Today, global markets developed in some kind of no man’s land. Investors await a speech of US president Trump later today. His assessment on the status of the US-China/global trade talks might decide whether the recent reflation trade can continue. During the weekend, some of the president’s comments could have been interpreted as more guarded. However, after a difficult start in Asia this morning, (equity) investors saw the glass still half full rather than half empty. European equities continue their recent uptrend. Major US equity indices are holding within reach of recent record levels. Eco data were moderately interesting, but OK. The expectations component of the ZEW investor sentiment index unexpectedly jumped (from -22.8 to -2.1, -13.0 was expected). However, this signal was more or less mirrored in a recent up-move in the German Dax, even as hard eco data remain (very) weak. US NFIB small business confidence was also marginally stronger than expected. However, both data were not strong enough to trigger a directional move in core yields. In technical trade, US yields decline between 0.5bp (2-y) and (1.5 bp) (30-y). Changes in the German yield curve are less than 1 bp compared to yesterday’s close. 10-y intra-EMU spreads with Germany were little changed. Greece slightly underperformed (+3 bp). Italy outperformed (- 4 bp). The Spanish spread was little changed even as the left parties (Socialist party and Unidas Podemos) announced an agreement that might help to unlock the stalemate further out in time.

Moves in EUR/USD and USD/JPY were limited and mostly technical in nature. Dollar strength pushed EUR/USD to the 1.1115 area, but a real test of the 1.10 big figure didn’t occur. The better ZEW initially didn’t help the euro, but the dollar slightly lost ground early in US dealings. EUR/USD is trading in the 1.1020 area. USD/JPY also failed to extend initial strength. The pair gradually returned from the 109.25/30 area to currently trade near 109.10 as markets await guidance from US president Trump’s speech.

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Yesterday, sterling profited as Nigel Farage of the Brexit Party said that his party won’t contest seats of the ruling conservative party. The (perceived) higher chance of a Conservative majority in the December 12 election trigger an intraday wave of sterling buying, pushing EUR/GBP below the 0.86 big figure. Sterling this morning temporarily reversed part of yesterday’s gain, but finally the pound found its composure again. UK labour market data came out rather soft. As was most often the case of late, the report had little lasting impact on sterling trading. EUR/GBP hovers in the 0.8575 area.

News Headlines

Spain’s PSOE and Podemos struck a deal to form a coalition government today after Sunday’s inconclusive fourth general election in as many years. Together they have 155 seats but need 176 to get a majority. A Spanish newspaper reported the PSOE’s strategy is to get support from other smaller parties, such as Ciudadanos (10 seats) and Más País (3 seats). For any confirmation vote of Sánchez as prime minister to pass, the Catalonian ERC would probably have to abstain however.

Norwegian total GDP growth flatlined during the third quarter of this year compared to a 0.2% q/q increase in Q2. Excluding petroleum activities, (mainland) GDP growth amounted to 0.7% q/q, as much as in the previous quarter but slightly below expectations of 0.8. Fixed capital formation and household spending increased while exports capped growth during the third quarter. EUR/NOK trades little changed near 10.07.


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