Article / 06 March 2017 at 12:15 GMT

Mid-session Europe: Euro wilts on Juppé's 'non'

Saxo Markets
Denmark

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Foreign exchange

Forex
European markets are facing a deficit of risk sentiment today, with Deutsche Bank's 5.2% decline weighing down financials as a whole on the back of the German banking giant's announcement of an €8.5 billion share shale.

This morning, news that Alain Juppé has declined to enter the presidential race as a replacement for the scandal-battered François Fillon saw the euro head lower on perceptions of instability at the European Union's core. The anti-EU nationalist Marine Le Pen continues to enjoy strong poll support.

Precious metals are drifting lower on US rate hike risks but the narrative of a Europe in crisis is adding some political support to a Federal reserve policy normalisation-fuelled decline. Crude oil, meanwhile, is retracing lower following Friday's jump on Libyan supply disruptions.

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Forex developments

EURUSD rallied at the end of Friday but failed to close above the 1.0623 level, which is the 38% Fibonacci retracement from the drop starting Feb 2 to the lows of March 2. On Alain Juppé's discounting himself as a French presidential candidate, EURSD started to decline as German-French spreads widened to around 64 basis points but have now slightly contracted to 62.5. EUR is also affected by a lower Retail PMI in Eurozone which came in below expansion for the first time since November.

USDJPY softer on the day with weaker indices in Europe and following the North Korean missile exercise.

GBP came under pressure on the back of speculation surrounding PSA buying Opel/Vauxhall as fears that Brexit might threaten jobs in Vauxhall plants weighed on sterling. GBPUSD is resting at 1.2250 which was a critical support back in December, as well as a decent resistance in November. If we start closing below this point, the path opens up for a move to the 1.2050 area. GBPJPY is at its 100-day moving average at the 139.35 area. This moving average was last broken in November, so it's important to see if we start closing below. The 200-day moving average comes a bit lower at the 138.36 area.

Commodity currencies: NZDUSD is above important psychological levels at 0.7000, which was rejected on Friday. The pair has made a new attempt at it today, and we are watching the possible breakdown in NZDUSD.

FX Options volatilities
 
Vols

Vols
 
The market has stabilised after last week’s selloff but is still offering front-end as there is little news out today; range-trading is still dominating. We have seen the German/French yield spread widening a little on the back of a new poll and euro fell slightly this morning as a result.

Fixed income

Bonds


Commodities

Commodities
 
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Equities

Equities
 
Investors showed no appetite for risky assets on Monday. This risk-off mode helped pull shares of Deutsche Bank down 5.2%. The shares were on course for their worst session since early February after the bank said it’s planning an €8 billion ($8.5 billion) share sale in a bid to strengthen its capital position

Other bank stocks suffered alongside Deutsche Bank. The UK’s Royal Bank of Scotland PLC lost 1.8%, Germany’s Commerzbank AG fell 0.3%, and Credit Suisse Group AG slumped 3.2%.

But moving higher Monday was Peugeot. Its shares popped up 2.4% after the French auto maker said it has made a €1.3 billion deal to buy General Motors' Opel brand in Germany and Vauxhall in the UK. As well, GM’s financial operations in Europe will be jointly acquired by Peugeot and French lender BNP Paribas for about €900 million. BNP shares were off 0.6% mostly due to the DB story.

At mid-day, the Dax 30 abandoned 0.7%, CAC 40 lost 0.4%, and the FTSE 100 lost 0.3%.

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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.





Deutsche Bank trading room
 Deutsche Bank made a splash with its announcement of an €8 billion 
capital raising. Photo: Deutsche Bank

— Edited by John Acher and Michael McKenna

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