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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 13 December 2016 at 8:00 GMT

Morning Markets: Italian banks and inflation making headlines

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Watchlist

  • Spain: consumer price index (0800 GMT)
  • Italy: consumer price index(0830 GMT)
  • UK: consumer price index (0930 GMT)
  • UK: house prices (0930 GMT)
  • Eurozone: employment (1000 GMT)
  • Germany: ZEW Economic Survey (1000 GMT)
  • Italy: Bank of Italy "Money & Banks" report (1000 GMT)
  • US: Small Business Optimism Index (1100 GMT)
  • UniCredit: Capital markets day/webcast (1259 GMT)

It's a data-heavy session in Europe today with inflation updates from around the continent first on the agenda. Germany's November numbers, already released at 0700 GMT, matched expectations with CPI rising to 0.1% (seasonally adjusted, month-on-month ), the same rise logged in October. The year-on-year figure – a 0.7% increase in consumer prices – also matched expectations.

Rather higher figures are expected from the United Kingdom at 0930 GMT with the m/m rate seen edging up to 2.1% and the annual price rise extending to 1.1%, as CPI adjusts to the effect of the post-Brexit vote sterling decline..

Elsewhere, the Italian banking debacle that has worried investors in recent days looks to be calming. According to a Financial Times report this morning,  UniCredit, the country's biggest bank, has unveiled a massive restructuring plan that will see it shed 6,500 jobs and raise €13.8 billion in a rights issue in order to bolster its capital levels and profitability. The news comes ahead of a UniCredit capital markets day and webcast at 1259 GMT today.

Market signals

Asian session

  • China reported stronger-than-expected industrial output and retail sales
  • Chinese shares extended declines despite the data
  • Investors focused on PBoC monetary tightening and expected Fed rate hike
  • Australian business conditions have fallen to their lowest in 19 months
  • NAB's monthly business conditions index dropped to +5 in November (from +7)
  • In early trade, US oil hovered below $53/barrel after Opec-fueled advance
  • Aussie 10-year bonds led gains in Asia-Pacific, with yields falling 3bps
  • Quarter-on-quarter growth in Australian dwelling values slowed to 1.5% from 2% 

Forex ahead

  • In early trade JPY fell 0.1% to 115.15 per dollar, following Monday’s 0.3% climb
  • The Korean won was highest among Asian currencies, adding 0.2% against USD
  • AUD nudged back above 0.75, buoyed by rising commodity prices and USD weakness 

From the Floor

Warning light. “Chinese macro data continues better than expected but it is at odds with some of the money market signals especially out of Hong Kong,” says Garnry.

Crisis management. “The Italian spread to German 10-year yields is down to 155 bps from nearly 200 before the referendum,” says Boye.


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

In opinion

1...2...3
The UK's headline inflation is ticking higher – just what the Bank of England wants – but it's probably not enough to spark a rate hike, says James Picerno

About face
Early trading in all Asian markets was volatile this morning, but the ASX did the big turnaround, first dropping steadily and then flipping to the upside, says Saxo Capital Markets

Inflation what-if
Max McKegg makes an Outrageous Prediction about ECB quantitative easing.

Bond high
The US Treasury 10-year yield hit 2.5%, writes the team at Saxo APAC Sales Trading, but the USD was unable to hold gains.


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China's retail sales advanced 10.8% last month compared with 10.2% expected. Photo: iStock

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