Article / 15 July 2016 at 7:00 GMT

Morning Markets: Fresh attack on France casts deep shadow

Former managing editor, / Saxo Bank



  • Euro area June Consumer Price Index (0900)
  • US June Retail Sales (1230)
  • US June Industrial Production (1315)

A fresh terror attack on France — this time on the coastal city of Nice — has left some 84 people dead and once again highlighted the existential threat to western values and ways of life that rears its ugly head when we least expect it and with devastating effect.

How European markets react is anyone's guess although Asian equities extended their rally into a fifth day with the MSCI Asia Pacific Index closing in on a year high. Both the Nikkei and Hang Seng Index were also up with the Shanghai Composite Index near flat for the day.

Chinese quarter-two GDP growth beat estimates to hold at 6.7%, and the risk-on bias helped push USDJPY beyond 106.0 as the yen headed for a 5% plus fall on week. GBPUSD meanwhile was consolidating around the 1.34 zone after spiking almost to 1.35 after the Bank of England held off cutting interest rates yesterday.

The bank's stayed hand initially spooked markets, but governor Mark Carney signalled a package of measures lined up for next month once the August 4 Inflation Report meeting is done. Details on the so-called Brexit bazooka are yet to be unveiled but there will be some concern in forex markets that Carney's sometimes sketchy communication skills might have markets guessing right up until the last minute on his intentions.

Elsewhere, WTI once again is homing in on the $45/barrel area, gold awaits a fresh catalyst as it bumps along the $1,330/oz zone and bond yields returned to more normal territory as safe-haven flight eased. The dollar could shift today too on a raft of data, but whether that moves Federal Reserve intentions on the next rate hike is another question altogether.

But, as on November 13, 2015 in Paris, March 22, 2016 in Brussels and on so many other horrific days when hate has won the day, markets seem somewhat by-the-by. Our thoughts go with all the bereaved and those they have left behind. 

Market signals

Asian session

  • The rally on Wall St gave sentiment a lift across Asia
  • Shares made strong gains in Tokyo
  • The Nikkei 225 was up 1.2% at 0520 GMT
  • Korea's Kospi Composite headed higher, up 0.46% at 0520 GMT
  • Hong Kong's Hang Seng made strong gains, up 0.64% at 0505 GMT
  • China's GDP expanded by 6.7% in the year to June, ahead of expectations of 6.6%
  • China retail sales rose 10.6% in June from 10%; industrial production up 6.2% from 6%
  • The strong China data gave the ASX200 a lift
  • At 0530 the S&P/ASX200 was up 0.48%
  • The Aussie dollar added 0.3 of a US cent on the China data

Forex ahead

  • The US dollar ticked higher against the yen; it was worth ¥106.24 at 0530 GMT
  • 107.0 emerging as the key area for USDJPY
  • Robust China data boosted the Aussie dollar; it was worth 0.7653 at 0530 GMT

From the Floor

Between the lines. "One key to that Chinese GDP data is that we saw growth of 20% in government spending and this is not sustainable", says Hardy.

Runaway equities. "We're leaning towards a negative view on the S&P 500 and I don't see the earnings season as a big catalyst", says Garnry.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Inflation remains stubbornly low, and even the core inflation rate is stuck to 0.9%. It's a headache the ECB can't ignore, says Juhani Huopainen

CPI circuit breaker
A strong CPI number today could take the USD back to some of its former strength, but it's always about inflation, says Max McKegg

Fresh faces
We're now seeing who will be in charge as the UK prepares for Brexit, and it looks like Article 50 will have to wait till the end of the year, CNBC reports

Grooming Johnson
Remarkably, Boris Johnson is already back in the fold as new prime minister Theresa May appoints him foreign secretary. Is he being groomed, asks Martin O'Rourke.

Oil and QE
If there is a ramp-up in quantitative easing over the next few months, then that is likely to lead to a stronger dollar and more negativity for oil, says Ole Hansen.

Don't be fooled
Brexit is a gamechanger and we should not be fooled by the price action since June 23, says Kay Van-Petersen, who feels the existential threat to the EU will push the euro lower.

WTO-plus deal
Citi believes that Britain is likely to push for a WTO-plus deal with the EU, according to this CNBC article on what the post-Brexit future will look like for Britain.


The horrific attack in Nice revives memories of the November 13 terror in Paris. Photo: iStock

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Max McKegg Max McKegg
NZDUSD slumped from 0.7150 to 0.7080 this morning after the June quarter CPI number came in 0.4% and the annual rate the same.

As shown in the chart below, the annual rate has risen slightly but is still a long was from the Reserve Bank of New Zealand’s 2% target.

The RBNZ’s forecast had been for a quarterly number of 0.6%, while the market expectation was 0.4% to 0.5%.

Traders won’t have long to hear what the RBNZ thinks of the inflation outlook. On Thursday the Bank will issue a special “Economic update”. While no change to the 2.25% policy rate will be announced (that will come in the regular Monetary Policy Statement on Aug 11), the Bank is clearly unhappy with the persistent strength of NZDUSD and they will try to jawbone it down on Thursday. The cross has weakened in the last couple of days in anticipation. However, things aren’t as clear cut as they seem. See here


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