Stocks Rebound After Frightful Previous Session
After a frightful sell off in the previous session, equities are on the rebound today. We expect the big swings in the market to continue. Wall Street slumped across the board in early trade but bargain hunters made an appearance later in the session. That picked indices off the lows into the close.
Flows into safe havens also eased with the US dollar moving higher versus the yen overnight, a sign that this shake out could be over. Sentiment is clearly very fragile at the moment meaning that this is unlikely to be the last erratic session.
Oil Regains some lost ground
Oil was on the rise after diving over 4.5% on Tuesday. The selloff came after Saudi Arabia confirmed that it would keep oil markets well supplied during upcoming supply disruptions, namely US sanctions on Iran. The promise of more oil to the markets from the Saudi’s sent oil tumbling.
Today investors are switching their focus back to the US - Iran sanctions and the expected tightening of market conditions.
BoC hike expected
The Canadian dollar remained resilient versus the dollar, despite the heavy sell off in oil. Investors are broadly expecting the Bank of Canada to raise interest rates today by 25 basis points, which is offering support to the currency.
Pound steady as Theresa May to face 1922 Committee
The pound managed to close higher versus the euro and the dollar in the previous session and has continued to rebound overnight. A shift in tone from the EU over the Irish backstop calmed pound traders after heavy selling at the start of the week. The EU is reportedly trying to help Theresa May around the backstop issue which threatens her fragile hold on power - and a Brexit deal being made. Theresa May will face her backbenchers today as she appears before the so called “1922 Committee” in an attempt to win them over.
Theresa May is no longer expected to be ousted imminently but she will have her work cut out. The pound markets will be watching her performance closely, with unverified reports circulating that she is just a handful of letters away from a vote of no confidence. The pound continues to trade below $1.30 indicating a high level of nervousness.
Eurozone PMI’s in focus
The euro remained resilient overnight after Brussels rejected Italy’s budget proposal. With three weeks to wait until Rome must submit a new spending proposal, traders will switch their attention back towards the economic calendar prior to Thursday’s ECB meeting.
Eurozone PMI’s are expected to show a marginal slowing in activity from September. Any surprises to the downside could the euro target $1.400.
Opening calls
FTSE to open 69 points higher at 7024
DAX to open 152 points higher at 11426
CAC to open 77 points higher at 5044