European Open Market Briefing – 05/07/2017 – by Arjun Lakhanpal

July 5, 2017 by

In Asian Equity Markets Japan’s Nikkei index fell to its lowest level in nearly three weeks on Wednesday amid heightened tensions following North Korea’s ballistic missile launch, while automakers managed to extend gains on encouraging sales. The Nikkei share average was down 0.7 percent at 19,899.69 after falling 19,888.90, its lowest since June 16. The broader Topix lost 0.4 percent to 1,603.96. MSCI’s broadest index of Asia-Pacific stocks outside Japan added 0.1 percent, having shed 0.6 percent on Tuesday when North Korea fired a missile into Japanese waters. Among the few releases in Asia was the Caixin/Markit services purchasing managers’ index (PMI) for China which fell to 51.6 in June, from 52.8 in May.

In Currency Markets the dollar fell against the yen on Wednesday on concerns about rising tensions between the United States and North Korea while the Canadian dollar held firm after the nation’s central bank chief backed an interest rate increase. The dollar shed 0.3 percent in early trade to fetch 113.00 yen, falling further from Monday’s 1-1/2-month high of 113.48. Although the common currency fell early this week after rallying 2.1 percent last week, it has stabilised around $1.1359. The Australian dollar licked wounds at $0.7617 after the nation’s central bank stuck to a neutral stance on the economy and interest rates on Tuesday, disappointing many traders who had expected a more hawkish tone.

In Commodities Markets oil decreased on Wednesday, pulled down by another rise in OPEC supplies despite a pledge to cut production, but geopolitical tensions in the Korean peninsula and the Middle East put a floor under prices. Brent crude futures were at $49.55 per barrel, down 0.1 percent, from their last close. U.S. West Texas Intermediate crude futures were at $46.99 per barrel, down 0.2 percent. Gold futures rose 0.73 percent to $1,228.09 troy ounce. Gold prices bounced back after a sharp fall on Tuesday amid heightened geopolitical risk after North Korea said it had successfully test fired an intercontinental ballistic missile. Gold ended the previous session down 1.47 percent at $1,224.34 an ounce.

In U.S., Equity Markets were closed for the Independence Day holiday.

In Bond Markets   borrowing costs across the euro area fell on Tuesday as signs that some ECB policymakers are having doubts about signalling a move away from an ultra-easy monetary policy stance this month brought a degree of comfort to a battered bond market.  Euro zone government bond yields fell 1-3 basis points, pulling back from recent highs. In Germany, the bloc’s benchmark bond issuer, two-year bond yields fell 3 bps to a one-week low of minus 0.61 percent. The yield on Germany’s 10-year Bund fell to 0.45 percent at one stage. Though it rose again, it was still down 2 bps on the day at 0.48 percent, and off 3-1/2 month highs hit on Monday.

Economic Calendar

  • 09:30 GMT+1 UK Services PMI
  • 19:00 GMT+1 US FOMC Meeting Minutes