*US indices at near-record level
*US/China trade deal imminent
*GBP/USD consolidates as AUD/USD impacted by wildfires
US indices closed near record high levels yesterday as we kicked off earnings season. Today we get some heavyweights reporting, with the likes of JP Morgan and Citi providing the market with their latest update.
Overnight in APAC the Nikkei 225 was playing catch up after being closed at the start of the week. The Japanese index rose 0.73%, while the ASX jumped 0.85% and the Shanghai Composite lagged behind falling -0.28%.
So far sentiment has been mixed in the EU session but there has been one piece of major news: the US and China may not release the full details of the ‘phase one’ deal they are due to sign this week. The Dax is trading around flat while the FTSE100 is around 0.16% higher.
The major theme in the market continues to be the signing of the US-China trade deal tomorrow and more details have emerged about some of the key clauses. China has agreed to buy more US energy and manufactured goods, running to £2bn over a two-year period, and the US has agreed to drop China’s label as a currency manipulator.
Recent metrics may have focused Chinese minds. Data released overnight indicated a smaller-than-anticipated Chinese trade surplus over the US: $46.79bn against an expected $48.00bn.
In FX markets USD/JPY has pulled away from its highs as the markets consolidate. If there is any more bullishness in equites following earnings results and any more US-China news we could see another push higher.
Today we get the latest CPI reading from the US and as the Fed are in ‘wait and see’ mode at the moment it may not have a material impact, but an unexpected readout could move markets.
GBP/USD has consolidated after the price dropped yesterday. The fall was due to another BoE member (Vlieghe) joining the dovish camp. This led to the markets pricing in around a 50% chance of a cut at Carneys last BoE meeting. Some analysts feel that the market is getting slightly ahead of itself, but we do get some more data in the meantime to digest.
AUD/USD continues to feel the effects of the wildfires as the market needs to price in the amount of spending and disruption the incident may have on data and growth.
Gold has dipped back below the previous consolidation high of $1557.10/oz after the broader risk tone improved. The main reason for the price rise was the US-Iranian conflict, and the more recent de-escalation of tension has driven retracement.
Copper traded well yesterday, pushing above the previous wave high of $2.84/lb and this in turn helped base metals stocks like Freeport McMorran (FCX).
In oil markets, the price continues to look subdued thanks to the US-Iran situation. We did hear from some OPEC delegates who stated that a decision will be made on the extension of production cuts once the current deal expires at the end of March.
For the rest of the session we will be looking out for US CPI, weekly oil API’s, comments from Fed President Williams, George and EIA’s STEO (Short-Term Energy Outlook).