Europe Roundup: Global Stocks and Oil Plunge, Euro and Yen Outperform, Sterling Slides Towards 7-Year Lows – Tuesday, January

Market Roundup

• DXY fell to 99.136 ahead of Fed, off low into NY. 99.426 high.
• Sterling slips as oil and stocks fall. GBP/USD plays in between 1.4250-1.4175 levels.
• SSEC index down 6.4 pct, lowest close since Dec 2, 2014.
• Oil falls below $30/barrel, pulling Asian shares lower.
• Brent crude fell to $29.27/barrel. $27.10, lowest since November 2003, on January 20.
• Iraq willing to reduce oil output if others also cut-Minister.
• Iraq Oil Minister Says Saudi-Russia more flexible on output cuts.
• Oil rebounds around 0.5% on Saudi output cut optimism.
• German two-year yields hit new low as March ECB cut almost priced in.
• BOE Carney – Fed rate rise in December contributed to market turmoil but not fundamental root.
• BOE Carney – Conditions or a rate rise not yet in place.
• China Stats Bureau – Moves in Yuan mainly due to strong dollar, but also pressure on China econ.
• JP LDP Hayashi – BOJ should think about options besides buying JGBs for monetary policy.
• Switzerland December Trade 2544mln vs previous 3159mln revised.
• Swedish December PPI -1.9% y/y vs previous -1.5%.
• Turkish CB Governor – Cannot move to single interest rate yet.
• Fitch revises NZ outlook to stable, affirms at ‘AA’.

Economic Data Ahead

• (0900 ET/1400 GMT) US house prices are expected to show solid gains in November, with the S&P/Case Shiller house prices likely to have risen 5.7 percent year-over-year in November, compared with 5.5 percent in the year to October.

• (0900 ET/1400 GMT) Mexico’s retail sales likely rose 0.10 percent in November, against October’s 0.3 percent rise, while sales probably edged up 5 percent in November on a year-over-year basis.

• (0945 ET/1445 GMT) The financial firm Markit releases its US services PMI for January which is expected to stay at 54.0, the index stood at 54.3 in December.

• (1000 ET/1500 GMT) The Conference Board is expected to report its consumer confidence index at an unchanged 96.5 in January despite a massive stock market selloff.

• (1000 ET/1500 GMT) TheFederal Reserve Bank of Richmond is set to release its manufacturing index for January and is likely to stay at 3.0.

• (1630 ET/2130 GMT) API Weekly Crude Oil Stocks.

Key Events Ahead

• Federal Open Market Committee’s two-day meeting on interest rate policy begins in Washington amid the snowstorm cleanup.
• (1045 ET/1545 GMT) FedTrade Operation 30-year Fannie Mae / Freddie Mac (max $2.200 bn)

FX Recap

The safe-haven Japanese yen and the low-yielding euro climbed as global stock markets and oil prices plunged, driving investors to move away from commodity-linked and oil-related currencies such as the Australian and Canadian dollars.USD: The dollar index dropped, with investors cautious before the outcome of the Federal Reserve’s two-day policy meeting beginning later in the day. It was down 0.45 percent against the yen at 117.76 yen.EUR/USD: The euro was up 0.15 percent at $1.0865 and started to retreat from that level. It was trading around 1.08380. Technically the pair is facing resistance around 1.0880 and break above will take it to next level 1.0950/1.0980/1.100 level. On the downside support is around 1.0780 and break below targets 1.0710/1.06700 level. It made intraday high at 1.0874 and low at 1.0825 levels.USD/JPY: The pair has reached a level of 117.65 today morning and started to recover from that level. It was trading around 118.39. Short term trend is slightly bullish as long as support 117.50 holds. The major support is around 117.50 and break below targets 116.80/116. On the higher side minor resistance is around 118.85 and break above will take the pair till 119.30/120. Pair made intraday high at 118.41 and low at 117.65 levels.GBP/USD: The Sterling slid back towards 7-year lows against the dollar, hit by oil and stock markets plunge that has added to concerns that Britain could vote to quit the European Union. It fell around a third of a percent in morning trade to $1.4197 and 76.33 pence per euro respectively. The Cable has broken a minor support 1.4200 which confirms minor weakness; a decline till 1.4120/1.4070 is possible. Short term trend is weak as long as minor resistance 1.4300 holds. Any break above 1.4300 will take the till 1.4365/1.4450 level. Overall bearish invalidation is only above 1.4500.

