Market participants will be keeping an eye on the crucial political conditions in Portugal following the collapse of the government in the country. Portugal’s 10-yr bond yield hit a 5-month high as it widened to 2.85% yesterday, while Portuguese CDS trading volumes remain fairly muted despite their surging spreads. Thus, it seems that political uncertainty continues to dominate Eurozone, adding pressure to the euro which has been hovering around 1.0750 against the USD. The Greek debt crisis dominated the first half of 2015, causing extensive volatility and nervous trading conditions. It seems Portugal’s uncertainty is likely to dominate the markets during the following weeks for the rest of 2015, until the political situation stabilises.
We received fairly mixed Chinese economic data. Retail sales surged 11% y/y in October, beating analysts’ expectations of 10.9%, while industrial production rose 5.6% y/y in October compared to 5.7% in September. Furthermore, China’s foreign direct investments rose 4.2% y/y in October, missing estimates of a 5.0% rise. The Hang Seng index received further pressure for fifth consecutive session after retreating towards 22,300. On the other hand, the Shanghai Composite Index edged higher (+0.30%) to retest 3,650. Base metal prices remained under pressure in early trade as disappointing Chinese industrial data weighed on market sentiment and raised renewed concerns over a slowdown of demand from Asia.
European economies opened higher this morning and posted robust gains in early trade with the DAX, CAC, IBEX and London equity benchmark indices climbing between 0.50% and 0.85%. Portugal’s PSI General index rebounded from recent losses and edged higher by 0.75% towards 2470. On the macroeconomic front, Germany’s wholesale price index declined 0.4% m/m in October compared to a -0.6% drop in September.
The USD index seems to be running out of steam after hovering around 99.0 against a basket of currencies during the last few trading sessions but failing to breach above the 100.0 key resistance level. The US markets will be closed today for the Veteran’s Day public holiday, so we expect muted volumes.
Crude oil prices came under renewed pressure this morning, as bearish fundamentals, a strong US dollar and persistent concerns over global supply glut weigh on market sentiment. WTI front month futures retreated over 1.0% towards $43.50 per barrel while Brent futures dropped towards $47 per barrel.