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European Equities Broadly in the Green; Wall Street Looks Set to Open Higher

Here are the latest developments in global markets:

FOREX: The US currency remained lower on the day, with its broader gauge, the dollar index, being down by 0.3% around midday. The euro and sterling were advancing versus the greenback, after declining notably in the preceding week and recording multi-week lows. Specifically, euro/dollar shed 1.6% during the week ending February 9, experiencing its worst weekly performance since November 2016. Euro/dollar and pound/dollar were up by 0.3% and 0.2% at 1.2269 and 1.3869 respectively. Dollar/yen was 0.15% down at 108.62. This compares to Friday’s five-month low of 108.03.

STOCKS: European equities were in the green, with every single major blue-chip index being comfortably in positive territory. The UK’s FTSE 100, German DAX and French CAC 40 were up by 1.2%, 1.8% and 1.45% respectively after last week’s sell-off that saw them post multi-month lows. Even the Italian FTSE MIB, which underperformed, was up by a hefty 0.8%. The pan-European Stoxx 600 was up by 1.5% at 374.04 and at a relative distance to Friday’s five-month low of 367.50, with all sectors comprising the index being in the green. Meanwhile, the blue-chip Euro Stoxx 50 traded higher by 1.5% as well. Also, the eurozone volatility index declined from the peaks hit last week. Futures on the Dow, S&P 500 and Nasdaq 100 traded higher by 1.1%, 1.1% and 1.0% respectively, pointing to a higher open on Wall Street. It remains to be seen whether positive momentum will be maintained or whether this is a knee-jerk "buy the dip" reaction, with more weakness following in the days to come.

COMMODITIES: WTI and Brent crude were up by 1.75% and 1.3% respectively. The notable gains for the two benchmarks come after considerable declines in previous days that saw them touch a one-and-a-half-month and a two-month low of $58.07 and $61.77 per barrel respectively on Friday. The fall in preceding days came on the back of increasing expectations of US production strongly reentering the market, curbing efforts by OPEC as well as some non-OPEC members to tackle oversupply issues that acted as a drag on prices in the past. Monday’s rise saw WTI recapture the $60/barrel level. Gold traded higher by 0.3%, at $1,320.76 an ounce. Last week, the precious metal touched a one-month low of $1,306.81.

Day ahead: Stocks remain in focus; US Federal Budget balance and OPEC monthly report due

Equities are gathering the lion’s share of attention during Monday’s trading, following last week’s unrest that saw US stocks recording their worst weekly performance in around two years. The absence of significant releases out of major economies as well as the earnings season which remains underway, are additional factors keeping investor focus in stock markets.

The US’s Federal Budget balance for the month of January is due at 1900 GMT. A budget surplus of $51 billion is anticipated during the month after a $23bn deficit in December. Discussions on the budget balance and debt sustainability are receiving renewed interest in the world’s largest economy, especially after the Trump administration ratified a package of tax cuts that will add $1.4 trillion over 10 years to the national debt which currently stands around $20tr. According to some forecasters, general gross government debt to GDP is estimated to stand around 120% in 2018.

Policymakers’ appearances as the day unfolds include Bank of England Monetary Policy Committee (MPC) member Ian McCafferty, who is scheduled to speak at 1630 GMT, and Reserve Bank of Australia Assistant Governor Luci Ellis who will be giving a speech at a forecasting conference at 2150 GMT.

In energy markets, OPEC’s monthly report due later on Monday could attract some interest. The release covers major issues affecting international oil markets, looking at key developments as well as supply and demand considerations, and providing an outlook for the coming year. The report lacks a fixed time of release.

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