Article / 23 November 2015 at 13:24 GMT

Mid-session Europe: Stocks wither as PMIs fail to help

Saxo Markets
Denmark

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Foreign exchange

FX Table
 
European stock markets fell broadly on Monday, with the November 13 Paris attacks still weighing on some sectors, such as hotels and restaurants. Weak commodities also continue to weigh on equity markets.

News of Pfizer's $150 billion acquisition of Botox maker Allergan buoyed the healthcare sector.

Purchasing managers index data from across Europe were mixed. The overall Eurozone preliminary manufacturing PMI for November came out better than expected at 52.8 points, up from an expected 52.3. The services PMI was also better than expected at 54.6 points, against an expectation of 54.1.

German manufacturing PMI rose to 52.6 points, beating an expectation of 52. The German services PMI was also better than expected at 55.6 points versus an expected 54.4.

But the French November preliminary services PMI came in below expectations, at 51.3 points, against a market expectation of 52.5, likely reflecting the worries about the Paris terror attacks on that branch of the economy. The French preliminary manufacturing PMI was in line with expectations.

Watchlist

  • US Nov preliminary manufacturing PMI (1445). Expected at 54, prior 54.1

  • US Oct existing home sales (15:00). Expected at 5.40m, prior 5.55m
Speakers

  • - ECB’s Lautenschlaeger (15:30) 
     
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Forex developments

EURUSD: Weakness in EURUSD took breather at the start of the European session, only to find good selling opportunities. EURUSD rallied after the French and German PMIs, but the selling resumed on the release of the Eurozone PMI. Grinding lower slowly could be the theme until the ECB's meeting on Decembe 3. Resistances of note on the top side are 1.0703 (10-day moving average, which EURUSD has failed to close above and remain above). Short bets on euro futures increased to a net of 164,117 contracts. 1.0600/1.0590 technical supports. Break of that opens to the 1.0566 area (lows of April 15). As John Hardy writes, positioning adjustments or risk aversion are the main risks for the upside.

GBP: GBPUSD looks weak with the drop from highs of November 20 and looking at the 1.500 area following the break of the upward channel at around 1.5175. The first decent levels to watch are in the 1.5100/06 area where it hit twice (on September 30 and October 1). GBP has been copying EUR weakness of late, and EURGBP has been stuck doing nothing, so we still like the downside, but would rather have it higher before testing again for short.

Commodity currencies: USDCAD is looking at 1.3500 and the first hurdle is 1.3457. Crude prices simply are not supporting CAD, and crude can easily slip below $40/ barrel on mild winter weather and Opec's failure to intervene. A scenario that could be favourable for CAD is any short covering in crude that has happened on several occasions in recent weeks. AUD hit by weaker industrial metals, with nickel dropping to its lowest since 2003 and copper to the lows of May 2009. Still, AUD's upside performance of last week is worth noting. AUDUSD stuck so far in a range of 0.7139 (55-day moving average) and 0.7206 (100-day moving average). Key resistance on the top side is 0.7250, which has been tested and rejected two times since November 20.

FX Options volatilities
 

Vols Table



 
There has been very little development in the options space since Friday. Overall the picture in majors is a low front end with a weak calendar and US markets closed for Thanksgiving on Thursday and many extending the holiday through Friday. So 1-week EURUSD is very discounted vs 2-week, where ECB and NFP is included. The 2-month date rolls to the December ECB meeting, which has taken that tenor a bit higher. Also 2-month USDCHF has been paid at 12% today. In USDJPY, we have seen 2-week strike 122 (NFP) vs Dec 17 124.25 (FOMC but not BOJ) trading in $400 million per leg, interest buying 2-week and selling Dec.17.

Fixed income
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Stronger PMI numbers coupled with plenty of auction supply worry government bond investors, and bunds drop nearly a full point to 157,30 and 6 basis points higher in yield terms to 0,53%. Xover credit spreads expand a marginal 3 bps and keep to the sub-300 level at 297 bps currently.

Commodities

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Equities

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European equity markets are lower across the board this morning as commodity and energy stocks drag indices lower on fears of reduced global demand.

The mining sector was the worst performer this morning as metal prices fell to multi-year lows, with copper trading at its lowest level since 2009.

Glencore’s shares were down 3.6% and BHP Billiton’s APAC down 2.1% overnight.

Belgian shares were relatively resilient this morning as they attempted to shrug off security concerns and fell broadly in line with other European exchanges.

Credit Suisse completed its capital raising today after having successfully placed 58 million shares raising CHF 1.32 billion

The Sunday Times reports that Deutsche Bank is to cut 1,000 jobs in London as part of its planned overhaul announced last month.

One of the biggest takeovers in the healthcare industry was announced today as Pfizer and Allergan agreed to merge in a $150 billion deal.

US futures are negative this morning and point to a 0.2% lower opening on the Street today.


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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.





Thanksgiving
"Smile." Americans celebrate Thanksgiving on Thursday, and the holiday usually leads 
to thin trading for the week as a whole. Photo: iStock 


— Edited by John Acher

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

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