Delayed - 09/21 11:06:53 pm

European Morning Briefing: Mixed Start for Stocks; Dollar Rally Pauses

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10/04/2017 | 04:15 am


Stocks seen mixed; EUR/USD 1.1767-70; bund yield 0.464%; Brent crude $55.65; gold $1275.50

-France's National Assembly Approves Antiterror Bill

-Glencore to Boost Stake in Peru Mining Company Volcan Compaņia Minera

-U.K.'s Royal Mail Reiterates Commitment to Talks After Union Backs Strike

Watch For: Eurozone, Germany, France, U.K., U.S. services PMI; eurozone retail trade; Poland interest rate decision; Theresa May gives keynote speech at the Conservative Conference in Manchester; Tesco interim results

Headline News:

France's National Assembly passed contentious antiterror legislation Tuesday that seeks to enshrine extraordinary powers the government adopted years ago when it declared a state-of-emergency in the wake of the Nov. 13, 2015, attacks.

The bill, first proposed in July and approved in a different form by the senate, would enshrine in common criminal law some of the emergency measures that France has deployed for the longest period in its history, since the November 2015 series of terrorists attacks that killed 130 people in the French capital. Senators and lawmakers are expected to agree on a single text bymid-October.

At the vote in France's lower house, 415 lawmakers voted in favor, 127 against and 19 abstained. Most of those voting in favor came from President Emmanuel Macron's majority, while far-left, National Front and some center-right lawmakers voted against.


European shares face a mixed open Wednesday, with DAX futures up 16 points but FTSE 100 futures 5 points lower.

Stocks in Asia-Pacific were largely higher in early action, building on fresh records for U.S. indexes, with Hong Kong flirting with 10-year highs Wednesday.

Hong Kong's Hang Seng Index jumped 1% at the open after logging a 2.2% gain on Tuesday--its best day in more than a year. If the Hang Seng finishes up more than 0.9%, it would notch its highest close in a decade.

Meanwhile, Japan's Nikkei Stock Average added 0.2% despite a rebound in the yen. Australian equities bucked the regional trend with the S&P/ASX 200 down 0.7%. The benchmark index is just above 5650, a technical level a number of analysts have been watching. Falling through the level, which has proven repeatedly this year to be a point of market support, could lead to bigger declines, they have said.

Corporate News:

Glencore said it could invest nearly $1 billion in a Peruvian zinc operation, another sign the Swiss mining and trading giant is opening its cash hoard for acquisitions as rebounding commodity prices refill its coffers.

The investment in Peruvian mining company Volcan Compaņia Minera will add to Glencore's world-beating zinc assets.

Royal Mail said Tuesday that it is committed to talks and that it wants to reach an agreement, after the Communication Workers Union voted in favor of a strike over issues including pensions and working hours.

The company said there are no grounds for a strike and added that it has offered to continue working toward a new pay deal, including an increase of up to 5% over two years and a replacement of its pension scheme with another type of defined-benefit scheme.


The dollar has hit session lows early in Asian trade, after easing back Tuesday.

The WSJ Dollar Index was down 0.2% at 86.54 after snapping a two-day winning streak in the U.S. session. Trading was thin ahead of Friday's release of jobs data in the U.S., some investors said. Several said signs of solid jobs growth will help justify an additional interest-rate increase by the Federal Reserve this year.

Fed-funds futures, used by investors to bet on central bank policy, late Tuesday showed a 78% probability that the Fed raises interest rates by the end of the year, up from around 44% a month ago, according to CME Group.

At 0350 GMT, USD/JPY was 112.66-67, EUR/USD was 1.1767-70 and GBP/USD was 1.3265-67.


December-expiring futures on 10-year German government bonds drop 0.44 point to 160.78 Monday, getting closer to what Raiffeisen analysts call a minor support level at around 160.5.

This limits the contracts downside potential for now, making a bearish extension unlikely to succeed immediately, the Austrian bank said. In the so-called cash market, 10-year German yields rose 3 bps to 0.483%, approaching the key level of 0.5% Tuesday.

U.S. government bonds edged higher Tuesday as the market took a break from its recent selloff. The yield on the benchmark 10-year Treasury note settled at 2.332%, compared with 2.337% Monday.

"A lot of moving parts" have led investors to sell bonds recently, said Stanley Sun, interest-rates strategist at Nomura Securities International in New York.

While inflation remains low, that "has stopped being news," leaving investors to focus on other matters like tax policy and candidates to replace Janet Yellen, he added.


Oil futures were hovering around 2-week lows in Asia, with WTI threatening to fall back below $50/barrel after a sizable jump in U.S. gasoline inventories last week by the American Petroleum Institute's count.

The API said late Tuesday that its data for the week showed a 4.1-million-barrel decrease in crude supplies, a 4.2-million-barrel increase in gasoline stocks and a 600,000-barrel decline in distillate inventories, according to a market participant.

Traders and analysts surveyed by The Wall Street Journal expect on average that crude inventories decreased by 300,000 barrels in the week ended Sept. 29. Gasoline stockpiles are expected to increase by 1.2 million barrels and distillate stockpiles are expected to fall by 1.8 million barrels. The EIA report is scheduled for release at 1430 GMT.

Oil has been pulling back from its recent highs, which are liable to have been overdone in the first place, on factors including worries about potential rising OPEC production.

At 0147 GMT, November WTI was down 0.8% at $50.03 and December Brent was 0.6% lower at $55.65.


London spot gold prices stabilized in Asian trading following their recent pullback.

Gold has dropped by nearly 6% since recent peaks in early September sparked by tensions over North Korean. Slight dollar softness appears to be the main reason for a halt in the downslide, with investors watching out for Fed speeches and economic data later in the week for the latest indication of whether U.S. rates will be raised again this year.

At 0237 GMT, gold was 0.3% higher at $1,275.50/troy ounce.

Dollar weakness boosted base metals too but with China markets closed for holidays this week, trading volumes in Asia were thin. Three-month aluminum and zinc futures each rose 0.5% on the LME while copper gained slightly.

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10-04-17 0015ET

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