March 14, 2017

Markets Today: When tomorrow comes

It has been a quiet overnight session with markets essentially marking time ahead of key risk events tomorrow and later in the week.

10y US Treasury yields are back above 2.60% with long dated corporate issuance seemingly a key driver and after being on the back foot for most of yesterday the USD has traded in a sideways pattern overnight. That said if the move in UST yields is sustained the USD could well be the performer today. European equity indices have ended the day up between 0.13% -0.33%  and US equities look set to end the day mixed with the Dow currently down -0.13%, S&P500  is flat and NASDAQ is +0.11%.

We have had lots of headlines coming from the UK, but market reaction has been rather muted. Scottish First Minister Sturgeon said she’ll seek authority from the Scottish Parliament next week for a second referendum to leave the UK, but PM Theresa May has been quick to rule it out telling the BBC that Sturgeon’s decision sets Scotland on a course for “more uncertainly and division” at a time when evidence suggests the majority of Scottish people do not want a second vote. GBP hardly moved on the headline as the decision to call a referendum needs to be agreed by the UK government and PM May has made it clear she has no interest in going there ahead of Brexit.

On the Brexit subject, just under an hour ago the House of Commons has rejected amendments to the Brexit bill and now the bill will be reconsidered by the House of Lords. The bill is expected to pass with no objections over the coming hours. This means PM May could trigger article 5o as early as tomorrow, but Downing Street sources have said the PM will wait until the end of the month to officially pull the Brexit trigger. The news has seen GBP slide about 10pips to 1.224.

Bloomberg’s currency ranker is showing SEK and GBP as the top G10 performers over the past 24hrs (up 0.74% and 0.54% respectively), but a closer look at the intraday chart shows most of the gains were achieved yesterday followed by sideways price action in the overnight session. EUR and DKK are the underperformers down -0.14% and -0.16% respectively with the dip in the EUR seemingly reflecting a belated reaction to Belgian CB Chief Smets’ comments denying the “ECB had taken even a small step toward an exit last week”. AUD traded in a 28 pips range overnight and is currently at 0.7575, essentially unchanged relative to Sydney’s closing levels.

As for commodities, oil appears to have found support just above the $48 mark, gold is unchanged but copper, steam coal and iron ore have had a good day, up 1%, 3.0% and 1.8% respectively.

Coming Up

Australia’s weekly consumer confidence reading kicks off the day and then half an hour before midday we get the all-important NAB business survey for February.

As usual we are not privy to what’s in today’s survey, however it’s probably worth reminding readers that the survey strength reported in December continued in January with both business conditions and confidence jumping to much higher levels. In January the conditions index jumped by a solid 6 points to +16 and notably the employment conditions index hit its highest level since 2011. Meanwhile, the business confidence index jumped 4 points to +10, well above the series long-run average.

This afternoon China releases its main activity indicator and in an effort to remove the Lunar New Year effect the data will reflect the aggregate reading for January and February. Bloomberg’s consensus shows Industrial Production, Fixed Asset Investment and Retail Sales are all expected to have risen by 0.2% to 6.2%, 8.3% and 10.6% respectively. If so, the data would suggest China has started 2017 on a solid footing.

Moving on to Europe, the Zew survey for March is out in Germany. Last month, albeit at still very elevated levels, both the current situation and expectation indices eased up a bit, but now both indices are expected to have rebounded in March.

The NFIB Survey (Feb) is the US data highlight and if the labour market component is any guide the headline index should dip to 105 from 105.9 previously.


On global stock markets, the S&P 500 was +0.04%. Bond markets saw US 10-years +4.21bp to 2.62%. In commodities, Brent crude oil -0.04% to $51.35, gold+0.2% to $1,204, iron ore +1.8% to $88.26, steam coal +3.0% to $81.10, met.coal -0.9% to $159.75. AUD is at 0.7575 and the range since yesterday 5pm Sydney time is 0.7565 to 0.7593.

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