Article / 05 September 2016 at 11:25 GMT

Mid-session Europe: Oil gyrates on hot air

Saxo Markets


Foreign exchange
Oil's spike on the back of a Saudi Arabia/Russia joint press conference proved shortlived underpinning the belief that without a short-covering position to take out, there is not all that much to sustain a rally. Talking the market it seems can only work so many times.

Elsewhere major indices are edging higher on the back of that weak nonfarm payrolls for August and the G20 leaders continue to jawbone. A somewhat chastened UK prime minister Theresa May will at least have enjoyed the positive UK services PMI which sent GBP a bit higher.


  • US Labor Day holiday    

Forex developments

GBP has been the interesting mover following a better-than-expected Services PMI, but still the reading might not be enough to avoid flat-line-at-best growth in Q3, and therefore PMIs need to continue better in September and October. GBPUSD is now comfortably above the 55-day moving average at the 1.3249 area, but is still having difficulty closing the day above the 1.3350/60 area that has been a top level since start of July.

AUDUSD: The next main event is the Reserve Bank of Australia meeting on September 6, and the expectation is for no cut overnight and one cut priced in for the next 12 months. AUDUSD is subsequently stronger on the day following the nonfarm payrolls and also better-than-expected Chinese PMI numbers, which is taking commodity currencies higher. The next key tech level is at the 0.7619 area (21-day moving average) and on downside key tech support is 0.7500 area, the 100-day moving average area, which has been tested 3 days since August 30 and we have been slightly below but failing to close day below. So watching these two levels for a break on RBA tomorrow.

FX Options volatilities
USDCAD: Vols got paid up this morning on news regarding cooperation between Russia and Saudi Arabia on oil production. However nothing seemed to have been agreed on and output freeze, and vols are likely to come off again.
GBPUSD: Strong PMI caused a spike higher in GBP. Vols have so far traded a touch lower, but we expect gamma to be paid if we manage to break above 1.3375.

Fixed income
A slow session due to US Labor Day primarily resulting in low-to-zero trading liquidity in US names. Bunds remain above the 167 level but still lower than before NFP on Friday. The European Central bank meeting on Thursday is not expected to bring additional measures although a verbal indication of action to come is more likely in our view and should keep government bonds as well as credit supported in the near term. XOVER continues to hover just above the 300 bps mark, unchanged for the session today.


European stocks edged up on Monday. The FTSE 100 rose 0.1% to 6,886, while Cac 40 added 0.2% to 4,552 and Dax stepped up by 0.3% to 10,711. Traders continued to react to Friday’s USjobs report, which came in weaker than expected and suggested that the Federal Reserve may hold off on hiking interest rates when policy makers meet later this month. 

Shares in mining companies got a lift in part from encouraging Chinese economic data. Copper miner Fresnillo PLC and platinum producer Anglo American PLC gained 1.3% and 1.6%, respectively. 

French telecom SFR Group SA is helping to lead the benchmark higher. SFR gained 5.9% after Altice, the holding firm controlled by French billionaire Patrick Drahi, offered to pay more than €2 billion ($2.24 billion) to buy out minority shareholders in its French cable and telecom unit to simplify the debt-heavy investment firm’s corporate structure. Amsterdam listed Altice rose 1.3%. 

Among the decliners, Zodiac Aerospace dropped 0.7% after the French supplier of aircraft interiors warned again on profit. The company said its operating income for 2015-16 is expected to be around 10% lower than consensus forecasts. 
German fashion house Hugo Boss AG fell 2.2% after UBS downgraded the stock to sell from neutral.


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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.


Hangzhou resides on the edge of beautiful West Lake, one of China's biggest tourist destinations, and the host for the G20 summit. Photo: iStock

— Edited by Martin O'Rourke and Michael McKenna
The Global Sales Trading desk is a multi-asset team providing customised trading solutions


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