Daily Kickstart (Watch US Data For Direction)

European and Asian bourses are mixed on Thursday amid thin holiday trading following Wall Street’s most recent failed attempt to reach the ever elusive Dow 20K summit on Wednesday.

“A fall in base metal prices weighed on mining companies, with copper futures down 0.8% at $5,462 a ton, while aluminum and zinc also declined,” WSJ notes, adding that “investors in Europe [are] focused on the fate of Italy’s Banca Monte dei Paschi [as] shares of the lender were up 3% in choppy morning trading—a relative stabilization after falling 12% Wednesday as the bank struggled to sell fresh shares and avert a government bailout.”

Oil is struggling to find its footing after a surprise build in US inventories while gold is little changed in quiet trading. The dollar is similarly mixed but is still near 14-year highs. Yields on US 10s are flat. Below are some summary bullets courtesy of Bloomberg:

A light data calendar during the European session followed by a plethora of releases out of the U.S. has combined with low trading volumes ahead of the Christmas holidays to provide for a rather uneventful, sideways trading session in the G-10 sphere.

  • Ranges have been tight with euro trading within 23 pips during London session versus the dollar and yen in 15 pips. Sparse liquidity has caused the occasional choppy price action here and there, yet overall flows are subdued typical for this time of the year
    • Indicative of the low interest to engage on fresh trades is implied volatility in the common currency in the front-end; one-week trades at lowest level since October and below its past 10-year average on a seasonality basis
  • EUR/USD unfazed by Italian banking trouble; news that Monte Paschi is heading for nationalization, the country’s biggest one in decades, did little to deteriorate sentiment in the common currency
    • Pair now +0.2% at 1.0444; EU4.72b worth of options expire today within 1.0400-1.0500, may need a big surprise out of U.S. growth print or durable goods to see a daily close outside the range
    • Based on an one-standard deviation model, there is a 81% chance that EUR stays within 1.0380-1.0527 by the end of this week
  • The Bloomberg Dollar Spot Index gains 0.1% at 1272.10, while the greenback is mixed versus its G-10 peers
  • SEK leading gains a second day as investors embrace theme of owning downside in USD/SEK and EUR/SEK, in both options land and the cash market, two traders in London say
  • Kiwi higher as New Zealand’s GDP beat estimates to grow 1.1% q/q in 3Q
  • A$1.03b roll over in AUD/USD today at 0.7200, may anchor price action; pair currently at 0.7219
  • Cable reversed early gains, drops to 1.2336 low; bids seen near the figure, the traders add

US econ could provide markets with something to trade on later today. Here’s a rundown of what’s on deck:

econ

(Table: Deutsche)

And here’s Deutsche Bank’s Joseph LaVorgna with some color:

We have repeatedly emphasized that forward looking measures of consumer and business attitudes are of greater importance at the moment given the potential for substantial fiscal stimulus next year. Thus, while this morning’s durable goods data are expected to show only modest improvement in capital expenditures (capex) in the current quarter, there are signs that business spending is poised to contribute meaningfully to growth in the quarters ahead. The recent improvement in business sentiment is welcome news given that inflation-adjusted capital expenditures last quarter were down -5% compared to a year ago—a growth rate normally commensurate with recession. With respect to the November durable goods report, headline orders should decline due to aircraft, while we expect ex-transportation orders to increase modestly. As always, we will pay close attention to non-defense capital goods orders excluding aircraft, which is the core of the report and an input into the capital spending series in the GDP accounts. While core orders should edge up a bit— our November forecast would put the level of core orders up only 0.5% annualized relative to Q3—the latest data from the Philadelphia Fed and New York Fed Empire surveys may presage a more meaningful recovery in (capex) over the next several quarters.

This week’s jobless claims data take on elevated significance as they correspond to the survey period for December employment. While claims can be volatile around the holiday period, as long as the four-week average continues to hover near roughly a four-decade low, we can be confident that the labor market remains sturdy.

So watch that data as it’s likely to be the only catalyst either way Thursday. Could it really be that Dow 20,000 is going to fail yet again? This week gives a whole new meaning to “so close, yet so far away.”

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