Spain Rebounds, Pound Tumbles In Quiet Session Ahead Of ECB Minutes, Fed Speakers

Global markets came off record highs, trading subdued, with US index futures unchanged as traders are unwilling to make major moves ahead of today’s ECB minutes and tomorrow’s NFP release, and before speeches by central bankers including SF Fed President John Williams and the potential next Fed chair Jerome Powell, as well as ECB executive board members Peter Praet and Benoit Coeure. 

There was a modest relief rally in Spain, where the main IBEX 30 stock index traded up close to 1%, with banks across the region seeing some bullish performance as participants continue to guess whether or not Catalonia will declare independence next week as Economy Minister Luis de Guindos poured cold water on Catalonia’s bid for independence. A well-received Spanish bond auction, the first since the referendum and which saw the highest 10-year bid-to-cover ratio since February, added to the optimism. Other auctions out of France and the UK were well digested across markets. The Spanish-German spread posted its first tightening this month.

Asian stocks were mixed after a four-day rally, with markets in Hong Kong, China and South Korea all closed for holidays. The Topix dropped -0.1% with the Nikkei 225 little changed. The MSCI Asia Pacific Index was little changed at 162.93. On Wednesday, the S&P 500 Index posted a slight gain, still ending at a fresh record, after data showed American services industries climbed at the fastest pace in 12 years, while private jobs numbers met expectations. Japan’s Topix index dropped for the first time in three days, led by insurers and transportation companies. Qantas Airways Ltd. closed at the highest level in almost 10 years in Sydney after Goldman upgraded the stock. Other markets: Australia’s S&P/ASX 200 Index was little changed, and New Zealand’s NZX 50 up +0.3%. Straits Times Index +0.8%, Philippines PSEi Index -0.6%, Malaysia’s FTSE KLCI Index -0.1%, Jakarta Composite Index -0.8%, Thailand’s SET Index +0.3%. India’s S&P Sensex Index +0.1%, Nifty 50 little changed

European bourses traded subdued, with outperformance in the IBEX 30, recovering from the losses seen yesterday. The Spanish stock index trades up close to 1%, with banks across the region seeing some bullish performance as participants continue to guess whether or not Catalonia will declare independence next week. A rangebound tone is the theme across the remainder of European indices, as utilities outperform, evident of the lack of risk trade. In Spain, the prospect of secession has increased pressure on Prime Minister Mariano Rajoy while rattling markets. His next move could involve suspending the regional government and implementing direct rule from Madrid. Emerging-market stocks are showing signs of shrugging off declines from last month that were triggered by concern a stronger dollar would hurt developing nations’ currencies.

“The focus is of course upon the situation in Spain and Catalonia,” Dennis Gartman, editor of the Gartman Letter, wrote in his daily emailed report. “Although Catalonia’s Parliamentary President, Mr. Puigdemont, has not yet officially called for an independent Catalan nation, he may do so early next week, at which time 1.17 shall almost certainly be given” for the euro.

The Bloomberg Dollar Spot Index was little changed while Treasuries and stock futures were stuck in tight ranges as traders stayed on the sidelines before a series of U.S. data and speeches by four Fed members including Chair candidate Jerome Powell. The pound and Aussie led G-10 losses while the euro struggled to rise a third day before ECB publishes the account of its September meeting. Currency-market volumes remain muted, with liquidity being described as below average.

GBP has seen the majority of early price action, where sterling saw a 0.6% drop vs. the dollar. Concerns about PM May’s tenure crept into markets overnight and through the morningfollowing the UK press reports from The Telegraph and The Times. However, Downing Street later came out and said this was not an issue for discussion. Cable could look towards pre hawkish Carney levels around 1.3150.

AUD saw the majority of volatility overnight, as Australian retailers were hit by the worst sales decline in over four years. August’s retail sales came in at -0.6% (M/M) leading to sharp selling pressure in the Australian dollar. AUD lost ground against both its major counterparts yet still consolidates inside current trading ranges, AUD/USD’s 2016 high continues to behave as support for the pair, with AUD/NZD not wanting to look toward 1.09.

Looking ahead, highlights include ECB Minutes, US Trade Balance, Weekly Jobs, Factory orders and a slew of central bank speakers.

Market Snapshot

  • S&P 500 futures up 0.02% to 2,536.75
  • VIX Index down 1.7%, ending 2-day advance
  • STOXX Europe 600 down 0.1% to 389.84
  • MXAP up 0.05% to 162.93
  • MXAPJ up 0.1% to 537.54
  • Nikkei up 0.01% to 20,628.56
  • Topix down 0.1% to 1,682.49
  • Hang Seng Index up 0.7% to 28,379.18
  • Shanghai Composite up 0.3% to 3,348.94
  • Sensex up 0.1% to 31,702.87
  • Australia S&P/ASX 200 down 0.01% to 5,651.77
  • Kospi up 0.9% to 2,394.47
  • German 10Y yield rose 0.6 bps to 0.459%
  • Euro up 0.09% to $1.1770
  • Brent Futures up 0.6% to $56.13/bbl
  • Gold spot up 0.1% to $1,276.57
  • U.S. Dollar Index up 0.01% to 93.47
  • Italian 10Y yield rose 2.9 bps to 1.901%
  • Spanish 10Y yield unchanged at 1.785%
  • Top Overnight News

  • Crisis in Spain: Spanish Economy Minister Luis de Guindos ruled out any sort of mediated talks with separatist leaders and said Catalan banks have signaled they may move out of the region if the push for independence continues
  • Saudi King Salman bin Abdulaziz is beginning an historic first visit to Russia by a monarch of the Gulf kingdom as he seeks an understanding with President Vladimir Putin to extend an agreement curbing oil supplies
  • Saudi Aramco isn’t talking with any Russian companies about possible participation in its initial public offering, the head of the state oil producer said
  • Brevan Howard Asset Management LLP’s flagship hedge fund lost 0.9% in September, the sixth monthly decline this year, according to an investor letter seen by Bloomberg News. The Master Fund, which managed $6.8 billion at the end of August, was down 4.6 percent through September
  • Foreign buying of South African bonds rose to a six-month high in September, suggesting that the highest yields among emerging markets are proving irresistible despite political and economic risks
  • Ex-HSBC trader says boss ordered him to ‘ramp’ up the price of the pound, according to a recorded phone call that prosecutors say is real-time talk from a front-running scheme run by then HSBC’s head of foreign exchange cash trading in Europe
  • House and Senate Republicans will take their first concrete steps toward enacting planned tax cuts by advancing budget resolutions for fiscal 2018, lawmakers see more fights ahead on tax details
  • Saudi King Salman bin Abdulaziz is due to meet Russian President Vladimir Putin in Moscow to discuss the extension of an oil pact, to talk oil pact on ‘epochal’ Russia visit
  • Trump’s Short List for Fed Chair Features These Hawks and Doves
  • GOP Budget Kicks Off Effort on Tax Cuts. Now Comes the Hard Part
  • Spain’s de Guindos Says Catalonia’s Independence Push Is Doomed
  • Amazon Is Said to Test Own Delivery Service to Rival FedEx, UPS
  • Sempra Revises $9.45 Billion Oncor Deal to Win Over Texas
  • John Catsimatidis Mulls Buying Fairway Market: New York Post
  • Deckers Could Double With Asset Sales, Recapitalization: Marcato
  • Oil Trades Near $50 as U.S. Export Surge Revives Glut Concerns
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    Author: Travis Esquivel

    Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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