ALPHA Market Update 04 October 2018

04.10.2018

Market Update

 

 

 

United States

  • The initial Jobless Claims will be released at 13:30
  • Cap Goods Ship Non Defense Exclude Air data and Factory Orders data will be published at 15:00
  • Fed Chairman Powell said that low interest rates are no longer suitable, we are still far from neutral interest rates.
  • US ADP employment in September increased by 230,000, significantly better than expected.
  • The US ISM non-manufacturing index in September out of the trough, which is close to the highest since 2004.
  • The S&P 500 index closed up 0.07%. Dow Jones gained 0.20%. The NASDAQ gained 0.32%.

Europe

  • The EU’s spending promises and pension costs rose by tens of billions of euros last year, an official report reveals, raising the possibility of an escalating Brexit divorce bill for the UK. The EU’s auditor also described member countries’ annual budget fees as “moveable”, because they are linked to commitments and liabilities that change. The British government has said the Brexit bill will be £39bn, with payments spread over decades, ending in 2064. But the EU’s chief negotiator, Michel Barnier, has never endorsed this figure, nor revealed an alternative. A senior EU source told the Guardian in 2017 that the UK had signed up to €60bn (£53bn), after the two sides settled the issue last December. Both sides can make different claims, because the figures are based on complex calculations woven with uncertainties, from the likelihood of countries defaulting on EU loans, to the life expectancy of a Brussels fonctionnaire.

 United Kingdom

  • Sterling is trading little changed on the upside at around 1.2965 level on Thursday after the Federal Reserve chairman Jerome Powell indicated more rate hikes are coming. During the panel discussion in Washington DC on Wednesday Powell said Fed may raise rates past “neutral” territory as they need to gradually move towards normal as they are far from “neutral” still accommodative. Comments from Fedchairman pushed the US Dollar higher across the board.

    In the UK, the ruling Conservative party annual conference ended with no clear outcome for heating Brexit negotiations that are set to restart next week. The Tory party conference saw ex-Foreign Secretary Boris Johnson supporting Prime Minister Theresa May, while May confirmed that further concessions are to be made in key questions of the Irish border. Theresa May said the UK is ready to accept no deal Brexit than bow to demands from the European Union, making her negotiating position harder.

    The European Union officials said that they are preparing the Brexit talks dinner for October 17.

Commodities

  • Oil prices on Thursday slipped from four-year highs reached the previous session, pressured by rising US inventories and after sources said Russia and Saudi Arabia struck a private deal in September to raise crude output. Brent crude oil futures were trading at $86.14 per barrel at 0651 GMT, down 15 cents, or 0.2 per cent, from their last close. Brent on Wednesday hit a four-year high of $86.74 a barrel, lifted by expectations of a tightening market ahead of US sanctions that will target Iran’s oil exports from next month. US West Texas Intermediate (WTI) crude futures were down 18 cents, or 0.2 per cent, at $76.23 a barrel.

Australia

  • AUD outlook softened this morning after official data revealed building approvals fell by close on 10% in August with analysts saying the shrinkage is largely due to tightening credit conditions. Signs that credit is becoming scarcer in the Australian banking system suggests to foreign exchange markets that the RBA might have to keep interest rates unchanged for even longer than markets are currently expecting, which in turn might well deprive the Australian Dollar of support over coming weeks and months.
  • Australian building approvals fell by -9.4% in August, deepening the -4.6% decline seen back in July, when markets had hoped to see a modest rebound of 1% for the month. The fall was led by a collapse of approvals for new apartments and other non-house developments in the private sector, with the states of Victoria and Queensland the hardest hit after seeing falls of -12% and -8.4% respectively.

New Zealand

  • NZD went into retreat yesterday after another survey showed business confidence collapsing to its lowest level since the financial crisis, prompting analysts to warn of ebbing momentum in the economy and a possible rate cut from the Reserve Bank of New Zealand (RBNZ).  The New Zealand Institute of Economic Research (NZIER) business confidence index fell to -30 during the third quarter, down from -20 for the three months ending in June, which marks its lowest ebb since the first quarter of 2009.
  • Companies cited government policies as being behind the decline, with those in the retail, manufacturing and construction sectors singling out staff shortages, costs and consumer confidence as being behind their own pessimism about the general business environment over coming months.
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