26 September 2016 at 11:21 GMT
Last week's decision by the Federal Reserve to hold rates steady saw stocks and risky assets soar, but markets are beginning to weigh the threat of an even bigger policy "event horizon" in the form of presidential candidate Donald Trump, who goes into tonight's debate polling even with rival Hillary Clinton.
Elsewhere, oil traders are headline-driven and sopeculation-spooked ahead of the energy summit in Algiers, where many have come to believe that a production freeze/cap deal between Opec and non-Opec producers may be on the cards.
Finally, Deutsche Bank shares are cratering as Berlin has said that it will not step in with a bailout. Too big to fail, or too big to avoid failure?
- ECB’s Coeure to Speak (1230 GMT)
- ECB’s Draghi to speak before European Parliament (1400 GMT)
- US Aug. New Home Sales (1400 GMT)
A choppy FX session ahead of the first presidential debates in US, scheduled for today at Hofstra University.
USD is seen lower in the majority of the crosses, except for GBP (again), with USD index erasing the early gains and currently trading at 95.26.
EURUSD is higher, attempting to break through the 1.1250 area with support from strong economic data in Germany where the Ifo business climate index showed very positive numbers coming out at 109.5 (a two-year high) versus 106.2 expected. USDJPY: Strong demand is seen in JPY with USDJPY traded below 100.4, losing 0.6% during the session, and currently looks poised to test the key support levels at 99.6-100. GBP: Further downside pressure is seen in GBPUSD. Prime minister Teresa May commenting on the Article 50 stays in focus, which keeps pushing cable to the lows of Friday.
FX Options volatilities
Market opens slightly nervous, driven by negative equities but also some focus on month-end flows.
Interesting levels in both USDJPY and GBPUSD where a break on the downside probably will create some buying interest in the option market.
Buying demand is particular in the three-month area while one-and two-month are trading more neutral. Overnight for most majors is trading high today, probably driven by the US presidential debate this evening.
Looking at the market from a more statistical approach, implied is trading slightly expensive compared to realised.
European stocks slid Monday; all sectors were lower, led by financials and oil and gas groups. The CAC 40 fell 1.7% to 4,410, FTSE MIB declined 1.8% to 16,154 and the FTSE 100 fell 1.2% to 6,823.
German lender Deutsche Bank AG was pushing the market’s benchmark toward its worst performance in almost three months. DB sank 6.1% to an all-time low of €10.63. That drop came after Germany’s Focus Magazine reported over the weekend that German chancellor Angela Merkel would not support providing state aid for the country’s largest lender.
Oil and gas companies were also trading in red territory. Both members in and outside of Opec are meeting this week in Algiers at the International Energy Forum. Investors will watch for any news that oil-producing countries will agree to curb oil output as the market deals with a long-running oil glut. Investors questioned whether producers could actually work out a deal.
As a consequence, Total fell 2.4%, Portugal’s Galp Energia lost 2.2% as did Spain’s Repsol. In the oilfield-services and equipment group, Italy’s Saipem gave up 5.5.
Specialty chemical company Lanxess jumped 11% after saying Sunday it’s buying Chemtura Corp. in a deal with an enterprise value of around 2.4 billion euros ($2.7 billion).
The replay of our Morning Call can be found here.
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
Now tied in the polls with Hillary Clinton, Donald Trump is posing a very real threat to investors favouring a more-of-the-same approach to US governance. Photo: iStock
— Edited by Michael McKenna