Global stock indices experienced a recovery session yesterday as some risk appetite came back to the market. The Nikkei led the way in the Asian session as it gained over 2% on the day and we saw healthy returns during the London and New York sessions although not to the same extent. The dollar appreciated well over the course of the day with the Dxy trading up at 96.80 at the start of the Asian session. The pound remains relatively well bid against both the dollar and the Euro with a big day ahead as parliament looks to examine new Brexit exit strategies. In the commodities space Oil drove higher on confirmation from Russia that it will meet it’s supply cut targets with WTI back up to $60/b and Gold dropped back from monthly highs as risk aversion abated.
Markets did appear to calm over the course of yesterdays trading day after a few days of strong defensive moves across the products. The barometer US 10 year treasury yield regained some ground and is trading near 2.42% as we enter the Asian session but still looks relatively volatile. The global growth and data concerns that drove the downside moves over the last few days are still with us and investors will be looking for fresh reasons for the market to rally further over the next few sessions. Attention will start to move to Beijing as we progress through the week and the latest meeting of Chinese and US officials as they attempt to thrash out a trade deal. If we start to see any progress on that front we may see the market rally strongly, however if any firm resolution continues to seem far from either sides grasp then it’s likely that the volatility and pain that we saw on Friday will return to the market and those moves could be exacerbated.
Looking ahead to today’s trading and the main focus for the Asian session will be the RBNZ rate announcement and statement at the new, much more market friendly time of 2pm NZ. Once again, no rate change is expected but investors will be looking for any change of outlook from the bank, some participants are looking for a more dovish perspective in line with the rest of the global central bank community. The London time zone is once again set to be dominated by Brexit updates as parliament meets to vote on alternative exit strategies but attention will also move across the channel with ECB President Draghi set to speak in Frankfurt. There’s not significant data releases in the US session but expect investors to continue to monitor news wires closely and maintain a close eye on those pending trade talks in Beijing.