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SOFT CHINA CPI BOOST STOCK MARKETS, USD CONSOLIDATES POST-NFP

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  •  EURUSD may consolidate post Draghi losses at 1,2358/1,2415
  •  Deflationary fears in commodity markets should keep pressures tight on AUD
  •  Chinese data boosted dovish bets after PBoC confirmed liquidity injection in 3Q
  •  USDJPY may go down on expectations Abe would proceed with second round of tax hike in 2Q

The USD made a soft start to the week amid Friday’s job report failed to boost Fed hawks. The US economy added 214K new nonfarm jobs (vs. 235K expected, September figures were revised up from 248K to 256K). The unemployment rate improved from 5.9% to 5.8% for a slightly better participation rate of 62.8% (vs 62.7% last). The average earnings remained soft, in line with expectations. The US 10-year yields remained capped at 2.40%, the DXY index made a comeback from 88.190, fresh four year high. All G10 and EM currencies traded higher at first trading hours of the week. We have light US data flow this week, traders will monitor retail sales on Friday. We expect consolidation in USD.

In Australia, home loans retraced by 0.7% on month to September, investment lending expanded by 3.7%, the owner-occupied home value increased by 1.4%. AUD/USD remained capped at 0.8683 on soft Chinese data. The PM Abbott said AUD is at “more comfortable” levels after the recent fall and added that “the iron ore prices can go down, it can go up as well […] shouldn’t assume the price is stuck at $75 a ton”. The iron core delivered to China is heading towards $75 for the first time since 2009 amid largest weekly decline in five months over the last week. Deflationary fears in commodity markets should keep the pressures tight on AUD.

China’s trade surplus increased from 30.94 to 45.41 billion dollars in October, yet exports grew at slower pace of 11.6% on year to October (vs. 15.3% a month ago), the CPI remained unchanged at 1.6%, the PPI decelerated at faster pace of 2.2% (vs -2.0% exp. & -1.8% last) mostly due to falling oil prices. Data boosted dovish bets especially after the PBoC confirmed liquidity injection in 3Q in a report released last week. The Chinese stocks kick-started the week (Hang Seng +1.40, Shanghai’s Composite +2.30%), USD/CNY trades range-bound with offers trailing below 6.1250/6.1264 (optionality / Fib 38.2% on January-April rally). Bids abound at 6.10+.

USD/JPY opened at 114.52 and legged down to 113.87 on expectations that the PM Abe would proceed with the second round of sales tax hike in 2015. We see resistance at 114.90/115.00 (30d upper Bollinger band / psychological level), large vanilla bids dominate above 115.00 for today expiry.

EUR/USD consolidates post-Draghi losses below 1.2500 this Monday. Trend and momentum indicators are comfortably bearish, option barriers sit at 1.2475/1.2500/1.2550 for today expiry. Support zone has shifted to 1.2358/1.2415 (post-Draghi reaction low / 30-day lower Bollinger band). EUR/GBP offers remain solid at 0.7885/0.7925 (21&50-dma & option barriers).

The economic calendar of the day: Norwegian October CPI and PPI m/m & y/y, Italian September Industrial Production m/m & y/y, Canadian October Housing Starts, US October Labor Market Conditions Index.

Quotes:

Peter Rosenstreich – Head of Market Strategy:

“With major central banks still pushing to keep liquidity loose through balance sheet expansions, risky assets should remained buoyant in the near term. Yes, global growth faces challenges, as the US and China, both engine of expansion, face headwinds. Yet there is growth and despite warnings of geopolitical risk derailing the fragile recovery, this has not occurred. USD and US asset will remain in demand but don’t expected high-beta currencies to collapse. Investors are yield starved and will increasingly take an extra risk for a speck of return. In addition, should the US and UK backtrack from the urgency of tighten we could see a sudden reversal of capital flow back the much maligned EM FX segment.”

“In addition, in China, reports over the weekend showed solid export growth at 11.6% in October, illustrating that the negative sentiment around Chinese growth could change.”

Ipek Ozkardeskaya – Market Analyst:

“Soft Chinese CPI and PPI, combined to developing bear market in oil clearly hints at more easing from the PBoC. The PBoC has no reason to refrain from more liquidity injection given its macro fundamental situation. The USD/CNY trades soft above 6.10 support, we expect a bounce back toward 6.15 (Fib 50% on January – April rally) as the divergence between Fed/PBoC deepens.”

Luc Luyet, CIIA – Senior Market Analyst:

“Gold rose sharply on 7 November. Given the recent overextended decline, a short-term rebound seems likely. However, the longer term technical picture continues to favour further weakness towards the May 2010 low at $1045. Resistances to monitor for a resumption of the underlying decline can likely be found at $1194 (50% retracement of the October-November decline) and $1217 (30/10/2014 high).”

For the full Daily Snapshot report please visit: http://en.swissquote.com/fx/news-and-live-signals/daily-forex-analysis/2014/11/10

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G4S urges shareholders to accept Allied deal as bid battle ends

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G4S urges shareholders to accept Allied deal as bid battle ends 1

By Yadarisa Shabong

(Reuters) – British private security group G4S on Tuesday urged shareholders to accept Allied Universal’s 3.8 billion pound ($5.4 billion) final offer after the end of the U.S. bidder’s drawn-out takeover battle with Canada’s GardaWorld.

Hostile bidder GardaWorld had called a halt to the contest on Monday by telling the UK’s Takeover Panel it would not increase its December bid of 235 pence per share for the world’s largest private security company.

