Market Overview

U.S. Safe-Haven Appeal Is Diminishing: 5 Things The Global Markets Are Talking About Today


Fundamentals have been temporarily ignored as the "lemming traders" take a grip.

Fading market fears over the U.S.-China trade war has the dollar within striking distance of its 2-month lows. Even emerging market currency pairs have found some traction after China said it would not retaliate with competitive currency devaluations.

Global equities are beginning to struggle as U.S. yields approach their highest level this year.

In Europe, U.K. consumer spending remains buoyant despite Brexit uncertainties. Norway raised interest rates for the first time in seven years and Switzerland kept rates on hold.

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

1. Asian Stocks Post Mixed Results

In Japan, the Nikkei ended little changed overnight as an extended rally in financial sector was largely offset by profit taking after this weeks rally. The Nikkei ticked up 0.01 percent, just staying in positive territory for the fifth consecutive session. The broader Topix added 0.11 percent.

Australian shares slipped overnight, led lower by banks and consumer staples as investors shifted funds to emerging markets as they became less worried about a U.S.-China trade war. The S&P/ASX 200 index fell 0.3 percent at the close of trade. The benchmark gained 0.5 percent on Wednesday. In South Korea, the Kospi index rallied 0.65 percent, supported again mostly by Samsung.

Stocks in China fell overnight, as investor sentiment remained fragile following the latest hit of tariffs in the trade war. At the close, the Shanghai Composite index and the blue-chip CSI300 index were both down 0.1 percent.

In Hong Kong, there were mixed results as some investors held on to hopes that China and the U.S. would eventually reach an agreement to avert an all-out trade war. The Hang Seng Index rose 0.26 percent, while the Shanghai Composite Index slipped 0.06 percent.

2. Oil Steady, Supported By U.S. Stocks

Oil prices are trading steady, nevertheless, the market remains a tad more bullish following this week's U.S. crude inventory reports and signs that OPEC may not raise production enough to compensate for the loss of Iranian exports hit by U.S. sanctions.

Brent has been trading below $80 for the past week after conflicting reports of the market views of Saudi Arabia, the biggest producer in OPEC. The Saudis want oil to stay between $70 and $80 a barrel for now, seeking a balance between maximizing revenue and keeping a lid on prices until U.S. midterms. However, giving the market a bid undertone were reports Wednesday indicating that the Saudi's were happy with prices above $80 a barrel.

EIA data Wednesday showed that U.S. crude oil stockpiles fell for a fifth consecutive week to a 3-year low, while gas stocks also showed a larger-than-expected draw on unseasonably strong demand. Crude inventories fell by 2.1 million barrels, compared with expectations for a decrease of 2.7 million.

3. Norway Hikes Rates For The First Time In 7 Years

Norway's central bank hiked its key interest rate for the first time in more than seven years on Thursday morning. Norges Bank increased the rate to 0.75 percent from 0.5 percent.

The central bank said another rate increase is likely in the first three months of next year, with a gradual series of moves taking it to 2 percent by the end of 2021.

"If the key policy rate is kept at the current level for too long, price and wage inflation may accelerate and financial imbalances build up further," said Governor Olsen. "That would increase the risk of a sharp economic downturn further out."

Sweden has also indicated that it may raise its key rate before the end of the year, while the ECB plans to end QE in December.

Elsewhere, the Swiss National Bank (SNB) kept its deposit rate at -0.75 percent, as expected. The accompanying statement painted two different pictures: the negative rate and willingness to intervene in forex markets "remain essential in order to keep the attractiveness of CHF low and thus ease pressure on the currency," but policy makers also painted a brighter economic future and raised its 2018 GDP forecast to between 2.5-3%.

4. Dollar Drops

The CHF is a tad weaker after the Swiss National Bank (SNB) left rates on hold. The fact that the franc remains "highly valued and has appreciated noticeably" has investors wary of the bank's next moves.

EUR/NOK initially fell following the Norges rate hike, but has since reversed and was trading down 1 percent outright after the bank cut its policy rate forecasts.

GBP/USD has rallied sharply, again testing Wednesday's intraday highs, on Brexit talk and on stronger than expected U.K. retail sales (see below).

5. U.K. Retail Sales Slowed

Data released Thursday morning showed that U.K. retail sales slowed in August, but continued to point to buoyant consumer spending in Q3, suggesting that the economy has kept expanding despite uncertainty over Brexit.

According to the ONS, U.K. retail sales rose 0.3 percent on month in August, after a revised 0.9 percent rise in July.

Digging deeper, consumer spending continues to power the British economy as sales increased across most store categories with the exception of food and clothing outlets.

But, given the high inflation, low wage growth and rising interest rates, traders are wondering: is it sustainable? Uncertainty over the U.K's future continues to deter investment.

Related Links:

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: News Emerging Markets Eurozone Commodities Forex Treasuries Global Econ #s


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