Lloyds Buys MBNA for £1.9bn, while European Markets Struggle after Berlin Terrorist Attack
Unlike yesterday, there are quite a few economic releases lined up across the globe today. Starting with the Eurozone, data from the European Central Bank showed that the region’s current account surplus widened in October. Moving to Germany, the nation’s monthly producer price index (PPI) rose at a faster pace than expected in November, while the annual PPI rebounded for the first time in three and a half years. Going ahead in the day, UK’s economic docket features the release of the Confederation of British Industry distributive trades survey scheduled in a short while. The US economic calendar is data empty today.
Yesterday, the Federal Reserve (Fed) Chairwoman, Janet Yellen, expressed confidence in US labour market and suggested a pick-up in wage growth.
Pound Sterling – UK Markets
The Pound ended lower against the greenback yesterday after registering an initial rise, following comments from UK Prime Minister, Theresa May. She indicated that the nation could continue funding into the European Union (EU) budget even after Britain officially exits from the union. Additionally, she maintained that the time table for officially beginning the Brexit process in March remains in place, even if the Supreme Court does not pass a ruling in favour of the UK Government. In further news flow emanating from Brexit developments, Secretary of State for Trade, Liam Fox, highlighted that the country may require a transitional deal with the EU, although he was cautious over signing up for too many regulations.
Today, market participants will keep a watch on CBI’s retailing reported sales due for release in a few hours. The report is expected to reveal a dip in the sales balance in December. Separately, the British Prime Minister, Theresa May is set to speak in front of the Liaison Committee, as she will be pressured by senior MP’s to give in further details regarding her Brexit plans.
Lloyds Banking Group is up 0.5% after its £1.9bn deal to buy credit card issuer MBNA. With 7m clients and gross value of £7bn, this is the bank’s biggest acquisition since the financial crisis.
US Dollar – US Markets
The US Dollar strengthened against most of its major peers yesterday, after the Fed Chairwoman, Janet Yellen, stated that economic gains are finally raising living standards for most Americans as an improvement in the nation’s labour market contributes to higher wage growth. Meanwhile, the preliminary Markit services PMI in the US unexpectedly declined in December, dampening optimism over the health of the nation’s economy. Also, a report indicated that despite the fact that business activity growth eased to a 3-month low in December, there was a healthy improvement in new work and job creation which hit a 9-month high.
The greenback is trading higher against the Pound and the Euro this morning. Market participants will keenly focus on the US GDP, durable goods orders and weekly jobless claims data along with the consumer sentiment index, scheduled to be released later in the week. The US annualised GDP is expected to advance for the third quarter of 2016.
Euro – European Markets
After a truck ploughed into Berlin’s Christmas market at Breitscheidplatz, killing 12 people and injuring 48 more on Monday night, in what has been described as a “presumed terrorist attack,” European markets are struggling at the start of trading. The Euro is also trading lower against its major counterparts this morning. The FTSE 100 is down 0.04%, Germany’s Dax has dipped 0.04% and France’s Cac is 0.03% lower.
Data released early today showed that German producer prices topped market estimates on a monthly basis in November, with the annual figure witnessing a rebound for the first time in almost three and a half years. In addition to this, the Eurozone’s current account surplus surprisingly widened in October. With no economic releases on the board today, investors will look forward to the region’s consumer confidence data, to be released tomorrow.
Yesterday, the shared currency ended weaker against its major peers. Figures from Eurostat showed that Eurozone’s seasonally adjusted construction output rebounded in October after posting a drop in the previous month, which was the first decline in six months. Meanwhile, the Bundesbank in its monthly report, stated that Germany’s economic growth is likely to be substantially higher in the last quarter of this year. Furthermore, inflation in the country is expected to exceed crucial 1.0% in December on the back of higher oil prices.
Other Currencies – Highlights
The Japanese Yen is trading lower against the US Dollar this morning. The Bank of Japan (BoJ), at the end of its two-day monetary policy meeting, kept its key interest rate unchanged at -0.10%, at par with market expectations. In the statement accompanying the rate decision, the BoJ offered a more optimistic view of the economy, strengthening market expectations that its future policy direction could be an increase in interest rates rather than a rate cut. However, the central bank cautioned that inflation expectations remain weak and risks to the outlook abound, ranging from developments in the Chinese and US economies to Brexit and geopolitical uncertainties. On the data front, Japan’s nationwide department store sales declined on a yearly basis in November, while the nation’s convenience store sales climbed in the same month. Data indicated that Japan’s adjusted merchandise trade surplus expanded in November.
Looking ahead, market participants would eye the all industry activity index, scheduled to release tomorrow.