With the US closed for Memorial Day and UK markets offline due to a bank holiday, overnight volumes have been weaker than normal on little newsflow. The main story remains the stronger USD following Yellen’s hawkish Friday speech, which not only led to the lowest Yuan fixing since February 2011…
… but pushed the USDJPY almost as high as 111.50 overnight before paring gains, however it was enough to send the Nikkei 1.4% higher.
Elsewhere, Europe’s Stoxx 600 is unchanged on volume that is ~55% of the 30-day average, after earlier rising above the 200 DMA for the first time in 2016, with the autos and media sectors outperforming and the oil & gas and technology sectors underperforming. US equity futures were 0.2%, or 4 points higher, currently resting just above 2,101 with the last trading day of May tomorrow expected to push the cash market over 2,100 as well.
The stronger dollar also pressured oil modestly lower while gold bullion fell for a ninth day in its longest losing streak following Yellen’s comment on Friday that an interest-rate increase is likely in coming months. The dollar strengthened against all but four of its 16 major peers. Treasury 10-year futures slid the most in almost two weeks, German bunds declined and emerging-market currencies headed toward the worst month since August. European stocks swung between gains and losses, with trading volumes less than half the daily average amid market closures in the U.S. and U.K.
The BBG Dollar Spot Index was poised for its biggest monthly jump since
September 2014, having surged as Fed Funds futures showed the odds of a
U.S. interest-rate hike by July more than doubled to 54 percent.
“What Yellen said confirmed the Fed is open for a June rate increase, and it’s now data dependent,†said Carl Hammer, chief currency strategist at SEB A/B in Stockholm. “The Fed might be on hold next month due to Britain’s European Union referendum, but then make it explicit there will be an increase in July. Our view is that there’s more room to add to positive dollar bets.”
Market Snapshot
- Equities:Â Nikkei 225 (+1.4%), FTSEMIB (+0.4%), CAC 40 up less than 0.1%, DAX up 0.4%, IBEX 35 up 0.1%, FTSE MIB up 0.4%, Euro Stoxx 50 up 0.1%, Vstoxx Index rises 3.6% to 21.2
- US futures:Â S&P 500 futures up 0.2%
- Commodities:Â Silver spot (-1.9%), Gold spot (-0.8%), Brent crude down -0.6% to $49.03/bbl, Gold down -0.8% to $1202.78/oz
- FX:Â Euro spot up 0.1% to 1.1126, Dollar index up 0.37% to 95.875; Yen spot (-1%), Dollar Index (+0.4%)
- Bonds:Â German 10yr yield up 2bps to 0.16%, French 10Yr yield up 3bps, Greek 10yr yield up 5bps to 7.31%, Portugal 10yr yield up 3bps to 3.08%, Italian 10yr yield up 1bp to 1.37%
Looking at regional markets, in the otherwise sleepy Asian session stocks fell with the Nikkei 225 outperforming and the Kospi underperforming; The MSCI Emerging Markets Index slipped 0.1 percent, bringing its decline in May to 3.9 percent, the most since January. Japan’s Topix index climbed 1.2 percent to a one-month high, led by exporters as the yen weakened. The Nikkei rose 225 +1.4%, Hang Seng +0.3%, Kospi -0.1%, Shanghai Composite up less than 0.1%, ASX up less than 0.1%, Sensex +0.2%; 8 out of 10 sectors fall with consumer discretionary and staples outperforming and materials and industrials underperforming.
European stocks pared modest early gains, with the Stoxx Europe 600 Index slipping less than 0.1% on worse than normal trading volumes.10 out of 19 Stoxx 600 sectors fall; industrials is the most active, down 0.1% on 77% 30-day avg. vol., followed by media +0.2% on 75% avg. vol.; basic resources is the least active sector down 0.1% on 38% avg. vol. Top Stoxx 600 outperformers include: PostNL +6.9%, Banca Monte dei Paschi di Siena +2.5%, SES +2.3%, Banco Popolare +2%, Eutelsat +2%, Air France-KLM +1.8%, Georg Fischer +1.7%, Volkswagen +1.7%; Top Stoxx 600 underperformers include: Eurobank Ergasias SA -4.2%, bpost SA -3%, Zodiac Aerospace -2%, ams AG -1.8%, Alpha Bank -1.6%, Fingerprint Cards AB -1.4%, Steinhoff International Holdings -1.1%, ArcelorMittal -1%.
