November 12, 2019 / 8:47 AM / 25 days ago

Daily Briefing: Trump speaks, sterling pops

LONDON (Reuters) - A gloomy start to the week for global markets turned a bit brighter overnight before U.S. President Donald Trump’s scheduled speech to the Economic Club of New York late on Tuesday, amid hopes for signs of a breakthrough in the U.S.-China trade war.

U.S. President Donald Trump delivers remarks at a Veterans Day Parade and Wreath Laying ceremony in Manhattan, November 11, 2019. REUTERS/Andrew Kelly

Trump is expected to speak about lunchtime in New York, just as European markets are closing, and the tone of the speech on trade will be important after he threw cold water at the weekend on speculation the U.S. had agreed to roll back tariffs against Chinese goods during phase one of a trade agreement early next month.

The market mood was also helped by reports Trump will announce this week a six-month delay to a decision on imposing additional tariffs on imported autos from European Union. Some of those reports said the move would come amid promises from European carmakers to invest and hire more in the United States.

The trade hopes outweighed another chaotic day on Hong Kong’s streets, where flash mobs sprang up in the heart of the financial centre after police fired tear gas at a university campus and territory-wide transport disruptions wreaked commuter havoc in the Chinese-ruled city.

Riot police detain a protester as they standoff with unniversity students at the Chinese University of Hong Kong, November 12, 2019. REUTERS/Tyrone Siu

After a flat overnight session for Wall Street markets, Asia’s major stock markets pushed higher following Monday’s Hong Kong-related shakeout. Hong Kong’s Hang Seng index was up 0.4% after losing almost 3% yesterday. Shanghai was up 0.2%, following a drop of nearly 2% on Monday.

Tokyo and Seoul equity benchmarks gained about 0.8% each. Japan’s yen slipped back to its weakest in almost two weeks against the dollar. China’s offshore yuan gained on the trade hopes. The re-opening of U.S. Treasury trading saw 10-year yields push back up toward three-month highs and the yield curve from three months to 10 years steepening to its highest this year.

Sterling was the other big mover on Monday, jumping to a six-month high against the euro after the UK’s Brexit Party leader Nigel Farage said the party would not field candidates in next month’s election against PM Boris Johnson’s Conservative Party in seats where the latter already had a majority.

That gave Johnson a better chance of winning an overall majority as the hard-line pro-Brexit party would be expected to take votes from the opposition Labour party instead. Johnson is still committed to pushing his recently negotiated Brexit deal with the European Union through parliament by the end of January if he wins.

However, many political  analysts said the net effect of the Brexit party’s move may be less than it seems because it still threatens to take votes from the Conservatives in key Labour seats it needs to get a parliamentary majority.

In addition, UK gross domestic product data for the third quarter came in below forecasts, although the country dodged a technical recession in the quarter. A break lower in euro/sterling followed almost a month in which the pair had flattened in a range of not much more than 1 cent.

The sterling rally against the dollar left it back at levels seen last week. All eyes in UK markets now switch to a UK employment report later in the day. Markets are also homing in on Thursday’s congressional testimony from the U.S. Federal Reserve Chairman Jerome Powell.

Elsewhere, the New Zealand dollar weakened by as much as 0.6% after the Reserve Bank of New Zealand’s quarterly survey of inflation expectations.

In emerging markets, Turkey's lira fell after EU foreign ministers agreed on Monday to economic sanctions over Turkey's drilling off the coast of Cyprus. President Tayyip Erdogan is expected to hold a news conference before his departure for Washington on a visit for talks with Trump.

The Russian rouble gained 0.1% on Tuesday and stock indexes rose, pricing in higher oil prices. In Lebanon, banks in Beirut and other areas will close on Tuesday after one of the country’s largest unions called a strike.

In European corporate news, Deutsche Post DHL's earnings pushed its stock up 1.5% after it reported third-quarter operating profit almost tripled and said it expected a strong fourth quarter. Uniper was up 3.5% after saying it expects a strong end to the financial year.

United Internet and Evotec were expected to rise after their results. UK aerospace supplier Meggitt was expected to rise 4% to 5% after raising its outlook for annual organic revenue growth, although it warned of pressure on its margins because of the grounding of Boeing's 737 MAX.

Vodafone was expected to rise 3% to 4% after raising its earnings guidance. Dialog Semi was up 3.5% after raising its long-term margins guidance. Infineon forecast slower growth in the year ahead, describing the economic environment as "fraught with uncertainty".

Alibaba data showed the Singles' Day shopping blitz in China brought in a record 268.4 billion yuan ($38.4 billion) in sales, more than six times the amount of online sales made in the United States on Black Friday last year.

— A look at the day ahead from EMEA Markets Editor Mike Dolan. The views expressed are his own —

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