How Did the Markets React?
Thin
ranges have prevailed in the European markets as the infamous US NFP report is
on tap today. Traders have opted to hold off from entering the market ahead of
the ensuing volatility so often accompanied by the release of the payroll
report. Meanwhile, a slew of European economic data hit the tape this morning,
though making little impact on price action. Economic confidence in the
Euro-zone unexpectedly slipped in December to 110.1 from 110.3. The breakdown
showed that the dip was driven by declines in construction and retail sentiment,
however, the figure remains at a relatively high level and should not
significantly alter the European Central Bank’s optimistic view on growth.
Additionally, Euro-zone unemployment dropped to 7.6 percent from 7.7 percent in
October, signaling that economic expansion is having a positive impact on the
labor market. Overall, economic data continues to be supportive of further
monetary policy tightening by the ECB in Q1, which would bring the European
benchmark rate up to 3.75 percent.
Bonds – German 10-Year Bunds
Bunds were little changed today
following an initial rally to 98.66 at the market opening, as fixed income
traders await the aftermath of the US NFP report. The release of Euro-zone
economic data brought prices to dip slightly towards Thursday’s close, though
yields still remain down one basis point to 3.914 percent. Given the declines in
the European benchmark equity indices, prices on 10-year bunds will likely
remain elevated until the announcement of US data at
13:30GMT.
FX –
EUR/USD
After plummeting nearly 200 points
since Wednesday, EUR/USD has temporarily bottomed out near the 1.3050 level.
Price has held within a tight range of 1.3062 – 1.3104 in the Asian and early
European sessions – which is typical of a NFP day – as traders are reluctant to
enter the market ahead of the post-release volatility. Euro managed to get a
boost at 10:00GMT on European economic data that remained supportive of tighter
monetary policy by the ECB. Trading of the EUR/USD pair will remain contingent
on
Equities – Xetra DAX
Index
European equities were unfazed by
economic data for the Euro-zone, as price action was reliant on weakening
commodity markets, which weighed on resource stocks, and a profit warning from
US telecom equipment maker Motorola, which hit Europe’s technology sector.
Energy stocks remained weak as oil
prices fell to $55.48 a barrel on the back of strong
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