(A look at the day ahead from EMEA markets editor Mike Dolan.
The views expressed are his own.)
By Mike Dolan
LONDON, Jan 9 (Reuters) - A chance to start the year again,
perhaps? World markets have come full circle, and then some,
since the jolt last Friday from the U.S. killing of a top
Iranian commander and Tehran’s reprisal attack on U.S. troops at
bases in Iraq on Tuesday. Fears of full-scale war between the
two sides subsided yesterday as U.S. President Donald Trump and
Iranian leaders appeared to downplay any further action, with
Washington opting for tougher economic sanctions rather than
another military strike.
The result was a full reversal of the oil price gains of the
past few days, with Brent crude dropping back below $66 per
barrel to its lowest since mid-December. That’s where it sits
early on Thursday, almost 9% below Tuesday's peak. The volte
face occurred across other financial markets, too, with Wall
Street’s S&P 500 rallying to record highs last night, putting it
up 0.7% for the year to date. The so-called five-day rule -- the
S&P 500 has ended the year higher in 80% of the past 60 years
when it closed in the black on the first five trading days –
will encourage some investors. Safe havens such as Japan’s yen
fell, with dollar/yen back above 109 for the first time since
Dec 30. U.S. Treasuries also gave back gains, with 10-year
yields climbing back to 1.88% for the first time since last
Thursday. More broadly, MSCI’s all-country stock index is now up
0.5% for the year so far. Asia markets kept the rally going
earlier, with Tokyo’s Nikkei up more than 2% and Shanghai, Hong
Kong and Seoul all up 1% or more.
China’s offshore yuan reached its strongest levels since
August as attention switched back to the trade war détente
between Washington and Beijing and next week’s expected signing
of the Phase 1 trade agreement between the two countries. Adding
to the optimism and the broad rally of the U.S. dollar, U.S.
private-sector job creation last month came in above forecasts
and the ADP payrolls rise for December was some 220,000. The
national monthly employment report is out tomorrow. There was
also some relief in German industrial data on Thursday, with
industrial production in November beating forecasts and clocking
its biggest monthly rise in 18 months, offsetting disappointing
orders data from Wednesday. November German trade numbers were
less rosy though, with exports, imports and the trade surplus
all below consensus expectations, although the numbers pre-date
the year-end trade deal between the United States and China.
Euro/dollar was lower first thing, just above $1.11. Borrowing
costs in the euro area were higher this morning, reflecting the
relaxation in U.S.-Iran tensions. Analysts said that paved the
way for this week's new supply to take over as a bigger
influence on direction, with France expected to auction bonds
later this session. German Bund yield was at a one-week high at
-0.24%, but yet to get back above last week's seven-month high.
In European corporate news, eyes were on UK retailers after
results from Marks & Spencer and Tesco. Marks & Spencer reported
a rise in underlying sales in its Christmas quarter, indicating
its latest attempt at a turnaround is showing some progress. But
the update disappointed markets and the shares skidded 7% at the
open. Tesco fared better, with its stock up 2% after reporting a
0.1% rise in underlying sales in its home market during what it
said was a "subdued" Christmas for consumer spending. Greeting
card retailer Card Factory plunged 17% at the open after it
warned over its annual core profits, blaming the general
election and weak consumer confidence over the Christmas period.
Building materials supplier SIG plunged 25% after a profit
warning. Chemicals maker Sika reported record annual sales of
8.1 billion Swiss francs, but the 16.3% growth rate fell short
of analyst expectations and its stock fell 2%. Sodexo
said first-quarter revenue grew 7.1% to 6.08 billion euros,
benefiting from its successful partnership for the rugby World
Cup. Norwegian seismic surveyor TGS posted lower-than-expected
fourth-quarter revenue but said first-quarter 2020 was
"promising".
A strategic alliance with Bayer lifted Evotec shares by 3%.
Italy's transport minister told a newspaper that Atlantia must
increase cuts in tollway fees proposed as part of a settlement
to avoid a revocation of its Italian operating licence.
Overall, according to the latest I/B/E/S Refinitiv data,
companies on the STOXX 600 are expected to report a 2.5% rise in
earnings, the best quarterly performance for the region since
the third quarter of 2018.
* European corporate events: M&S, Tesco Q3 and Christmas
trading, John Lewis Christmas update, Takeaway.com trading,
Mitchells & Butler trading
* Swiss National Bank annual results, Swiss Nov retail sales
* Germany Nov industrial output, trade, engineering orders
* Spain sells government bonds
* EZ Nov unemployment
* NY Fed chief Williams speaks at Bank of England panel
event
* European Central Bank policymaker Villeroy speaks in
Paris, ECB
board member Schnabel speaks in Mainz, ECB policymaker Weidmann
speaks in Cologne
* Turkey’s President Erdogan speaks in Ankara
* Bank of Israel policy decision
* South Africa Nov industrial production
* US weekly jobless claims
(Editing by Larry King)