Markets
• Chinese mass protests over President Xi Jingping’s zero Covid-policy dominate today’s headlines. The rare civil unrest was triggered by a deadly apartment fire where pandemic control barriers etc hampered civil services to extinguish the fire while residents in the region were already for three months in isolation. Another issue is related to unpaid workers at the biggest iPhone assembly plant. The unrest and protests are feared to add to China’s economic woes. Regional bourses lost up to 1.5% this morning with European stock markets ceding up to 1%. USD/CNY significantly weakened from last week’s close at 7.165 to 7.2050. This year’s CNY low stands at 7.3275 (weakest since 2007). The Chinese growth fears pulled oil prices significantly lower today, with Brent crude sliding from around $84/b to currently $81.5/b, breaking below the September low. US bond yields (Asian dealings ) and German yields (at the open) lost quite some bps initially, but managed to overturn that move. US yield changes currently range between -3 bps (30-yr) and +1 bps (5-yr). German yield differences compared with Friday’s close vary between – 0.5 bps (2-yr) and +2.0 bps (10-yr). The German 10-yr yield again attempts to reconquer the 2% mark. The dollar initially followed the textbook reaction, profiting somewhat from the risk-off context, but that move didn’t last long. From the start of the European bell it went from below 1.04 just below 1.05. Resistance stands at 1.0479/1.0516 (recent high/50% retracement on Feb/Sep EUR/USD decline). The trade-weighted dollar in a similar move fell below 106 with DXY testing the mid-November low at 105.34.Even USD/JPY tested 137.68 support. Sterling finally threw the towel following an intense test of EUR/GBP 0.8559/67 support. The pair followed EUR/USD’s leap higher and is currently changing hands near 0.8660.
• Today’s eco calendar only contained second tier eco data. We retain hawkish comments from ECB Knot who finds the underlying inflation trends worrisome while adding that inflation forecasts are entirely tilted to the upside. ECB President Lagarde wouldn’t go as far as saying inflation has peaked, stressing the central bank will hike rates as long and much as needed. From tomorrow on it’s all hands on deck with US consumers confidence, ADP employment change, manufacturing ISM, US payrolls and a speech by Fed chair Powell. In Europe, we’ll get national EMU inflation numbers from tomorrow on, which will evolve to the overall EMU figure on Wednesday.
News Headlines
• The monthly UK retail sales as measured by the CBI index deteriorated sharply in November. The headline balance for the retail sector dropped from 18 in October to -19 this month. The orders placed subindex dropped from -1 to -32, the lowest level since March of last year. Sales for the time of the year also eased from 20 to 3. At the same time, the level of stocks compared to expected sales continue to rise. British retailers also don’t expect an improvement in the near future as the expectations balance also nosedived from -9 to -21, as did orders (-38).
• IFO export expectations improved in November to plus 0.4 points, up from minus 4.6 points in October, the German IFO institute reported today. The rise was mainly driven by the automotive industry again expecting exports to grow. Manufacturers of machinery and equipment and companies in the electrical industry expect hardly any further improvement from international business. On the negative side, beverage producers, the furniture industry, and the chemical industry are expecting declining sales. Ifo added that the export environment remains especially difficult for energy-intensive industries.
• According to Reuters reporting based on a document seen by the press agency, the EU commission is preparing a draft proposal that requires market participants in the European Union to have an active account with a minimum of activity at a clearing house in the EU. According to the draft the measures are aimed at safeguarding financial stability by ending “excessive exposures” to “a few” non-EU clearers. The draft with other detailed measure, for example on commodity derivatives markets, is said to be published on December 7. At the end of the procedure final approval is needed from the European Parliament and EU members states.
KBC Sunset Market Commentary 28/11/2022 via Trader Talent
Published by Trader Talent on
Sunset
Daily Market Overview
• Chinese mass protests over President Xi Jingping’s zero Covid-policy dominate today’s headlines. The rare civil unrest was triggered by a deadly apartment fire where pandemic control barriers etc hampered civil services to extinguish the fire while residents in the region were already for three months in isolation. Another issue is related to unpaid workers at the biggest iPhone assembly plant. The unrest and protests are feared to add to China’s economic woes. Regional bourses lost up to 1.5% this morning with European stock markets ceding up to 1%. USD/CNY significantly weakened from last week’s close at 7.165 to 7.2050. This year’s CNY low stands at 7.3275 (weakest since 2007). The Chinese growth fears pulled oil prices significantly lower today, with Brent crude sliding from around $84/b to currently $81.5/b, breaking below the September low. US bond yields (Asian dealings ) and German yields (at the open) lost quite some bps initially, but managed to overturn that move. US yield changes currently range between -3 bps (30-yr) and +1 bps (5-yr). German yield differences compared with Friday’s close vary between – 0.5 bps (2-yr) and +2.0 bps (10-yr). The German 10-yr yield again attempts to reconquer the 2% mark. The dollar initially followed the textbook reaction, profiting somewhat from the risk-off context, but that move didn’t last long. From the start of the European bell it went from below 1.04 just below 1.05. Resistance stands at 1.0479/1.0516 (recent high/50% retracement on Feb/Sep EUR/USD decline). The trade-weighted dollar in a similar move fell below 106 with DXY testing the mid-November low at 105.34.Even USD/JPY tested 137.68 support. Sterling finally threw the towel following an intense test of EUR/GBP 0.8559/67 support. The pair followed EUR/USD’s leap higher and is currently changing hands near 0.8660.
