With the US closed for Memorial Day and UK markets offline due to a bank holiday, overnight volumes have been weaker than normal on little newsflow.
The main story remains the stronger USD which not only led to the lowest Yuan fixing since February 2011…
… but pushed the USDJPY almost as high as 111.50 overnight before paring gains, however it was enough to send the Nikkei 1.4% higher.
Elsewhere, Europe’s Stoxx 600 is unchanged on volume that is ~55% of the 30-day average, after earlier rising above the 200 DMA for the first time in 2016, with the autos and media sectors outperforming and the oil & gas and technology sectors underperforming. US equity futures were 0.2%, or 4 points higher, currently resting just above 2,101 with the last trading day of May tomorrow expected to push the cash market over 2,100 as well.
The stronger dollar also oil modestly lower while gold bullion fell for a ninth day in its longest losing streak following Yellen’s comment on Friday that an interest-rate increase is likely in coming months. The dollar strengthened against all but four of its 16 major peers. Treasury 10-year futures slid the most in almost two weeks, German bunds declined and emerging-market currencies headed toward the worst month since August. European stocks swung between gains and losses, with trading volumes less than half the daily average amid market closures in the U.S. and U.K.
The BBG Dollar Spot Index was poised for its biggest monthly jump since
September 2014, having surged as Fed Funds futures showed the odds of a
U.S. interest-rate hike by July more than doubled to 54 percent.
“What Yellen said confirmed the Fed is open for a June rate increase, and it’s now data dependent,” said Carl Hammer, chief currency strategist at SEB A/B in Stockholm. “The Fed might be on hold next month due to Britain’s European Union referendum, but then make it explicit there will be an increase in July. Our view is that there’s more room to add to positive dollar bets.”
Market Snapshot
- Equities: Nikkei 225 (+1.4%), FTSEMIB (+0.4%), CAC 40 up less than 0.1%, DAX up 0.4%, IBEX 35 up 0.1%, FTSE MIB up 0.4%, Euro Stoxx 50 up 0.1%, Vstoxx Index rises 3.6% to 21.2
- US futures: S&P 500 futures up 0.2%
- Commodities: Silver spot (-1.9%), Gold spot (-0.8%), Brent crude down -0.6% to $49.03/bbl, Gold down -0.8% to $1202.78/oz
- FX: Euro spot up 0.1% to 1.1126, Dollar index up 0.37% to 95.875; Yen spot (-1%), Dollar Index (+0.4%)
- Bonds: German 10yr yield up 2bps to 0.16%, French 10Yr yield up 3bps, Greek 10yr yield up 5bps to 7.31%, Portugal 10yr yield up 3bps to 3.08%, Italian 10yr yield up 1bp to 1.37%
Looking at regional markets, in the otherwise sleepy Asian session stocks fell with the Nikkei 225 outperforming and the Kospi underperforming; The MSCI Emerging Markets Index slipped 0.1 percent, bringing its decline in May to 3.9 percent, the most since January. Japan’s Topix index climbed 1.2 percent to a one-month high, led by exporters as the yen weakened. The Nikkei rose 225 +1.4%, Hang Seng +0.3%, Kospi -0.1%, Shanghai Composite up less than 0.1%, ASX up less than 0.1%, Sensex +0.2%; 8 out of 10 sectors fall with consumer discretionary and staples outperforming and materials and industrials underperforming.
European stocks pared modest early gains, with the Stoxx Europe 600 Index slipping less than 0.1% on worse than normal trading volumes. 10 out of 19 Stoxx 600 sectors fall; industrials is the most active, down 0.1% on 77% 30-day avg. vol., followed by media +0.2% on 75% avg. vol.; basic resources is the least active sector down 0.1% on 38% avg. vol. Top Stoxx 600 outperformers include: PostNL +6.9%, Banca Monte dei Paschi di Siena +2.5%, SES +2.3%, Banco Popolare +2%, Eutelsat +2%, Air France-KLM +1.8%, Georg Fischer +1.7%, Volkswagen +1.7%; Top Stoxx 600 underperformers include: Eurobank Ergasias SA -4.2%, bpost SA -3%, Zodiac Aerospace -2%, ams AG -1.8%, Alpha Bank -1.6%, Fingerprint Cards AB -1.4%, Steinhoff International Holdings -1.1%, ArcelorMittal -1%.
Key movers were Belgian postal company Bpost SA which fell 1.4 percent after saying it failed to reach an agreement to buy PostNL NV of the Netherlands in a surprise announcement following speculation of an imminent merger. PostNL NV gained 3.2 percent. Banco Popular Espanol SA added 0.5 percent after Spanish newspaper Expansion reported the lender has orders exceeding 4 billion euros ($4.4 billion) for its 2.5 billion-euro planned capital increase. Bayer AG rose 1 percent after people familiar with the matter said the chemical company is close to choosing banks to arrange funds for its proposed acquisition of Monsanto Co.
In FX, the yen fell as much as 1 percent to 111.45 per dollar after an aide to Prime Minister Shinzo Abe said a sales-tax increase will probably be delayed. Japan released retail sales figures on Monday showing that growth stalled in Asia’s second-biggest economy, bolstering the case for a planned sales-tax increase to be postponed. The MSCI Emerging Markets Currency Index declined 0.4 percent and is down 3 percent in May, snapping a three-month run of gains. South Korea’s won retreated 1 percent on Monday. For the month, South Africa’s rand led losses, sliding 9.9 percent.
The yuan dropped as much as 0.3 percent to a four-month low in Shanghai after the People’s Bank of China weakened its daily fixing by 0.45 percent. With the U.S. poised to raise interest rates and pressure building on China to ease monetary policy, cash outflows will accelerate, said Song Yu, China economist for Goldman Sachs/Gao Hua Securities Co. in Beijing.
In commodities, WTI crude fell 0.3% to $49.17 a barrel as Canadian producers moved to resume output after wildfires and before this week’s meeting of the Organization of Petroleum Exporting Countries. Total volume traded was about 50 percent below the 100-day average. Issues including a production freeze will be discussed at the June 2 talks, said Iraq’s Deputy Oil Minister Fayyad Al-Nima, who will head his ministry’s delegation. Oil was headed for fourth monthly gain, the longest winning streak since April 2011.
Gold for immediate delivery dropped as much as 1 percent to $1,199.80 an ounce, a level last seen in February, and is down 7 percent in May, the biggest monthly decline since June 2013. Money managers’ cut bullish bets on the metal by the most this year during the week ended May 24, according to U.S. Commodity Futures Trading Commission data. Silver slid 1.8 percent as of 10:54 a.m. in London, while platinum retreated 0.8 percent as the prospect of higher U.S. borrowing costs damped the appeal of non-interest-bearing assets. Copper futures slipped 0.9 percent in New York, snapping a four-day advance. The London Metal Exchange was closed on Monday.
via http://ift.tt/1VpYRQe Tyler Durden