Trade Talks To Dictate Next Dollar Move: 5 Things The Global Markets Are Talking About Today

For now, trade negotiations remain the dominant theme for market moves as uncertainty over how Canada will respond to Monday's "non-ratified agreement" between the U.S and Mexico.

U.S.-Canada talks are underway and a failure to agree over the new bilateral terms set with Mexico could mean tariffs rising on exports such as automobiles. However, there are reports that Canada is ready to make concessions on its dairy market to be included in any North American trade deal.

For the U.S., time constraints are an issue, with the midterms in November; there is a 90-day period for Congress to be consulted on any decision to disband NAFTA.

Some European bourses and U.S. equities were trading in the green after a lackluster Asian session. G10 currency pairs are again confined to a relatively tight trading range. The Euro has lost some of its lustre after the Italian government was said to be asking the European Central Bank to pass a new program of bond purchases to protect the third largest European economy its debts.

With all this in mind, here are five things the global markets were talking about Wednesday morning.

1. Stocks Mixed Globally

In Japan, the Nikkei rallied overnight for the seventh consecutive session as tech stocks advanced along with their stateside counterparts. The Nikkei ended the day up 0.15 percent, while the broader Topix rallied 0.46 percent.

Down-under, Australian shares also moved higher, supported mostly by the financials and the tech sector. The S&P/ASX 200 index rose 0.8 percent. The benchmark added 0.6 percent on Tuesday. In South Korea, the Kospi stock index rose 0.26 percent on positive sentiment about the U.S.-Mexico trade deal, but concerns over the U.S.-China tariff war capped gains.

In Hong Kong, stocks rallied overnight, supported by property developers, but concerns for trade and economic growth in China put pressure on the Hang Seng's China Enterprises index. At close of trade, the index was up 0.23 percent, while the Hang Seng China Enterprises index fell 0.13 percent.

Stocks fell in China as state planners warned of more risks to growth in the second half of 2018. The blue-chip CSI300 index fell 0.4 percent, while the Shanghai Composite Index ended down 0.3 percent.

In Europe, regional bourses traded mixed in another quiet day ahead of the Labor Day weekend in the U.S.

2. Oil Slips On Rising U.S Supply, Venezuela Investment

Oil prices are under pressure, pulled down by a rise in U.S. inventories and hopes that new investment could halt a plunge in Venezuela's output. Brent crude oil is down 20c at $75.75 a barrel, while U.S. light crude is 10c lower at $68.43 a barrel.

There are reports of potential investment in Venezuela's struggling oil production is also affecting markets. Note, Venezuelan crude exports have been reduced by 50 percent in 24 months to below 1 million barrels per day.

API data on Tuesday showed that U.S. crude inventories rose by 38,000 barrels to 405.7 million barrels in the week ending August 24. The market had been expecting a headline drawdown.

3. BTP Yields Fall On Report That Italy May Ask For More QE

Italian bond yields fell 4-5 bps ahead of the U.S. open on reports that Italy may reach out to the ECB for help. According to local sources, the Italian government plans to reach out to the ECB for a new round of quantitative easing (QE) to avoid a ratings downgrade.

Note: Italy has been searching for allies to support its bonds in recent weeks, with the U.S. and China voicing concern about a recent widening in Italy's bond yield spread over Eurozone peers.

Italian 2-year BTP yields are down 5 bps at 1.24 percent, while its 10-year BTP yield fell 3 bps to 3.15 percent, narrowing the gap over German Bund yields to 277 bps from Tuesday's 280 bps.

In Germany, the 10-year Bund yield was unchanged at 0.38 percent — the highest in three-weeks — while the U.K.'s 10-year Gilt yield declined 1 bps to 1.449 percent, the largest fall in more than a week.

4. The Dollar Shines For Now

EUR/USD has moved back below the €1.17 handle as concerns on Italy continued to simmer. The EUR's move higher over the past fortnight (€1.13 to €1.17) removed all the pricing of political and economic risks from Turkey and the rest of emerging markets. The situation in Turkey has not changed — TRY continues to fall €7.4320 — but it seems the market has taken the view that European banks do not have too much debt exposure to Turkey. The EUR is also on firmer footing because the dollar has not found that "safe haven" support on global trade worries.

GBP/USD is steady but holding below the psychological £1.29 level despite U.K. and E.U. officials now see mid-November as the new Brexit deal deadline rather than October. Delays could present timetable challenges to ratifying the Brexit terms by March 29, 2019.

Elsewhere, the CAD advanced after a report indicated that Prime Minister Justin Trudeau is ready to make concessions on its dairy market to be included in any North American trade deal.

5. French Consumer Spending Growth Slows

Data Wednesday morning showed that growth in French consumer spending slowed last month but by less than expected, as households spent more on food and clothing.

According to Insee, a French statistics agency, consumer spending rose just 0.1 percent on the month after revised figures showed a 0.3 percent increase in June. The market was expecting a headline print of a month-to-month decrease of 0.2 percent in July.

Digging deeper, energy spending declined 0.2 percent primarily because of a drop in gasoline purchases, while household durable goods fell 0.8 percent, with a drop in TV purchases after the end of the soccer World Cup. But those declines were offset by a 0.2 percent increase in food spending, as well as a 0.4 percent rise in clothing purchases.

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