Morning Report – Monday 24th August

Main Headlines

Stock futures in Europe and the U.S. rose along with equities in Asia on signs of a thaw in U.S.-China tensions with investors also looking ahead to a policy speech by Federal Reserve Chair Jerome Powell later in the week. Hong Kong shares outperformed, aided by a rally in WeChat owner Tencent Holdings Ltd. and signs of progress on the virus. President Donald Trump’s team is privately seeking to reassure U.S. companies that they can still do business with the WeChat messaging app in China.

Equities in South Korea, Japan and China were also higher with Euro Stoxx 50 futures. S&P 500 contracts rose modestly after U.S. shares ended Friday with a fourth week of gains. Gold began the week on the back foot. The 10-year yield on New Zealand bonds fell to a record low after the central bank fell short of its quantitative easing buying target. Treasuries and the dollar were steady.

The coronavirus crisis will see the world’s biggest firms slash dividend pay-outs between 17%-23% this year or what could be as much $400 billion, a new report has shown, although sectors such as tech are fighting the trend.

Singapore’s large pool of fiscal reserves is proving to be a boon for the nation’s currency. The city state’s dollar advanced to its highest level in six months last week – erasing its pandemic-driven losses – after the government unveiled another stimulus package, financed in part by unused expenditure from earlier budgets.

GBP

The pound fell more than 1% on Friday on a mix of bad news on the latest Brexit negotiations and gains for the U.S. dollar. Britain and the European Union made scant progress towards a deal on future ties in talks last week, both chief negotiators blamed each other for the stalemate as time ticks down to an year-end deadline.

EUR

The euro was on the defensive following disappointing manufacturing and services sector data for Europe released on Friday. The common currency’s next major hurdle is the release of the closely watched IFO sentiment survey tomorrow. The euro has pulled back slightly from a two year high versus the dollar reached last week, which analysts have been suggesting makes it vulnerable to short term profit taking.

USD

The dollar steadied against major currencies in early trade this morning as traders looked to more data for a gauge on the health of the global economy and the Federal Reserve’s annual retreat for guidance on the outlook for U.S. monetary policy. Sentiment for the greenback has improved somewhat due to supportive data on business activity and home sales, but there are still concerns that additional monetary easing may be necessary to keep economic growth on track. Federal Reserve Chairman Jerome Powell will discuss monetary policy on Thursday at the opening day of the Kansas City Fed’s annual symposium.

Main Economic Data/Central Banks/Government (All Times BST)

11:00 a.m.: UK CBD Trades Survey
1:30 p.m.: US National Activity Index