NZD/USD: The New Zealand dollar was trading at 0.6435, down around 0.3 percent. The calendar in both New Zealand and Australia was empty today. It made intraday high at 0.6470 and low at 0.6424 levels. Initial support is seen at 0.6318 and resistance at 0.6896 levels.AUD/USD: The Australian dollar was 0.2 percent weaker at $0.6941, pressured by the slumping crude futures and stock markets. It was fetching $0.6937, down around 0.3 percent. It is trading in a narrow range around 06920-0.7046 for the past two trading sessions. On the higher side major resistance is around 0.7060 and break above targets 0.7115/0.7170. The pair’s minor support is around 0.6900 and break below will drag the pair till 0.6820. Short term trend is slightly bearish as long as resistance 0.7060 holds. Pair made intraday high at 0.6977 levels and low around 0.6918 levels. Initial support is seen at 0.6825 and resistance at 0.7050 levels.USD/CHF: The pair has broken major resistance 1.0150 and jumped till 1.01670. Short term trend is bullish as long as support 1.0500 holds. Any break above 1.0150 confirms minor trend reversal a jump till 1.018/1.0250 is possible. On the lower side major support is around 1.0050 and break below will drag the pair till 1.000/0.9950. Overall bullish invalidation is only below 0.9990.

Equities Recap

World stock markets plunged again on Tuesday as China’s weak economic data drove shares there 6 percent lower and oil’s dip below $30  a barrel again led to a renewed sell-offs.Europe’s FTSEurofirst 300 fell 0.86 pct to 1,312.12 points in early deals, Britain’s FTSE dropped 1.4 pct, France’s CAC inched lower 1.6 pct and Germany’s DAX was down 1.4 pct.Tokyo’s Nikkei closed down 2.35 pct at 16,708.90, China’s CSI300 Index ended down 6.0 pct at 2,940.51 points, while Shanghai Composite Index fell 6.4 pct at 2,749.79 points. HK’s Hang Seng Index dropped 2.5 pct at 18,860.80 points.

Commodities Recap

Crude futures fell below $30 a barrel on worries about oversupply and Chinese economic slowdown, extending the previous day’s losses by more than 3 percent. Brent crude dropped $1.13 to $29.37 a barrel by 0824 GMT, after hitting a session low at $29.27 a barrel, after settling down $1.68 in the previous session. U.S. crude fell $1.03 to $29.31 a barrel, after touching a low of $29.25. It fell $1.85 a day earlier.Gold rallied to its highest since November as investors preferring safe-haven assets as worries over a slowing global economy weighed on  stocks and crude oil again. U.S. gold for February delivery rose 0.7 percent to $1,113.10 an ounce. Spot gold was up 0.5 percent at $1,112.86 an ounce in European trading, after earlier peaking at $1,113.54, its highest since Nov. 4.

Treasuries Recap

The 10-year U.S. Treasury yield stood at 2.009 percent vs U.S. close of 2.022 percent on Monday.The Japanese government bond prices rose on falling Tokyo stocks, increasing the allure of safe-haven debt. March 10-year JGB futures  rose 0.02 point to 149.52. The 30-year JGB yield slipped to 1.165 percent, its lowest since January 2015.German bund futures opened 31 ticks higher at 161.73. while the yields on 2-year government debt stood at record lows, deep in negative territory.

New Zealand government bonds eased, sending yields 1.5 basis points higher across the curve.

The material has been provided by InstaForex Company – www.instaforex.com