FX News Today
European Fixed Income Outlook: The 10-year Bund future opened at 163.15 after closing at 162.96 on Tuesday. 10-year cash yields are down -1.1 bp at 0.248% in opening trade. The sharp sell-off on Wall Street and the drop in 10-year Treasury yields suggest downside risks to world growth that are weighing on sentiment and saw Asian stock markets sliding overnight, although compared to the more than 3% decline in the Dow Jones (USA30), losses were more muted with soothing comments from China on trade and better than expected Services PMIs helping to stabilise markets, as US futures point to a higher open in the US. Overall sentiment remains depressed however and in Europe, Brexit risks, Italy jitters and political developments in France, Spain and Germany are adding to the mix. Today’s data calendar focuses on Services PMI readings out of the Eurozone and the UK, as well as Eurozone retail sales.
Asian Market Wrap: 10-year Treasury yields are little changed at 2.91%, JGB yields fell back -0.2 bp to 0.059%. The flattening of the yield curve in the US is underpinning concerns about the health of the US economy and the outlook for world growth. Asian stock markets headed south, after the sharp slide on Wall Street yesterday and Topix and Nikkei are both down -0.53%, the Hang Seng lost -1.77% and the CSI 300 is down -0.56%, despite a much better than expected Caixin Services PMI reading, which jumped to 53.8 from 50.8 in the previous month. Trade developments remain in focus and underpinned the sharp swings in markets over the first two days of the week and US futures are already coming back after China’s Commerce Ministry said that trade negotiations between the US and China will proceed based on a time table and that China will implement specific items as soon as possible. Trump, meanwhile, tweeted that there will be a “real deal” or none at all. Oil prices fell back below the USD 53 mark.
Charts of the Day
Main Macro Events Today
- ECB President Draghi Speech
- UK Services PMI – Expectation – It is forecast to lift to a 52.5 reading after October’s 52.2 outcome.
- EU Services PMI – Expectation – The services reading is anticipated at 53.1, and would leave the composite at 52.4.
- BOC Statement and Rate Decision – Expectation – No change in the current 1.75% setting for the overnight rate widely expected.
Support and Resistance
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