Europe Summary and Highlights 19 Aug
Equity and bond back and forth, market edgy up at these levels
CAD does react much initially to deadline extension, suggestion of potential deal, but still has potential
GBP little moved out of broadly as expected CPI
Europe
Oil prices continue to slowly leak out higher, Brent +$1 to $92, with US-Iran digging in and Trump suggesting no talks ongoing or scheduled. Refined products also still in focus, much nearer the Mar-Apr highs.
After a rough Asia regional session, equities have steadied on the morning, S&P and Nasdaq back to flat, as long end bond yields have also tempered the recent push out, JGBs 30s -5bp filling into Monday’s small gap overnight, and US30s now off the session yield lows but still 5bp off Tuesday’s highs. Lots of back-and-forth feedback between bonds and equities on show in recent sessions highlighting the sensitivities up at these post-2007 yield highs.
Trump announces a 3-day extension on the Canada tariff deadline, suggesting a deal subject to finalisation, Carney more reserved: ‘substantial progress has been made, although there is important work still to be done’. CAD proving reluctant to count chicken yet, slightly ahead of antipodeans on the day, but generally little changed and in the pack. Skew is still towards short covering outperformance if relief is eventually confirmed, particularly given recent macro recovery for Canada.
UK CPI data was largely as expected with the headline back up to 2.9% from 2.6%, as a result of the energy cap lift, though with core also inching to 2.6% from 2.5%. GBP little moved.
Asia Session
Korean equities are taking the spotlight on Wednesday. It once again hit the circuit break of more than 5% losses, more losses are pending as the Korean index is taking a breathe. Regional equities are also underperforming U.S. equities, though the late is in the red. AUD/USD is trading 0.17% lower at 0.7074 with Q2 wage banging in estimates. NZD/USD is trading 0.05% lower while USD/CAD slips 0.11% with oil higher.
It is reported that UAE has formally halted all trade, commercial and financial transactions with Iran. The UAE seems to be joining forces with U.S. in the economics front to maximize non-military pressure. USD/JPY is trading 0.11% lower at 159.43. Else, EUR/USD and GBP/USD are up 0.05%.