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DJ European Morning Briefing
Dow Jones Newswires , 16 May 2017 12:09
European Morning Briefing: Stocks to Stutter; Euro Prospects Improve
Snapshot:
========
Stocks seen flat; EUR/USD 1.0986-89; Bund yield 0.422%; Brent crude $52.00; gold $1234.24
-Germany’s Merkel Advocates German-French Cooperation in Meeting With Macron
-U.K. International Trade Secretary: We Are Prepared to Be Free-Trade Champions
-Researchers Identify Clue Connecting Ransomware Assault to Group Tied to North Korea
Watch For: Eurozone GDP, foreign trade; Germany ZEW Indicator; U.K. inflation; Italy GDP; IEA oil market report; earnings from easyJet, Vodafone; U.S. earnings from Home Depot, Staples, Urban Outfitters
Headline News:
=============
Angela Merkel said Monday that she was open to changing the European Union’s treaties to strengthen the bloc, voicing a desire to work closely with France as she met with Emmanuel Macron on his first full day in office.
Ms. Merkel said she and Mr. Macron had agreed to “develop anew” their bilateral relationship and that their cabinet ministers would meet shortly after the French parliamentary election in June. In a sign that she was prepared to discuss far-reaching changes to the EU and the eurozone with Mr. Macron, she said she would be prepared to support changing EU treaties “if it makes sense.”
“First we will work on what we want to do, and if it then demands a treaty change I, at least, will be ready to do it,” Ms. Merkel said.
Ms. Merkel said the election of Mr. Macron, who ran on a centrist, pro-EU platform pledging reforms, offered an opportunity to improve the bloc.
“The French elections, also the Dutch elections, have shown the Germans once more what a treasure Europe is and how important German-French cooperation and friendship is for this treasure,” Ms. Merkel said. “So I believe we are at a very sensitive moment in history that we should now also use to make something of it that will be understood by the people as a strengthening of Europe and a fortification of Europe.”
The U.K.’s top trade official said that Britain would be a leading advocate for free trade despite its plans to leave the European Union.
Liam Fox, the U.K.’s international trade secretary, said the Brexit process would give Britain back an independent trade policy for the first time in four decades. But Mr. Fox said the U.K. wasn’t pursuing a policy of isolationism.
Instead, the U.K.’s departure from the EU political framework would give it more freedom to pursue a free trade agenda, Mr. Fox said.
Mr. Fox was also critical of other nations for a slowdown in international trade due to rising protectionism, calling members of the Group of Seven nations some of the worst offenders. He didn’t name specific countries.
Cybersecurity researchers identified a digital clue connecting the global ransomware assault to previous cyberattacks by a group linked to North Korea.
The link involves a version of the software used in the latest attack, known as WannaCry, that was detected earlier this year and uploaded to an archive for security researchers.
Neel Mehta, a security researcher at Google, on Monday pointed out similarities between that earlier WannaCry variant and code used in a series of attacks that security specialists have attributed to the Lazarus group.
Security experts say that hacking group carried out a series of multimillion-dollar online banking thefts as well as the 2014 cyberattacks on Sony Entertainment — attacks they believe North Korea orchestrated.
Stocks:
======
The rally in European stocks could falter Tuesday, with futures for the DAX and FTSE 100 unchanged, although analysts expect further gains are likely.
“It’s tough to be anything else other than bullish on risk assets at the moment and while implied volatility is extremely low global equity markets continue to creep higher,” wrote IG’s Chris Weston.
“The mood on the street still doesn’t feel overly bullish in any way, but look around the markets and we see new highs in the FTSE 100, DAX, S&P 500, NASDAQ 100 and a new high in the MSCI World index should be in play this week. Emerging markets are flying too and attracting heavy inflows into equity and bond funds,” Mr. Weston added.
Stock markets across Asia-Pacific lacked direction early Tuesday, with gains for regional energy and mining firms thanks to a jump in commodity prices, while Chinese markets again succumbed to selling pressure.
