Written Commentary
STOCK INDEXES
Global markets have been able to regain a mildly positive tone coming into this morning’s action. The only economic data of note was a lower than expected reading for November Japanese services PPI. Asian shares posted mixed results with the Shanghai Composite posting a mild loss while the Japanese Nikkei and South Korean Kospi indices finished in positive territory. There have been indications that the UK and EU will announce that a Brexit deal has been finalized later today. European shares are finding modest early strength and were led by gains in the UK FTSE-100, French CAC-40 and Spanish IBEX indices. There are no major US economic numbers due to a government holiday. The North American session will feature a November reading on Canadian building permits which are expected to have a sizable uptick from October’s -14.6% reading
CURRENCY FUTURES
The Dollar has kept within a fairly tight pre-holiday range, but is finding moderate pressure coming into this morning’s action. There has been some improvement in global risk sentiment that has fueled modest safe-haven outflows from the Dollar. Wednesday’s large set of US data was highlighted by 9-month lows for both jobless claims readings but among several weak numbers, the large miss in new home sales may have the most lasting negative impact on the Dollar as the housing sector has been a source of strength this year. Near-term resistance is at 90.55 as the Dollar looks to go into the holiday weekend on a downbeat note.
With no major US economic numbers to digest, the Dollar will take most of its direction from the ebb and flow of global risk sentiment. The likely announcement of a Brexit deal should give a boost to risk appetites and send the Pound up to a new multi-year high, but further gains may be held in check until the deal has been scrutinized by the market. The Canadian Dollar could build onto this week’s recovery move if Canadian building permits come in higher than forecasts.
INTEREST RATES
The Treasury markets are finding modest early strength this morning, but they have so far avoided downside follow-through from yesterday’s wide-sweeping outside-day down session. There have been positive vibes from Brexit negotiations that a deal will be finalized later today, and that has led to the 5-year/30-year yield spread reaching its highest level since November 2016. President Trump’s threat to veto the fiscal stimulus package has not rattled market sentiment as of yet, but may impact risk appetites next week if there is no further movement from the White House. There has not been a “Santa Claus” rally in equity or commodity markets that would further boost sentiment or increase concern with rising inflation levels, and that may have helped Bonds and Notes find their footing.
March treasury bonds remain in a slow but steady downtrend and the outside day down yesterday would suggest a potential resumption of the downtrend.
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