Europe Roundup: Sterling eases below 1.2900 as probability of a hung parliament increases, euro tumbles as EZ factory activity declines, investors eye ECB President Lagarde's speech – Monday, December 2nd, 2019

Market Roundup

  • Euro zone factory activity shrank in November: PMI
  • UK manufacturers cut jobs at fastest rate since 2012 – PMI
  • German manufacturing contraction eases in November
  • Italian government pursues parliament vote to end ESM reform dispute
  • Hong Kong October retail sales slump worst on record 

Economic Data Ahead

  • (0930 ET/1430 GMT) The Markit will release Canada's Manufacturing PMI for the Month of November. The indicator stood at 51.2 in the prior month.
  • (0945 ET/1445 GMT) Financial firm Markit releases U.S. Manufacturing PMI for the month of November. The index is likely to show a final reading of 52.2 after posting similar gains in the previous month.
  • (1000 ET/1500 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. manufacturing Purchasing Managers' index rose to 49.4 in November from 48.3 in October.
  • (1000 ET/1500 GMT) The Commerce Department is likely to report that U.S. construction spending increased 0.3 percent in October after rising 0.5 percent in the previous month.

Key Events Ahead

  • (0900 ET/1400 GMT) European Central Bank's President Christine Lagarde’s speech

FX Beat

DXY: The dollar index held firm near a 1-1/2 month peak recorded in the previous session, as focus shifted on manufacturing surveys in the United States later in the day for further clues on the strength of the economy. The greenback against a basket of currencies traded 0.1 percent up at 98.34, having touched a high of 98.54 on Friday, its highest since October 15. 

EUR/USD: The euro declined after data showed Eurozone manufacturing activity contracted for a 10th straight month in November. Moreover, separate data showing German export-dependent manufacturing sector contracted at a slower pace for the second month in a row in November further dented the bid tone around the major. The European currency traded 0.05 percent down at 1.1016, having touched a low of 1.0981 on Friday, its lowest since October 10. Immediate resistance is located at 1.1035 (10-DMA), a break above targets 1.1046 (21-DMA). On the downside, support is seen at 1.1003, a break below could drag it below 1.0966.

USD/JPY: The dollar advanced to a fresh 6-month peak, as an unexpected rebound in Chinese manufacturing activity raised hopes of a brighter outlook for the world economy. The major was trading 0.1 percent up at 109.63, having hit a high of 109.72 earlier, its highest since May 30. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. manufacturing PMI from both ISM and Markit and construction spending. Immediate resistance is located at 109.83, a break above targets 110.19. On the downside, support is seen at 109.29 (5-DMA), a break below could take it near at 109.00.

GBP/USD: Sterling eased below the 1.2900 handle as polls showed a growing probability the December 12 election would end in a hung parliament. The major traded 0.2 percent down at 1.2898, having hit a high of 1.2951 on Thursday, it’s highest since November 21. Investors’ attention will remain on the development surrounding the general elections, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2942, a break above could take it near 1.2970. On the downside, support is seen at 1.2881 (21-DMA), a break below targets 1.2823. Against the euro, the pound was trading 0.3 percent down at 85.37 pence, having hit a high of 84.99 on Thursday, it’s highest since May 8.

USD/CHF: The Swiss franc consolidated near a 2-month peak as investors risk sentiment improved on signs of economic growth following reports of an expanding Chinese factory sector. The major trades at flat at 0.9992, having touched a high of 1.0023 on Friday, it’s highest since October 3. On the higher side, near-term resistance is around 1.0027. and any break above will take the pair to the next level till 1.0065. The near-term support is around 0.9964, and any close below that level will drag it till 0.9950.

Equities Recap

European shares rebounded as upbeat manufacturing data in China and renewed optimism over a trade deal boosted investor sentiment.

The pan-European STOXX 600 index rallied 0.4 percent at 408.85 points, while the FTSEurofirst 300 surged 0.4 percent to 1,600.45 points.

Britain's FTSE 100 trades 0.5 percent up at 7,380.96 points, while mid-cap FTSE 250 eased 0.1 to 20,785.48 points.

Germany's DAX rose 0.7 percent at 13,324.00 points; France's CAC 40 trades 0.4 percent higher at 5,928.92 points.

Commodities Recap

Crude oil rebounded from recent lows, boosted by hints that OPEC and its allies may agree to deepen output cuts at a meeting this week and as rising manufacturing activity in China suggested stronger demand. International benchmark Brent crude was trading 1.9 percent up at $61.89 per barrel by 1028 GMT, having hit a low of $60.34 on Friday, its lowest since November 20. U.S. West Texas Intermediate was trading 2.3 percent up at $56.50 a barrel, after falling as low as $55.01 on Friday, its lowest since November 20.

Gold prices declined as investors turned to riskier assets on signs of economic growth following reports of an expanding Chinese factory sector. Spot gold was trading 0.5 percent down at $1,456.40 per ounce by 1030 GMT, having touched a high of $1466.44 on Friday, its highest since Nov. 22. U.S. gold futures shed 0.5 percent to $1,466.

Treasuries Recap

The German 10-government bond yields climbed to a one-week high on Monday as the Social Democrats chose new leaders, threatening the ruling German coalition. Benchmark German bond yields were higher across the board, with 10-year yields up 5 basis points at -0.303 perent in early trading. Italian ten-year yields rose more than 5 bps at 1.3920 percent.

The yields on 10-year Japanese government bonds rose to their highest in more than two weeks. The benchmark 10-year JGB futures fell 0.33 point to 152.83. The 10-year JGB yield rose 2.5 basis points to minus 0.060 percent, the highest yield since Nov. 14. The 20-year JGB yield rose 1 basis point to 0.260 percent. The 30-year JGB yield rose 1 basis point to 0.415 percent. In the middle of the yield curve, the five-year yield rose 1.5 basis points to minus 0.170 percent. At the short end, the two-year JGB yield rose 1 basis point to minus 0.170 percent.

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