After two sessions in the red, Japan’s headline stock index rose and closed in on the key 20000-point level, helped by gains in energy stocks. Elsewhere, a boost from commodity-exposed stocks lifted Australia’s S&P/ASX 200 by 0.2%
Meanwhile, Chinese markets were markedly lower, after data on Monday disappointed with retail sales and industrial production seeing slower growth in April, while fixed asset investment in the first four months of the year failed to meet expectations, rising just 8.9% compared with the same period the year before.
The Shanghai Composite Index was last down 0.7%, while the Shenzhen Composite Index was off 0.5%. In Hong Kong, the Hang Seng Index was off 0.3%.
U.S. stocks rose Monday as a jump in commodities prices boosted shares of energy and mining companies.
The Dow Jones Industrial Average gained 0.4%, the S&P 500 rose 0.5% and the Nasdaq Composite added 0.5%. Both the S&P 500 and Nasdaq reached fresh highs.
Forex:
=====
EUR/USD extended its rally in Asia on a weaker dollar and encouraging Eurozone political developments, said CBA.
Angela Merkel and Emmanuel Macron pledged to co-operate on a “road map” of pro-growth economic reforms for the European Union while Mr. Macron’s appointment of Edouard Philippe as France’s new prime minister raises the likelihood the new French president will manage to win a majority at the June legislative election. This will ultimately allow him to implement his pro-growth economic reforms in France, said CBA.
The dollar was hurt Monday by a surge in oil-dependent currencies and disappointing U.S. data. The buck fell 0.5% against the Canadian dollar, 1.3% against the Russian ruble and 0.1% against the Norwegian krone. Meanwhile, a closely watched measure of inflation came in below expectations on Friday, a potential obstacle for the Federal Reserve as it seeks to normalize interest rates. Signs that inflation has firmed would bolster the Fed’s case for raising rates more aggressively.
Federal-funds futures, used by investors to bet on the U.S. interest-rate outlook, show a 74% chance that the Fed will raise rates at its meeting in June, according to CME Group data. That is down from 83% a week earlier.
Investors continue to assess the outlook for the Trump administration’s tax-overhaul and stimulus plans, which were expected to bolster the U.S. economy and the dollar.
“The broader issue for the U.S. dollar is perhaps the hangover from recent developments in Washington which has slowed President Donald Trump’s pro-growth/business agenda,” said analysts at Scotiabank in a research note. ” Getting Washington back on track will help lift the [dollar].”
The WSJ Dollar Index, which measures the U.S. currency against 16 others, continued to fall in Asia and was recently at 89.85.
Bonds:
=====
U.S. government bonds pulled back Monday as investors took some chips off the table after the biggest price rally in nearly a month at the end of last week.
The yield on the benchmark 10-year Treasury note settled at 2.338%, compared with 2.331% Friday.
One factor sapping demand for haven bonds: German Chancellor Angela Merkel’s party-Christian Democratic Union-prevailed in elections Sunday in North Rhine-Westphalia, the most popular state in Germany. Analysts took it as a sign Ms. Merkel may fare well in the federal elections later this year. The news followed the presidential elections in France, which reduces political anxiety in Europe.
Energy:
======
Crude oil futures were up in Asia trade, with prices headed closer to U.S. session highs, as expectations that OPEC will extend production cuts until early next year continued to boost trading sentiment.
“An extension of OPEC and Russia’s oil production cuts for another nine months should put a floor under the oil price in the mid-$40 range as the market inches gradually towards balance,” said Ric Spooner, chief market analyst at CMC Markets.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $49.05 a barrel at 0242 GMT, up $0.20 in the Globex electronic session. July Brent crude on London’s ICE Futures exchange rose $0.18 to $52.00 a barrel.
Metals:
======
Gold prices were at their highest level in two weeks in Asia, as some investors looked to safe-haven assets following the recent show of nuclear strength by North Korea and despite the prospect of another rate hike next month from the Federal Reserve.
“We are still constructive on gold,” said Daniel Hynes, commodities analyst with ANZ Bank. “Once we get through June, the market will warm up to other factors.”
He noted physical demand in India and China was stronger in April, though coming off low prior-year levels. At 0210 GMT, gold was up 0.3% at $1,234.24/troy ounce, having slid Monday during the U.S. session.