• Today’s eco calendar only contained second tier eco data. We retain hawkish comments from ECB Knot who finds the underlying inflation trends worrisome while adding that inflation forecasts are entirely tilted to the upside. ECB President Lagarde wouldn’t go as far as saying inflation has peaked, stressing the central bank will hike rates as long and much as needed. From tomorrow on it’s all hands on deck with US consumers confidence, ADP employment change, manufacturing ISM, US payrolls and a speech by Fed chair Powell. In Europe, we’ll get national EMU inflation numbers from tomorrow on, which will evolve to the overall EMU figure on Wednesday.
News Headlines
• The monthly UK retail sales as measured by the CBI index deteriorated sharply in November. The headline balance for the retail sector dropped from 18 in October to -19 this month. The orders placed subindex dropped from -1 to -32, the lowest level since March of last year. Sales for the time of the year also eased from 20 to 3. At the same time, the level of stocks compared to expected sales continue to rise. British retailers also don’t expect an improvement in the near future as the expectations balance also nosedived from -9 to -21, as did orders (-38).
• IFO export expectations improved in November to plus 0.4 points, up from minus 4.6 points in October, the German IFO institute reported today. The rise was mainly driven by the automotive industry again expecting exports to grow. Manufacturers of machinery and equipment and companies in the electrical industry expect hardly any further improvement from international business. On the negative side, beverage producers, the furniture industry, and the chemical industry are expecting declining sales. Ifo added that the export environment remains especially difficult for energy-intensive industries.
• According to Reuters reporting based on a document seen by the press agency, the EU commission is preparing a draft proposal that requires market participants in the European Union to have an active account with a minimum of activity at a clearing house in the EU. According to the draft the measures are aimed at safeguarding financial stability by ending “excessive exposures” to “a few” non-EU clearers. The draft with other detailed measure, for example on commodity derivatives markets, is said to be published on December 7. At the end of the procedure final approval is needed from the European Parliament and EU members states.
Graphs & Table
Yuan weakens north of USD/CNY 7.20 as investors grow uncertain on impact op new lockdowns on Chinese growth.
German 10-y returns to 2% despite global risk-off
Brent oil drops to lowest level since January as markets ponder global/Chinese demand
EUR/GBP rebounds off key 0.8560 support area.
This document has been prepared by the KBC Economics Markets desk and has not been produced by the Research department. The desk consists of Mathias Van der Jeugt, Peter Wuyts and Mathias Janssens, analists at KBC Bank N.V., which is regulated by the Financial Services and Markets Authority (FSMA). Read the full disclaimer.
Register for a 2 week free trial today, pass a Growth, Venture or Rocket Tryout and get a funded prop trading account for upto $120,000.
Related Posts
Financial Markets Daily Commentary
KBC Sunset Market Commentary 24/07/2023 via Trader Talent
Sunset Monday, July 24, 2023 Daily Market Overview Click here to read the PDF-version of this report. Markets • The July European PMIs painted a bleak picture of the economy. They also all missed expectations. The composite indicator Read more…
Financial Markets Daily Commentary
KBC Sunrise Market Commentary 24/07/2023 via Trader Talent
Monday, 24 July 2023 Please click here to read the PDF version Markets • Markets on Friday mostly showed no big swings with investors mainly looking forward to this week’s eco data and central bank Read more…
Financial Markets Daily Commentary
KBC Sunset Market Commentary 20/07/2023 via Trader Talent
Sunset Thursday, July 20, 2023 Daily Market Overview Dear reader, There will be no KBC Economics-Markets reports on Friday July 21st. We resume our publications on Monday July 24th. *********************************************************************************************************** Click here to read the PDF-version of Read more…