What could You expect from a trading day when almost all of the major countries have holiday? Well, the actual developments have surpassed expectations. The dollar index went up 0.6% with only CAD and NZD able to stay flat against USD. The 1% increase of DAX and even more on the Italian equity index are also definitely worth mentioning.
Both the US dollar and the main German equity index used the afternoon to extend the gains from the morning. but at at reduced pace. European equities received enough of positive information to move up: strong PMIs from Eurozone member states and no collapse of sentiment in Chinese business - but let’s see if the alternative measure released overnight confirms this.
DAX was one of the hottest markets today. moving up 1% in cash trading and even more on futures contracts (DE30) with most of the move realized within one hour in the morning. The wave of optimism went wide across European equities and the Italian FTSE MIB managed to grow more than 1.7%.
Despite the positive tone of the December PMI releases from Eurozone and its member states EURUSD has fallen below 1.05.
Oil market was inactive today, but it is still worth to keep track of the received supply side news: Kuwait confirmed shutdown of 80-90 oil wells today, . Russia’s December oil output stayed close to post-Soviet highs, so there is plenty of room to deliver the promised 300k b/d reduction, especially that Russia is not obliged to slash output instantly in January.
Tomorrow almost all of the markets will be back and will start from analysing Chinese Caixin PMI for manufacturing. A year ago this index served as one of the triggers for a massive sell-off on global equities. We think that the drop of net speculative positioning on NZD and AUD can be linked to fears that the history will repeat this year
Australian manufacturing PMI will also be out during the Asian session on 10:30 pm offering an opportunity to improve the investors’ sentiment towards AUD.
Judging by positions in the calendar for the whole week it looks like the markets can only get more volatilte, the situation may become quite exciting the closer we get to Friday NFP report (with US ISMs and FOMC minutes out, but also important data from Canada).