March 14, 2017
Tuesday 08:00 GMT
What you need to know
● Pound under pressure amid Brexit and Scottish secession worries
● Sterling drops below $1.22 and euro edges up towards 88p
● European equities mixed, energy stocks steadier as oil little changed.
● S&P 500 futures flat, Treasury yields higher ahead of Fed
● Gold only one dollar above the $1,200 mark
Hot topic
The UK pound is back under pressure as traders become concerned that Edinburgh’s demand for a another referendum on Scotland leaving the UK adds to the uncertainty over Britain’s divorce from the EU.
Sterling accelerated losses in early European trading once it breached the $1.22 level, and is down 0.7 per cent at $1.2133 to once again flirt with seven-week lows.
It now takes 87.62 pence to buy one euro, up 0.5 per cent on the day.
However, the weakening pound is helping support London’s blue-chip equity index. The FTSE 100, replete with foreign currency earners that are seen benefiting from softer sterling, is up 0.1 per cent.
Equities
The tone across stock markets is generally cautious as traders are wary of making bold bets ahead of a plethora of events this week: including the Dutch general election, and monetary policy decisions from the central banks of the US, UK and Japan.
US index futures suggest the S&P 500 will start the day unchanged at 2,373.5, less than 1 per cent shy of its record closing high touched at the start of the month.
The pan-European Stoxx 600 index is down 0.1 per cent as miners see losses.
However, resources stocks supported the Australian market, where the S&P/ASX 200 was flat as financials struggled.
Greater China shares exemplified the mildly mixed mood, with Hong Kong’s Hang Seng index down 0.1 per cent and the Shanghai Composite up less than 0.1 per cent.
Japan’s Topix dipped 0.2 per cent as shares in Toshiba rose 5.6 per cent in Tokyo after the company confirmed it had been granted a one-month extension to the March 14 deadline for filing third-quarter results.
Forex
The euro is down just 4 pips to $1.0649 as investors await the outcome of the Dutch election, due to take place on Wednesday.
The dollar index, which measures the greenback against a basket of peers, is up 0.3 per cent at 101.58 as investors continue to price in a 93 per cent chance — according to CME FedWatch — that the Federal Reserve will raise interest rates by 25 basis points this week.
The Japanese yen is up 0.2 per cent to ¥115.13 per dollar and the Turkish lira is 0.4 per cent softer at 3.7527 per buck as Ankara’s relations with a number of European countries deteriorate.
Fixed income
The recent trend of higher sovereign bond yields is trundling on ahead of the Fed decision and as evidence builds of improving economic conditions in Europe.
The US 10-year Treasury yield, which moves opposite to the price, is up 2 basis points to 2.63 per cent, close to its highest level since September 2014.
The equivalent maturity German Bund is up 3bp to 0.50 per cent, its highest in nearly 14 months after data confirmed inflation of 2.2 per cent in the eurozone’s biggest economy.
Commodities
Oil prices are relatively calm after last week’s sharp sell-off which came in response to fears that US production is counteracting Opec’s output cuts.
Brent crude, the international oil marker, is 0.2 per cent lower at $51.22 a barrel, and West Texas Intermediate, the main US contract, is down 0.1 per cent at $48.43.
The former dollar and higher bond yields are again weighing on gold, the precious metal is slipping 0.2 per cent to $1,201 an ounce.
Additional reporting by Hudson Lockett in Hong Kong
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