend as Italy prepares to elect its next government on Sunday, while Germany is scheduled to publish results regarding a coalition vote held by Merkel’s former coalition partners, the SPD, last month.
It would be interesting to see whether the pro-European sentiment will strengthen in Eurozone in case Italy’s former ruling party, the center-left Democratic Party which has been in power from 2013 to 2016 wins the trust of the Italian citizens. However, the markets are currently suggesting that the outcome is likely to be a hung parliament and predict that the center-left coalition of Matteo Renzi’s Democratic Party, the populist Five Star Movement, and the right-wing bloc comprising Silvio Berlusconi’s Forza Italia and the far-right Lega Nord could be among those to lead the government in the upcoming months.
The Brexit story will remain in the spotlight after the British Prime Minister Theresa May’s rejection of the Brexit draft treaty issued by the European Commission questioned any progress made in the EU-UK negotiations so far, including mainly the Irish border problem. May is anticipated to give a major speech on the Brexit front today in London at 1330 GMT.
Here are the latest developments in global markets:
Day ahead: Canadian GDP growth eyed; Theresa May comments on Brexit
Looking forward in the day, the focus will turn to Canada and the release of GDP growth figures, which have the potential to shake the loonie in times when the government faces trade headwinds arising from the US.
At 1330 GMT, the Canadian annualized GDP growth is expected to rise by 2.0% on a quarterly basis in the final quarter of 2017, surpassing the previous print of 1.7% and signaling that the economy ended the year on a strong foot. For the month of December, though, analysts believe that the country’s economic performance slowed down, predicting a growth of 0.1% in monthly terms compared to 0.4% seen in November. An upward surprise in the data could push the loonie higher if the numbers approve stronger enough to convince investors to buy the currency despite Trump’s announcement on steep tariffs on steel and aluminum which are likely to complicate the already subdued NAFTA talks even further. Note that Canada is the largest steel importer in the US, holding 16% of the product’s volume.
In the US, data releases will include the final estimate of the Michigan consumer confidence index for the month of February and the Baker Hughes oil rig count for the week ending February 23 due at 1500 GMT and 1800 GMT respectively.
Political developments in Eurozone will be in the highlights during the weekend as Italy prepares to elect its next government on Sunday, while Germany is scheduled to publish results regarding a coalition vote held by Merkel’s former coalition partners, the SPD, last month.
It would be interesting to see whether the pro-European sentiment will strengthen in Eurozone in case Italy’s former ruling party, the center-left Democratic Party which has been in power from 2013 to 2016 wins the trust of the Italian citizens. However, the markets are currently suggesting that the outcome is likely to be a hung parliament and predict that the center-left coalition of Matteo Renzi’s Democratic Party, the populist Five Star Movement, and the right-wing bloc comprising Silvio Berlusconi’s Forza Italia and the far-right Lega Nord could be among those to lead the government in the upcoming months.
The Brexit story will remain in the spotlight after the British Prime Minister Theresa May’s rejection of the Brexit draft treaty issued by the European Commission questioned any progress made in the EU-UK negotiations so far, including mainly the Irish border problem. May is anticipated to give a major speech on the Brexit front today in London at 1330 GMT.
Related Posts: