Article / 03 February 2017 at 12:52 GMT

Mid-session Europe: Shares gain on US jobs optimism

Saxo Markets
Denmark

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Foreign exchange
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European stocks rose as investors await the first US monthly jobs report of 2017 for new clues on the outlook for the world’s biggest economy. Payrolls are expected to have grown by 174,000 in January, up from 156,000 in December, but in line with what has been seen in the past couple of years.

Bank shares stood out among gainers, while the basic resources sector fell with metal prices.

US online retailer Amazon.com reported fourth-quarter earnings better than forecasts, but investors were disappointed by the company's first-quarter revenue outlook. The shares were indicated down 3.6% in the US pre-market session.

Photo-sharing service Snapchat's owner Snap Inc. files for IPO seeking to raise $3-4 billion on a market value of $25 billion.

Watchlist
  • US January change in nonfarm payrolls (180K exp.) (1330 GMT)
  • US January unemployment rate (4.7% exp.) (1330)
  • US January average hourly earnings (2.8% exp. y/y) (1330)
  • US January final Markit services PMI (1445)
  • US January ISM non-manufacturing composite (57.0 exp.) (1500)
  • US December final durable goods orders (1500)
             
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Forex developments

Foreign-exchange markets saw a further retracement of the USD index in the first half of the European session, to current levels inches above 100 index points, on anticipation of potentially strong US jobs data at 1330 GMT today.

EURUSD is offered, trading down 0.16%, just below 100-day exponential moving average resistance at 1.074. Euro selling was stoked partly by Bundesbank economist Jens Ulbrich's morning commentary which said he saw no reason for European Central Bank’s stimulus reduction.

Sterling (GBPUSD) is the weakest G10 currency today, down about 0.48%, traded slightly below 1.2470.

USDJPY is on the positive side, staying well above 113.0, after the Bank of Japan conducted a second purchase of sovereign yield as part of its yield-curve control exercise.


FX Options volatilities
 
Vols
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Ahead of US nonfarm payrolls today, overnight straddle EURUSD is trading around 60 pips, and USDJPY around 100 pips.

Curves are generally unchanged, with limited inspiration today. EURUSD traded 2-month 5 delta EUR call (1.14-ish) for 750 million at 9.1. No notable bigger strikes expiring today. The biggest single strike for the next few days is 1.10 for February 8 in 2.9 yard. Seller seen of 3-month at-the-money EURAUD, and also sellers of front-end AUDJPY (1m-3m). Looking for more sellers in general next week.

Fixed income
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Equities

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European stocks rose as investors look to the US monthly jobs report to gauge the outlook for the world’s biggest economy.

Basic resources was the only sector that fell, with mining stocks dropping along with metal prices following lower-than-expected Chinese macroeconomic data.

Metro AG fell 1.8% after the German retailer reported profit that missed estimates on price reductions at its food wholesale division, especially in Russia. 

Swedish polymers group Hexpol AB shares surged 7.1% after the group posted better-than-expected quarterly profits.

Bank stocks have generally fared well today. Deutsche Bank advanced 1.5%, regaining part of Thursday’s loss after it posted a worse-than-expected fourth-quarter net loss of €1.9 billion ($2.05 billion). Royal Bank of Scotland, which runs US-based NatWest, picked up 2%. France’s BNP Paribas tacked on 1.3%, and Spain’s CaixaBank popped up 2.2%. But Banco Popular Espanol shares were dragged down 5.7% after the Spanish lender swung to a yearly loss of €3.5 billion ($3.75 billion), hurt by bad loans and higher provisions.

The VIX volatility index dropped for a second time since last Friday, trimming its weekly increase to about 11%.

Six members of the S&P 500 are reporting quarterly results today, including chocolate maker Hershey Co. With more than half of the index components having released results this season, about three-quarters beat profit estimates and about half beat sales estimates .


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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.





US city skyline
 Markets await a new key measure (nonfarm payrolls) on Friday of whether the 
US economy is still briskly creating jobs. Image: Shutterstock


— Edited by John Acher

The Global sales Trading desk is a multi-asset team providing customised trading solutions

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