Dow Jones Newswires , 16 May 2017 12:09
European Morning Briefing: Stocks to Stutter; Euro Prospects Improve
Snapshot:
========
Stocks seen flat; EUR/USD 1.0986-89; Bund yield 0.422%; Brent crude $52.00; gold $1234.24
-Germany’s Merkel Advocates German-French Cooperation in Meeting With Macron
-U.K. International Trade Secretary: We Are Prepared to Be Free-Trade Champions
-Researchers Identify Clue Connecting Ransomware Assault to Group Tied to North Korea
Watch For: Eurozone GDP, foreign trade; Germany ZEW Indicator; U.K. inflation; Italy GDP; IEA oil market report; earnings from easyJet, Vodafone; U.S. earnings from Home Depot, Staples, Urban Outfitters
Headline News:
=============
Angela Merkel said Monday that she was open to changing the European Union’s treaties to strengthen the bloc, voicing a desire to work closely with France as she met with Emmanuel Macron on his first full day in office.
Ms. Merkel said she and Mr. Macron had agreed to “develop anew” their bilateral relationship and that their cabinet ministers would meet shortly after the French parliamentary election in June. In a sign that she was prepared to discuss far-reaching changes to the EU and the eurozone with Mr. Macron, she said she would be prepared to support changing EU treaties “if it makes sense.”
“First we will work on what we want to do, and if it then demands a treaty change I, at least, will be ready to do it,” Ms. Merkel said.
Ms. Merkel said the election of Mr. Macron, who ran on a centrist, pro-EU platform pledging reforms, offered an opportunity to improve the bloc.
“The French elections, also the Dutch elections, have shown the Germans once more what a treasure Europe is and how important German-French cooperation and friendship is for this treasure,” Ms. Merkel said. “So I believe we are at a very sensitive moment in history that we should now also use to make something of it that will be understood by the people as a strengthening of Europe and a fortification of Europe.”
The U.K.’s top trade official said that Britain would be a leading advocate for free trade despite its plans to leave the European Union.
Liam Fox, the U.K.’s international trade secretary, said the Brexit process would give Britain back an independent trade policy for the first time in four decades. But Mr. Fox said the U.K. wasn’t pursuing a policy of isolationism.
Instead, the U.K.’s departure from the EU political framework would give it more freedom to pursue a free trade agenda, Mr. Fox said.
Mr. Fox was also critical of other nations for a slowdown in international trade due to rising protectionism, calling members of the Group of Seven nations some of the worst offenders. He didn’t name specific countries.
Cybersecurity researchers identified a digital clue connecting the global ransomware assault to previous cyberattacks by a group linked to North Korea.
The link involves a version of the software used in the latest attack, known as WannaCry, that was detected earlier this year and uploaded to an archive for security researchers.
Neel Mehta, a security researcher at Google, on Monday pointed out similarities between that earlier WannaCry variant and code used in a series of attacks that security specialists have attributed to the Lazarus group.
Security experts say that hacking group carried out a series of multimillion-dollar online banking thefts as well as the 2014 cyberattacks on Sony Entertainment — attacks they believe North Korea orchestrated.
Stocks:
======
The rally in European stocks could falter Tuesday, with futures for the DAX and FTSE 100 unchanged, although analysts expect further gains are likely.
“It’s tough to be anything else other than bullish on risk assets at the moment and while implied volatility is extremely low global equity markets continue to creep higher,” wrote IG’s Chris Weston.
“The mood on the street still doesn’t feel overly bullish in any way, but look around the markets and we see new highs in the FTSE 100, DAX, S&P 500, NASDAQ 100 and a new high in the MSCI World index should be in play this week. Emerging markets are flying too and attracting heavy inflows into equity and bond funds,” Mr. Weston added.
Stock markets across Asia-Pacific lacked direction early Tuesday, with gains for regional energy and mining firms thanks to a jump in commodity prices, while Chinese markets again succumbed to selling pressure.
