Markets Overview and Key Focuses of The Day
Good morning. More votes on Brexit’s direction are ahead, Chinese factory numbers look much healthier and the second quarter is setting up to be heavy on deals. Here’s what’s moving markets.
After some very undiplomatic language from a German official who laid blame at the door of a “silver spoon” elite in Britain, the agonizing over Brexit makes a return on Monday with more indicative votes on the way. Deep divisions in the Conservative Party have sparked “pragmatic” planning for a snap election and the creation of a pro-European Union grouping to counter the powerful Brexiteer contingent. Banks think a one-year extension is more likely, a European Central Banker warns markets aren’t pricing in a hard Brexit, expats in Luxembourg are worried, one fund is having success ignoring the whole thing and Angela Merkel is preparing to step in.
Asian stocks powered higher on Monday as positive Chinese factory gauges and signs of progress in Sino-U.S. trade talks boosted sentiment, although another defeat for British Prime Minister Theresa May’s Brexit deal added to sterling’s woes.
The Australian dollar advanced 0.35% o $0.7122. The Aussie is sensitive to shifts in the economic outlook for China, the country’s main trading partner. Australia RBA Commodity Index SDR (YoY) registered at 11% above expectations (10.8%) in March.the Australia’s business conditions rose to 7.0 in March, reversing the fall in February and moving back above the long-run average.
The USDJPY pair reached highs near 111.20 before retreating to the 111 handle amid reduced demand for the safe-haven US dollar across its main competitors. As a result, both the Euro and the GBP also traded firmer, with the bulls now awaiting fresh fundamental catalysts for the next push higher.
Safe-haven government bonds retreated as risk aversion in the broader markets eased.
The benchmark 10-year U.S. Treasury yield edged up to a six-day high of 2.444%, pulling away from a 15-month low of 2.340 % brushed on March 25.
The Treasury 10-year yield had sunk as the Federal Reserve halted its drive to hike rates and as risk aversion, driven by concerns about a global economic slowdown, gripped financial markets towards the end of March.
The slide had pushed the 10-year yield below the three-month rate for the first time since 2007 late last month.
Crude oil prices added to Friday’s gains, with U.S. West Texas Intermediate (WTI) futures gaining 0.6 per cent to $60.52 per barrel.
Oil prices posted their biggest quarterly rise in a decade during January-March, as U.S. sanctions against Iran and Venezuela, as well as OPEC-led supply cuts, overshadowed concerns over a slowing global economy. [O/R]
The better growth numbers from China have given stocks and oil a boost and pushed the yen lower going into Monday’s session. European futures are pointing to a positive open. Beyond Brexit, there will some important PMI data for the euro area and the U.K. later this week, interest rate decisions from Australia and India’s central banks, minutes from the ECB’s latest meeting, a host of Fed speakers and U.S. payrolls to digest on Friday.
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