European Closing Report 05 Apr 2018

Risk sentiment is firmly on the front at the European close as fears of a global trade war continue to recede.

European Closing Report (by Sigma Squawk)

US officials have struck a more conciliatory tone in their dispute with China over the last twenty-four hours and signalled a willingness to negotiate before the proposed import tariffs are introduced. 

European cash equity markets are therefore firmly in the green with the Euro Stoxx 600 hitting a two-week high in the latter stages of the session; basic resources are leading gains while the German banking sector received a boost after regulators warned against large mergers. 

Wall Street has also opened higher, adding to yesterday’s sizeable gains with US government bond yields and the US Dollar following suit. US assets received a further boost after rating agency Fitch affirmed the US AAA rating with a stable outlook. They did warn however that rising deficits and debt could eventually test credit strengths, in the absence of reform. 

Elsewhere in FX, the Japanese Yen has slipped to the bottom of the G10 pile amid the resurgence in risk while Sterling is still on the back foot after a soft service PMI print earlier today. 

Data wise, the US trade deficit widened again in March to -$57.6 Bln (f/c. -$56.8 Bln) from -$56.7 Bln while jobless claims rose to 242K (f/c. 225K) from 218K. The Atlanta Fed GDPNow tracker was later cut to +2.3% from +2.8%. Still to come today, possible comments from the SNB’s Maechler and Moser at 17:00 BST and Atlanta Fed President Bostic at 18:00 BST.

Key Headlines/Data:

* US Corporate News:
– American Express (%): Citigroup starts with a buy ratings.
– Facebook (%): CEO Zuckerberg says data scandal has had no meaningful impact

* EU Brexit Minister Barnier said he wants to have as close a relationship with the UK as possible post-Brexit.

* Lega Nord leader Salvini said the centre right coalition and Five Star Movement need to be a part of the new Italian government. He said they are aiming at a five year long government although would not rule out new elections. He also said they aim to push back against the policies of Macron and Merkel in the EU

* Rating agency S&P said the US-China trade dispute is still a skirmish but credit risks are rising.

* US Jobless Claims (Mar 31) 242K versus 225K expected, previous 215K revised to 218K
– Continuing Claims (Mar 24) 1.808 Mln versus 1.849 Mln expected, previous 1.871 Mln revised to 1.872 Mln.

* Canadian Trade Balance (Mar) -C$2.69 Bln versus -C$2.10 Bln expected, previous -C$1.91 Bln revised to -C$1.94 Bln.

* US Trade Balance (Mar) -$57.6 Bln versus -$56.8 Bln expected, previous -$56.6 Bln revised to -$56.7 Bln.

* White House adviser Kudlow said they will keep an eye on the US Dollar. He said three-to-four percent growth is possible and they could reach five-percent for a short period. He also said any second tax reform plan is not likely to be immediate, adding he expects to see something more concrete on phase-two of tax reform next year.

* Atlanta Fed GDPNow (Q1) revised lower to +2.3% from +2.8%

* Canadian PM Trudeau says NAFTA talks are progressing in a significant way.

* White House Trade advisor Navarro said there vision on trade is to erase unfair imbalances and move to free trade. He added that USTR Lighthizer and Treasury Secretary Mnuchin will talk to China on trade.

* Fitch Affirms U.S. at ‘AAA’; Outlook Stable:
– The U.S. sovereign rating is supported by structural strengths including the size of the economy, high per capita income, and a dynamic business environment.
– The U.S. benefits from issuing the dollar, the world’s preeminent reserve currency, and from extraordinary financing flexibility given that the U.S. Treasury market is the deepest and most liquid asset market in the world.
– While there has been a recent loosening in fiscal policy, Fitch considers debt tolerance to be higher than that of other sovereigns. However, rising deficits and debt could eventually test these credit strengths, in the absence of reform.

* Five Star Movement leader Di Maio reiterated his proposal for a German style contract on a coalition government with either the League or PD.

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European Midday/US Morning Report 05 Apr 2018


US Closing Report 05 Apr 2018

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