After subdued trading in the overnight session until a little after 8pm Eastern, algos went into overdrive just around the time the Fed’s 2015 voting member and uberdove Charlie Evans told reporters that“raising rates would be a catastrophe”, hinting that the first rate hike would likely be – as usual – pushed back from market expectations of a mid-2015 liftoff cycle into 2016 or beyond (but don’t blame the US, it is the “international situation’s” fault), in the process punking the latest generation of Eurodollar traders yet again. Whatever the thinking, S&P futures soared on the comments and were higher by just under 20 points at last check even as Crude has failed to pick up and the 10Y is barely changed at 2.00%.
European equities (Eurostoxx50 +1.6%) trade in positive territory after overnight gains in Asia (Nikkei +1.7%) following post-FOMC Minutes remarks from Fed’s Evans in which the market perceived as dovish. However, since the open equities have slowly drifted lower as markets remain on the back foot given the ongoing man hunt and continued troubles in France.
In stock related news, UK retailer Tesco (+6.4%) maintained its profit guidance after four consecutive profit warnings and Marks & Spencer (-3%) trading update missed expectations. Firmer equities have in turn weighed on Bunds and T-notes (-10 ticks), where both French and Spanish supply was smoothly absorbed into the market. The GE/GR 10yr spread (-11bp) is seen tighter after two polls further indicated the SYRIZA’s lead narrowed ahead of the 25th January snap election and reports that Germany are open to Greek debt talks after election, according to lawmakers, citing possible easing of Greek repayment terms. However, they are not open to a Greek debt write-off.
Heading into the US entrance the USD (+0.41%) trades near session highs as EUR/USD hit 9 year lows on the break below 1.1800. Reported hedge fund selling of EUR/GBP also weighed on the pair. Elsewhere, GBP/USD traded at its lowest levels since July 2013 after tripping stops through 1.5050 as the USD weighed on the pair.
In the energy complex, Brent and WTI have traded sideways and have held onto gains. Brent trading above $51, holding rebound after price drop yday under $50 to lowest for front-mo. since 2009. WTI gains, narrows discount to Brent to $2.16, tightest spread since Oct. Brent futures “recovered from its 1st test below the $50 level since April 2009 to settle at $51.15/b, up $0.05 from the prior close,†says Citi Futures energy futures specialist Tim Evans. “The recovery suggests that the mkt has fallen enough to reflect its weak fundamental prospects, at least for now.†Citibank analyst Fitzpatrick sees WTI bottoming nr ~$45.50. Feb. Brent +20c at $51.35, range $50.71-$51.91; yesterday fell to $49.66 intraday. February WTI +26c at $48.91, fell to $46.83 yesterday lowest since April 21, 2009.
Meanwhile, NatGas futures slid to a two year low overnight as US temperatures appear to be turning milder. Separately, Precious metals slide with Silver underperforming (-1%) alongside the USD strength. Copper saw marginal gains overnight and is on course for its first increase for 2015 amid an increased appetite for riskier assets, while China’s iron futures declined as investors declined on continued underlying weak demand.
HSBC says they are raising their average gold price forecast for 2015 to USD 1,234.00 from USD 1,175.00, leaves 2016 unchanged at USD 1,275 and say raising 2015 gold forecast based on the possibility that further USD strength could trigger safe haven demand for bullion.
In Summary:Â European shares rise close to intraday highs with the retail and health care sectors outperforming and tech, real estate underperforming. German factory orders fall more than expected in November, which in turn pushed the plunging EURUSD to fresh multi-year lows just above 1.176. The French and Italian markets are the best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. Irish 10yr bond yields rise; Japanese yields decline. Commodities gain, with natural gas, silver underperforming and zinc outperforming. U.S. jobless claims, consumer credit, Challenger job cuts due later.
Looking over today’s calendar we kick off this morning in Europe with November factory orders data for Germany. This is followed up later with various prints for the Euro-area including PPI, retail sales and various confidence indicators. As well as this we also have the BoE decision this morning. This afternoon in the US, we have more employment data with the Challenger job cuts reading for December as well as the initial claims numbers. November consumer credit rounds off the releases.