After two sessions in the red, Japan’s headline stock index rose and closed in on the key 20000-point level, helped by gains in energy stocks. Elsewhere, a boost from commodity-exposed stocks lifted Australia’s S&P/ASX 200 by 0.2%
Meanwhile, Chinese markets were markedly lower, after data on Monday disappointed with retail sales and industrial production seeing slower growth in April, while fixed asset investment in the first four months of the year failed to meet expectations, rising just 8.9% compared with the same period the year before.
The Shanghai Composite Index was last down 0.7%, while the Shenzhen Composite Index was off 0.5%. In Hong Kong, the Hang Seng Index was off 0.3%.
U.S. stocks rose Monday as a jump in commodities prices boosted shares of energy and mining companies.
The Dow Jones Industrial Average gained 0.4%, the S&P 500 rose 0.5% and the Nasdaq Composite added 0.5%. Both the S&P 500 and Nasdaq reached fresh highs.
Forex:
=====
EUR/USD extended its rally in Asia on a weaker dollar and encouraging Eurozone political developments, said CBA.
Angela Merkel and Emmanuel Macron pledged to co-operate on a “road map” of pro-growth economic reforms for the European Union while Mr. Macron’s appointment of Edouard Philippe as France’s new prime minister raises the likelihood the new French president will manage to win a majority at the June legislative election. This will ultimately allow him to implement his pro-growth economic reforms in France, said CBA.
The dollar was hurt Monday by a surge in oil-dependent currencies and disappointing U.S. data. The buck fell 0.5% against the Canadian dollar, 1.3% against the Russian ruble and 0.1% against the Norwegian krone. Meanwhile, a closely watched measure of inflation came in below expectations on Friday, a potential obstacle for the Federal Reserve as it seeks to normalize interest rates. Signs that inflation has firmed would bolster the Fed’s case for raising rates more aggressively.
Federal-funds futures, used by investors to bet on the U.S. interest-rate outlook, show a 74% chance that the Fed will raise rates at its meeting in June, according to CME Group data. That is down from 83% a week earlier.
Investors continue to assess the outlook for the Trump administration’s tax-overhaul and stimulus plans, which were expected to bolster the U.S. economy and the dollar.
“The broader issue for the U.S. dollar is perhaps the hangover from recent developments in Washington which has slowed President Donald Trump’s pro-growth/business agenda,” said analysts at Scotiabank in a research note. ” Getting Washington back on track will help lift the [dollar].”
The WSJ Dollar Index, which measures the U.S. currency against 16 others, continued to fall in Asia and was recently at 89.85.
Bonds:
=====
U.S. government bonds pulled back Monday as investors took some chips off the table after the biggest price rally in nearly a month at the end of last week.
The yield on the benchmark 10-year Treasury note settled at 2.338%, compared with 2.331% Friday.
One factor sapping demand for haven bonds: German Chancellor Angela Merkel’s party-Christian Democratic Union-prevailed in elections Sunday in North Rhine-Westphalia, the most popular state in Germany. Analysts took it as a sign Ms. Merkel may fare well in the federal elections later this year. The news followed the presidential elections in France, which reduces political anxiety in Europe.
Energy:
======
Crude oil futures were up in Asia trade, with prices headed closer to U.S. session highs, as expectations that OPEC will extend production cuts until early next year continued to boost trading sentiment.
“An extension of OPEC and Russia’s oil production cuts for another nine months should put a floor under the oil price in the mid-$40 range as the market inches gradually towards balance,” said Ric Spooner, chief market analyst at CMC Markets.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $49.05 a barrel at 0242 GMT, up $0.20 in the Globex electronic session. July Brent crude on London’s ICE Futures exchange rose $0.18 to $52.00 a barrel.
Metals:
======
Gold prices were at their highest level in two weeks in Asia, as some investors looked to safe-haven assets following the recent show of nuclear strength by North Korea and despite the prospect of another rate hike next month from the Federal Reserve.
“We are still constructive on gold,” said Daniel Hynes, commodities analyst with ANZ Bank. “Once we get through June, the market will warm up to other factors.”
He noted physical demand in India and China was stronger in April, though coming off low prior-year levels. At 0210 GMT, gold was up 0.3% at $1,234.24/troy ounce, having slid Monday during the U.S. session.
