The U.S. dollar came under pressure Monday and found it difficult to gain much traction this morning as investors taking profit on U.S assets outweighed concerns about Italy, Brexit and the trade war. Weighing down the dollar were the expanding U.S. deficit and prospects of a halt in Fed's rate hike cycle.
Looking oversees, regional stock markets were mixed overnight as investors await the next wave of corporate earnings and further developments across the aforementioned geopolitical issues.
Oil prices continue to fluctuate within striking distance of recent highs amid tensions between Saudi Arabia and the U.S. over the disappearance of Jamal Khashoggi, a prominent journalist.
With all this in mind, here are five things the global markets were talking about on Tuesday.
1. Stocks Post Mixed Results
In Japan, the Nikkei rebounded overnight, supported by short covering in index heavyweights (automakers and SoftBank), but retailers came under pressure on worries about domestic personal consumption and slowing demand from China. The Nikkei share average closed 1.3 percent higher after tumbling 1.8 percent on Monday.
Australian shares rebounded overnight as well, as mining and financials bounced back from Monday's 6-month low. However, rising tensions between Saudi Arabia and the West and weaker PPI data in China capped broader market gains. The S&P/ASX 200 index rose 0.6 percent. In South Korea, the Kospi stock index closed flat on Tuesday as global uncertainties capped gains during the day.
In China, stocks ended lower after data showed factory-gate inflation had cooled for a third consecutive month in September amid lean domestic demand. The blue-chip CSI300 index ended 0.8 percent weaker, while the Shanghai Composite Index also closed 0.8 percent lower.
2. Oil Dips On Expectations Of Higher U.S. Stocks
Oil prices have eased a tad amid expectations of an increase in U.S. crude inventories, but signs of a fall in Iranian oil exports for October are limiting losses.
Brent crude for December delivery dipped 0.07 percent to $80.72 per barrel, while U.S West Texas Intermediate (WTI) crude for November delivery was down 14c at $71.64 a barrel.
U.S. crude stockpiles are forecasted to have risen for the fourth consecutive week, by about 1.1 million barrels, ahead of reports from the API (due at 4:30 pm on Tuesday) and the EIA (to be released at 10:30 am EDT Wednesday).
Iran exported 1.33 million bpd of crude in the first two weeks of October to countries including India, China and Turkey. That is down from 1.6 million bpd during the same period in September.
3. German Bund Yields Edge Higher
A cautious, risk-on mood currently prevailed in the Eurozone sovereign bond markets Tuesday morning, with yields of German Bunds and of other core Eurozone bonds up as Italian bond yields moved lower.
This suggests that market risk sentiment may be improving following last week's sudden correction, but the balance remains a tad precarious in the current political environment. German 10-year Bund yield has backed up 1.4 bps to 0.51 percent.
4. G7 Currency Pairs Were Little Changed
Major currencies (€, £, ¥ and C$) were relatively unchanged ahead of the U.S. open.
Dealers and investors have little technical or fundamental data to work with at current levels. In fact, the market is looking for guidance that may come in the shape of the U.S. Treasury forex report, which is likely to be released this week. Traders are noting that the U.S. could officially name China a currency manipulator.
If the U.S. were to name China a currency manipulator, it could further pressure China on trade and add to the exisiting tensions.
The performance of several petro-forex (NOK, CAD, RUB) was been held back due to various unique factors that have not translated into a growth boost for these currencies. For example, the ruble has been driven by U.S. sanctions, and the Canadian dollar has been held back by NAFTA re-negotiations.
The Turkish Lira retreated after seven days of gains after the country released U.S. pastor Andrew Brunson on Friday.
5. U.K Wage Growth Fastest In A Decade
U.K. data this morning showed that wage growth quickened over the summer at the fastest pace in almost a decade, adding to signs of inflationary pressure.
The ONS said that average weekly earnings in Britain, ex-bonuses, grew 3.1 percent in the three months through August.
The figures will likely reinforce market expectations that the Bank of England will remains on course tighten monetary policy over the next 24 months to keep overall price-growth in check, assuming Brexit goes well.
Other data showed that U.K unemployment in the previous three months was unchangedat 4 percent, while the number of people in work, 32.4 million, remained close to its record high.
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