Dollar on the backfoot; Auto shares drag European stocks lower
Here are the latest developments in global markets:
- FOREX: The dollar was the worst performer among its major peers during early European trading hours as optimism on the Eurozone’s economic outlook and doubts over the effect of the US tax overhaul pushed the dollar index down to a three-month low of 91.75 (-0.29%). Euro/dollar approached a four-month peak at 1.2084 (+0.47%) and dollar/yen tumbled to 112.16 (-0.41%). Pound/dollar held strong above 1.35 (+0.30%) despite disappointing data on Markit UK manufacturing PMI. The antipodean currencies, the Kiwi, and the Aussie hovered near 2 ½ -month highs but were on track to close the day lower.
- STOCKS: The European stocks started the year in the red as a decline in auto shares dragged the market down, while other sectors except energy were also in the backfoot. The pan European STOXX 600 and the blue chips STOXX 50 tumbled by 0.56% and 0.78% respectively at 1050 GMT. The German DAX 30 declined by 0.85% as the British Airways agreed to buy Air Berlin’s insolvent Austrian airline Niki which Lufthansa backed down to acquire in December. The French CAC 40 fell by 0.88% and the British FTSE 100 pulled back by 0.41%.
- COMMODITIES: Oil prices reversed earlier gains and deviated below the three-year highs reached in the Asian session amid anti-government protests in Iran. WTI crude was 0.13% down on the day at $60.34 per barrel and the Brent was weaker by 0.21% at $66.75. The dollar-denominated gold extended its gains towards a fresh three-month high of $1,312.74 per ounce.
Day ahead: US Manufacturing PMI & global dairy prices pending
A look ahead to the major economic releases expected later in the day, the IHS Markit company will publish final figures on the US manufacturing PMI for the month of December at 1445 GMT, while changes in global dairy prices will be also awaited at a tentative time.
According to forecasts, the US PMI is anticipated to remain unchanged at 55.0 in December, above the threshold mark of 50 which separates growth from contraction. However, since preliminary data are more important for the dollar, any upside or downside surprises in the data would influence moderately the greenback. In contrast, the FOMC meeting minutes due on Wednesday and Friday’s nonfarm payrolls are predicted to offer a higher volatility to the dollar.
Investors will be also looking forward to the global dairy auctions to reveal changes in milk prices. A strong positive print could move the kiwi higher as milk is New Zealand’s largest single export.
In energy markets, the API weekly report which tracks oil inventories in the US will be published at 2130 GMT.
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