EU-UK Deal Sends Sterling And The Euro Higher

Overview: A Brexit deal between the UK and the EU has been struck. Whether it can win Parliament's approval is a horse of a different color. Meanwhile, US-Chinese relations continue to sour. The capital markets are narrowly mixed as investors await further developments. The MSCI Asia Pacific is consolidated after gaining for the past four sessions. Following a better than expected jobs report, that seemed to make a rate cut next month less likely, the Australian equities fell by 0.75% to lead the regional decline. European and US shares are little changed but slightly firmer. Benchmark 10-year yields rose in Asia and are mixed in Europe. UK Gilt yields have pushed lower, while Spanish bonds continue to underperform amid elevated political risk following the sentencing of rebels from Catalonia. That said, Spain's 10-year bond auction was oversubscribed by the most since early last year (2.45x vs. 1.39x previously). Australia and New Zealand dollars are leading a move against the US dollar, though sterling is extending yesterday's surge, and the euro has punched through $1.11. The Norwegian krone is extending its loss into record territory against the euro. Most emerging market currencies are edging higher against the greenback. Gold is little changed, while oil prices are unwinding most of yesterday's gains following a surge in US inventories (10 mln barrels) estimated by API.

Asia Pacific

Australia reported a sufficiently strong employment report to give the market pause after moving to largely discount a rate cut next month. Job growth in September was close to expectations at 14.7k, but full-time positions rose 26.2k. The unemployment rate slipped to 5.2% from 5.3%, though there seemed like a function of the decline in the participation rate (66.1% vs. 66.2%). That said, underemployment and underutilization also eased.

Japanese press reports that the government will downgrade its overall economic assessment this month. It may be reluctant to blame the sales tax increase, but the destruction of the typhoon gives ample cover. This underscores the likelihood that the BOJ eases policy at the meeting at the end of the month, and Prime Minister Abe is likely to offer a supplemental budget.

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Read more by Marc on his site Marc to Market.

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Cynthia Decker 7 months ago Member's comment

Hard to believe this #Brexit saga may finally be over!

Adam Reynolds 7 months ago Member's comment

I wouldn't say it's over. On the contrary, we're just turning the page and it will be a whole new ballgame with its own problems. Plus it's not officially passed yet.