Article / 16 October 2017 at 7:00 GMT

Morning Markets: Right-wing resurgent in Austria, oil makes gains

Head of Editorial Content / Saxo Bank
Denmark

Morning Markets


Watchlist

  • China: PPI (already published)
  • China: CPI (already published)
  • US: Empire State Manufacturing Index (1230 GMT)
  • New Zealand: CPI (2145 GMT)

Austrian conservative Sebastian Kurz is set to become Europe and the world’s youngest leader at 31 following an election that saw his Peoples Party take 30.2% of the vote. The far-right Freedom Party took 268.% of the vote and is widely expected to form a coalition with the Peoples Party; the mainline, centre-left Social Democrats came in third with 26.3%.

The election, which saw Kurz run a hard-right campaign borrowing many themes from the Freedom Party, is just the latest sign that the political centre of the past five decades is under siege. Migration policy is the site of the largest gap between Europeans and their leadership class, with polling data showing that a majority of European voters want an end to migration from Muslim-majority countries even as such a position remains unthinkably extreme in the continent’s halls of power. 

The Austrian vote saw EURUSD head lower overnight to below the 1.18 handle while EURGBP traded largely flat into the European bell. 

The outbreak of conflict in Kurdistan as Iraqi federal troops prepared to take the disputed city of Kirkuk has oil prices higher with Brent crude spiking to a two-week high at $57.90/barrel. 

The oil price gains drove energy shares across the APAC region higher with the S&P/ASX 200’s energy index rising 1.2% while its Hong Kong counterpart gained 0.6%. China's 19th Communist party congress is set to begin Wednesday with markets looking for clues as to Beijing's appetite for reforms and environmental measures.

Market signals

Asian session

  • Sebastian Kurz, 31, has won the Austrian election on a right-wing platform
  • The upbeat close on Wall Street Friday gave Asian investor sentiment a lift
  • China's annual CPI came in as forecast at 1.6% in September; annual PPI was 6.9%
  • China's 19th Party Congress begins on Wednesday
  • The Congress will bring in pollution curbs that impact industries and global commodities
  • Beijing-backed investors are buying stocks, to keep markets stable for the Congress
  • But the Shanghai Composite fell today; it was down 0.19% to 3,384.22 at 0505 GMT
  • Hong Kong's Hang Seng rose; it was up a hefty 0.87% to 28,723.77 at 0505 GMT
  • Japan's Nikkei 225 traded up 0.47% to 21,255.56
  • Crude prices made gains in the US, on a fall in the rig count
  • Oil demand growth will be healthy to 2022: Opec Secretary General Mohammad Barkindo
  • But crude demand growth will slow markedly from 2035 to 2040
  • State-owned oil giant Saudi Aramco says its IPO plans for 2018 are on track
  • The crude giant plans a dual listing on the Saudi exchange and an overseas bourse
  • Spot iron ore prices have gained 4.1%, giving a lift to leading Australian miners
  • Miners lifted the S&P/ASX200, which closed up 0.56% at 5,846.90

Forex ahead

  • USD regained some ground against the yen; it was worth ¥111.76 at 0655 GMT
  • AUD fell below 0.79 after the China data release; it was worth 0.7877 at 0655 GMT
  • Cable trading broadly flat just shy of the 1.33 handle
  • USDCAD dipped to 1.2475 ahead of the European opening bell

From the Floor

Rally to continue. "We remain bullish Japanese and Hong Kong equities", says Peter Garnry

Oil ascendant. "Supply worries centred on Kurdish Iraq and Iran are giving oil a small risk premium this week", says Hansen.

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

In opinion

Crude reality
News headlines are having an impact on oil, with Iran's exports in doubt after moves by Donald Trump and tensions between Baghdad and Kurdistan, says Saxo Capital Markets Australia

China focus
The key focus this week will be China's National Congress along with Japan's elections and the appointment of the Fed chair, writes Kay Van-Petersen in this week's Macro Monday.

The loonie has legs

USDCAD is in a downtrend while prices are below the 1.2600-20 area suggesting that the recent rally is just a correction, says Michael O'Neill.

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Policies adopted by China's Party Congress will affect industries like steel making, which will need to switch to higher grade iron ore and clean energy to curb pollution. Photo: Shutterstock

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