Stocks fins a bottom for now
Cable pressured on Brexit fears
Nikkei -1.04 Dax 1.01%
UST 10Y 0.68
Asia and the EU
North America Open
CAD BOC 10:00
Equity markets stabilized and finally caught a bid after a few days of heavy selling with Nasdaq up 2% in early European trade while in FX cable continued to be pressured lower on fears that the UK was abdicating international agreement as a result of its Brexit policy.
Stocks actually sold off at the start of the Asian session trade on news that AstroZenica halted the trials of its COVID vaccine trials after a patient developed unexplained adverse symptoms, but the oversold tech-heavy Nasdaq found support at the 11,000 level and equities popped in mid-morning European dealing on short-covering flows.
There is no major data on the docket today in North America, so market flows will be driven by momentum alone and it remains to be seen if the selling pressure has abated for now. There are no positive catalysts to drive stocks higher as the eco data suggests that the biggest gains from the COVID rebound have already been priced in while vaccine development may take longer than anticipated. With legislators in DC still at war over the fiscal spending bill, any prospect of further stimulus seems remote so the move in Nasdaq may be simply a pause on the way to a much more significant test of the 10,000 level as selling resumes.
In FX the focus was on cable once again with the currency market concerned that the UK may be violating international law in its latest Brexit policy action. The drama surrounds the latest version of the internal market bill which calls for new UK policies on trade within the kingdom that includes Northern Ireland. Northern Ireland is supposed to be under EU authority on trade according to the Withdrawal Agreement, but the new bill would establish UK jurisdiction over trade matters in that region that could come in conflict with current EU law.
The new bill has created a row amongst the Tories on fears that the new bill would breach international agreements and jeopardize Brexit negotiations, although the EU policymakers have been relatively silent on the matter. With EU Chief negotiator Barnier in London this week and with PM Johnson holding a press conference at 1500 GMT the market will be keen to hear where things stand and if there is no progress in talks with both sides remaining belligerent cable could see further weakness as the day proceeds with short targeting the 1.2900 figure as the next level to break.