While today’s key news event will be the preannounced latest, third, round of anti-Russian sanctions and the Russian retaliation, the reality as DB notes, is that the market seems to be seeing “some fatigue” in this story with the ECB, Scotland and next week’s Fed meeting taking center stage. As a result, and ahead of expectations of change in Fed language which should carry a more hawkish tone, the dollar has been bid up some more overnight, leading to fresh multi-year highs in the USDJPY, and the now-paired TSY trade, with 10Y yields up to 2.57%, although this may now be in short-term oversold territory. The latest Scottish poll appears to have dented some of the “Yes” momentum, with 52% of the polled saying they would vote No in the referendum, although right now neither side has a clear majority when factoring in the undecideds: which means it will come down to the wire next week, with clear implications for Europe’s secessionist movements if the Yes vote still manages to prevail, not to mention massive ramifications for the UK.
Overnight in Asia, China’s latest lending data was released. China’s credit growth rebounded sharply in August following a weak July. New loans in August came in at RMB702.5bn up from RMB385.2bn in July and was around market consensus. M2 was up 12.8pct yoy, lower than the 13.5yoy growth in July (and consensus) but this was previewed by Premier Li’s speech earlier this week. Markets are range bound in the Asia with the Nikkei up 0.4% and the Shanghai Composite up 0.2% although the Hang Seng is down -0.3%. MSCI Asia Pacific down 0.2% to 146. Nikkei 225 up 0.2%, Hang Seng down 0.3%, Kospi up 0.4%, Shanghai Composite up 0.9%, ASX down 0.3%, Sensex up 0%
European equities trade mixed, with minor outperformance in both the FTSE-100 and the IBEX-35 as recent independence campaigns from Scotland and Catalonia lose some steam. Yesterday’s YouGov poll showed Salmond’s Independence bid only briefly holding the lead over the ‘No’ vote, as unionists reclaimed the top spot just six days away from referendum polling. Nonetheless, Spain’s IBEX-35 has suffered throughout the week on Catalonia’s break-up bid, with today’s upside only trimming the weekly losses to 2.2%. 14 out of 19 Stoxx 600 sectors rise. 55.7% of Stoxx 600 members gain, 41.2% decline. Eurostoxx 50 -0.1%, FTSE 100 0.2%, CAC 40 -0.2%, DAX -0.3%, IBEX 0.3%, FTSEMIB 0%, SMI -0.3%.
Looking to the day ahead, in Europe we have the Spanish August inflation read (expected in at 0.1% MoM), Italian and euro area July Industrial Production (expected in at -0.2% and 0.7% MoM). In the US we have August Retail Sales reads with the advanced MoM expected in at 0.6%, the September UoM Confidence read (expected at 83.3) and July Business Inventories data (expected in at 0.4%). In geopolitics, today sees the strengthened EU sanctions on Russia take effect. Implementation had been delayed in light of the ceasefire announcements last week but yesterday leaders and diplomats agreed to now bring them in. The US looks set to follow suit and President Obama yesterday said he would provide more details today. We seem to be seeing some fatigue in this story with the ECB, Scotland and next week’s Fed meeting taking center stage. However the regions problems are clearly yet to be resolved and the aim of bringing in the new sanctions today is to keep up pressure on Russia (BBC). Russia has said it is preparing its own sanctions in response.
This post was published at Zero Hedge on 09/12/2014.