There is a cautious look to major markets this morning. Wall Street markets fell away late into yesterday’s close and this is leaving a bitter taste in the mouths of equities traders early today. A risk negative bias is threatening through US bond markets as a “bull flattening” is emerging. With longer dated yields (associated with growth and inflation expectations) are falling more than shorter dated yields (which are fairly anchored now on expectations of Fed tinkering with yield curve control). This could begin to weigh on equities if it continues. Forex markets have been choppy in recent days, with false moves seen on major pairs and increasingly ranging configuration. The UK has a bit of focus into today. Sterling has been boosted in the past 24 hours from a more constructive dialogue over the Brexit trade deal talks. UK Chancellor Sunak is also set to announce further fiscal support today. Whether this is all enough to make a sustainable difference to sterling, with forex pairs seemingly stuck ranging, remains to be seen. One other key mover is a breakout on gold to multi-year highs, as it closes in on $1800 for the first time since 2011. Daily drip feed of risk negative newsflow on rising COVID-19 reinfection rates, economy re-openings paused and snipping between the US and China over Hong Kong, all play into a stronger outlook for gold.
Wall Street fell into the close last night to leave the S&P 500 ending the session -1.1% at 3145. US futures are all but flat today with the E-mini S&Ps -0.1%. This has left Asian markets mixed, with the Nikkei -0.8% but the Shanghai Composite has climbed another +2.2%. European look set for a mildly negative early session, with FTSE futures -0.8% and DAX futures -0.7%. In forex, there is little direction, aside from a mild underperformance from AUD and NZD along with risk aversion. In commodities, gold and silver are consolidating, whilst oil is a shade lower by around half a percent.
It is a quiet day for the economic calendar today. The EIA Crude Oil Inventories at 1530BST are the only significant release. Oil stocks are expected to drawdown by another -3.4m barrels (after last week’s surprise -7.2m barrels of drawdown).