Article / 22 January 2018 at 8:00 GMT

Morning Markets: Shutdown in focus, US yields near the heights

Head of Editorial Content / Saxo Bank
Denmark

Morning Markets


Watchlist

  • Canada: Wholesale sales monthly (0830 GMT)
  • Japan: All industries activity (2330 GMT)

Asian bourses were mixed Monday as the potential impact of the US government shutdown was felt across financial markets. Japan's Nikkei 225, however, was able to eke out a 0.03% rise while Hong Kong's Hang Seng index traded 0.43% higher.

Australia's S&P ASX 200 ended the day 0.23% in the red while South Korea's Kospi declined by 0.72%; in mainland China, the Shanghai Composite gained 0.39%.

The US dollar index tracked modestly higher overnight but remains close to the three-year low set last Wednesday in anticipation of the US shutdown. In forex, USDJPY edged higher in potential anticipation of the Bank of Japan reiterating its commitment towards easy monetary policy while the euro remained steady versus USD as Germany's Social Democrats prepare to vote on a coalition government with Angela Merkel's Christian Democrats.

One major question for FX investors is whether the correlation between US rates and USDJPY will re-establish itself as 10-year US Treasury rates continue to rise; the yield currently trades at 2.648%.

Today sees ZEW economic sentiment data out from Germany at 10:00 GMT and EU FCCI flash consumer confidence figures out at 15:00 GMT.

Market signals

Asian session

  • The market impact of the US government shutdown and its duration are uncertain
  • Moderate senators cite progress in ending the shutdown
  • Confidence among Japanese manufacturers jumped in January to an 11-year high
  • Japan's Tankan sentiment index stood at 35 in January, up from 27 in December
  • Australia's NAB is considering floating its funds management, super and advice business 
  • German political deadlock ends as SPD votes for coalition talks with Angela Merkel
  • US 10-yr Treasury yields spiked on Friday night, hitting levels not seen since May 2014
  • World leaders will meet at the World Economic Forum in Davos, Switzerland, this week
  • Equity markets have largely shrugged off America’s government shutdown drama

Forex ahead

  • NZD held below 0.73 at the local open as investors shrugged off the US shutdown 
  • The USD was steady as the shutdown dragged into a third day 
  • JPY was little changed at 110.80 to the USD
  • GBPUSD was flat at $1.3885

From the Floor

Crisis in Washington. "We need to see the US government shutdown resolved this week or it could become a problem across markets," says Hardy.

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

In opinion

Bank float
National Australia Bank is said to be considering spinning off and floating its funds management, superannuation and financial advice operations, writes Saxo's Sydney trading team.

Fragile ore rebound

Iron ore prices have recovered, thanks to buyer interest emerging in the lead up to the Lunar Chinese New Year, but high inventories are a concern, says Saxo APAC Sales Trading.

Weather watch

Weather upsets this year, some interesting contrarian trade opportunities could open up in agricultural commodities, says Kay Van-Petersen in his Macro Monday column.

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Prime Minister Narendra Modi will highlight India's potential as a driver of the world economy at the WEF summit in Davos, Switzerland, this week. Photo: Shutterstock

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