Equities steady with Brexit vote, key US data ahead
There was more Christmas cheer in London as the FTSE 100
broke higher again to finish up at 7573. European equities are looking a touch
softer without investors offered little to focus on as the Christmas wind-down
commences. However we could yet see more upside to
the FTSE on positive flows.
It was the same story on Wall Street as the S&P 500
ground out another record high to close at 3,205. Impeachment, what
impeachment? The markets have totally shrugged off the proceedings against the
President. It only further delineates the two partisan camps ahead of the presidential
election next year.
USMCA trade deal has been backed by the House of
Representatives and should pass the Senate soon. China situation looks ok –
nothing new to rock the ship. Mnuchin says phase one will be signed in January.
Asia has been mixed overnight with no real momentum from
the slow steamroller in the US. Japanese inflation was 0.5% year-on-year,
in line. Tokyo closed 0.2% lower.
Sterling is still on the
defensive with GBPUSD briefly taking a 1.29 handle and looking
a tad shaky here at 1.30. Looking to consolidate around this round number but
the trend remains bearish.
The Brexit vote takes place in Parliament today –
GBP crosses may be sensitive to some of the headlines but by-and-large there
ought to be no surprises with the bill expected to pass easily.
Today sees some pretty important US data in the shape of
the Fed’s preferred gauge of inflation, the core PCE numbers.
If this ticks up a bit then it will only add to the sense the Fed is right
to pause its rate-cutting cycle and could push up yields and the USD. EURUSD looks
vulnerable to a downside move should the PCE number beat – that 1.12 level
looks increasingly distant and a 1.10 handle may come first. Cable could also
be susceptible to pressure if the core PCE emerges as firmer than expected.
Core CPI was strong in Nov and suggests core PCE could beat the 1.5% expected.
UK GDP later expected at 2.1% – secondary to feelings about
Brexit and the Boris Bounce for UK assets though. Andrew Bailey of the FCA
reported as the new Bank of England governor after Mark Carney. Not an
unblemished record but likely a safe pair of hands.
Crude oil continues to roll higher in the uptrend
past $61 as it just keeps on making new highs. Gold is static at $1478.
Shell has delivered an update on the fourth
quarter. It expects post-tax impairment charges in the range of $1.7-2.3
billion for Q4, with capex at the lower end of the range.
narrowed, now expected to be between 2,775 and 2,825 thousand barrels
of oil equivalent per day, vs 2,650 – 2,800 thousand boe/d guided on Oct 31st. Downstream oil products sales
volumes are expected to be between 6,500 and 7,000 thousand barrels per day,
vs 6,650 – 7,050 thousand boe/d previously guided. Gas guidance is unchanged – Integrated Gas production
is expected to be 920 – 970 thousand boe/d. LNG liquefaction volumes are expected to be 8.8 – 9.4
Also watch BATS and IMB after
Congress approved a bill to ban tobacco and e-cigarette sales to anyone under
the age of 21 in the US. The move is a long time coming but there may be a
slight negative reaction. Some 19 states and 500 cities had already raised the
minimum age to 21 but it’s indicative of the squeeze on big tobacco. Quite
whether making something illegal for youngsters stops them trying it and
becoming hooked is another matter, but the pressure to combat marketing aimed
at young people ought to help.