Allied on Tuesday said it would not increase the 245 pence per share offer it announced on Dec. 8, making it the final bid.

G4S had backed that offer last year after repeatedly rejecting GardaWorld’s hostile advances, but low shareholder acceptance forced repeated extensions to offer deadlines.

“G4S directors unanimously recommend that G4S shareholders accept the final Allied Universal offer,” The London-listed company said.

Allied on Tuesday extended its offer deadline to March 16 and the acceptance condition was lowered to 75% from 90% in nominal value and voting rights.

It has largely obtained the required antitrust regulatory approvals in the United States and European Union, Allied Universal added, though Britain has yet to approve the deal.

“The biggest issue now is probably the pension deficit in the UK, which has constricted M&A deals in the recent past involving G4S UK businesses,” said Morningstar analyst Michael Field.

G4S last year sold most of its cash-handling business to rival Brinks Co but held on to the UK operations with attached pension obligations.

In its offer document, Allied said it planned to evaluate the possibility of exiting the prison business, where G4S has faced problems in the past, and some other markets, such as Iraq, Afghanistan, Sudan and Uganda.

“Allied will have to work with the pension trustees to come to an arrangement if it wishes to divest anything here (in the UK),” Field added.

Shares in G4S traded flat at 242 pence at 0855 GMT.

($1 = 0.7102 pounds)

(Refiles to restore dropped letter in headline)

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Rashmi Aich and David Goodman)

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Commodities rally, stocks steady, yields off highs

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Commodities rally, stocks steady, yields off highs 2

By Danilo Masoni and Anshuman Daga

MILAN/SINGAPORE (Reuters) – Optimism about the economic outlook pushed commodity prices to new highs on Tuesday, helping stocks steady as expectations of a dovish testimony by Federal Reserve Chairman Jerome Powell calmed down bond yields.

The MSCI world equity benchmark was flat near two week lows by 0919 GMT, helped by gains in commodity-heavy equity indexes in Asia and a rally in European travel stocks on the prospect of easing social restrictions.

British Prime Minister Boris Johnson set out a phased plan on Monday to end a COVID-19 lockdown in the world’s sixth largest economy.

World stocks had been weighed down in recent sessions by a rapid surge in global bond yields which fuelled expectations that central banks could eventually turn less accommodative in a bid to tame inflation. Tech stocks were among the hardest hit.

But the sell-off in the bond market eased after European Central Bank chief Christine Lagarde said on Monday the central bank was “closely monitoring” rising borrowing costs.

Investors now expect Fed’s Powell to be equally reassuring when he testifies before Congress at 1500 GMT.

“If there were already any expectations that Powell could try to calm down rates, then (Lagarde’s remarks) have just further cemented them,” said Giuseppe Sersale, strategist and fund manager at Anthilia in Milan.

Tech stocks and rate-sensitive sectors like utilities in Europe however fell, offsetting stronger travel and commodity stocks and pushing down the <STOXX 600> regional benchmark by 0.6%.

In Asia, the rally in commodities lifted Australia’s S&P/ASX 200 0.9%, while tech-laden South Korea’s Kospi lost 0.3%. Japanese markets were shut for a public holiday.

Nasdaq futures were down 0.6% at three-week lows after high-growth stocks such as Apple, Microsoft and Tesla dragged the index down 2.5% on Monday, while S&P 500 futures inched 0.1% lower.

Bond yields have risen sharply this month as prospects of more U.S. fiscal stimulus boosted hopes for a faster economic recovery globally. However, that is also fuelling inflation worries, prompting investors to sell growth stocks that have rallied in recent months.

“Real U.S. interest rates are now in positive territory, which has created some concern around the consequences for equities markets,” Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management said in a report.

U.S. 10-year Treasury yields edged up to 1.374% but remained below the one-year high of 1.394% hit on Monday.

Germany’s 10-year Bund yields also rose to -0.309% but were below the 8-month high of -0.278% hit in the previous session.

Commodity prices strengthened again.

Oil prices jumped by more than $1, underpinned by optimism over COVID-19 vaccine rollouts and lower output as U.S. supplies were slow to return after a deep freeze in Texas shut in crude production last week.

Brent crude was last up 0.9% at $66.18 a barrel after earlier hitting a fresh 13-month high of $66.79, while U.S. crude rose 1.2% to $62.45 a barrel.

“Oil has been caught up in the broader commodities move higher, with a weaker USD proving constructive for the complex,” ING strategists led by Warren Patterson said in a note.

“Meanwhile, there is also a growing view that the oil market is looking increasingly tight over the remainder of the year”.

Copper prices meanwhile hit a 9-1/2-year high as tight supply and solid demand from top consumer China boosted sentiment.

In currency markets, the dollar briefly dropped to its lowest since Jan. 13 ahead of Powell’s testimony, while commodity-linked currencies hovered near multi-year highs.

The dollar index was up 0.1% at 90.143, with the euro flat at $1.2151.

(Reporting by Danilo Masoni in Milan and Anshuman Daga in Singapore; Editing by Ana Nicolaci da Costa)

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Sterling climbs towards $1.41 as PM sets roadmap to easing lockdown

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Sterling climbs towards $1.41 as PM sets roadmap to easing lockdown 3

By Joice Alves

LONDON (Reuters) – Sterling edged higher on Tuesday against both the dollar and the euro after Prime Minister Boris Johnson set out a schedule for easing lockdown, while British finance minister Rishi Sunak added that more job support will be unveiled next week.

The pound strengthened almost 3% in February against the dollar as traders expect that Britain’s speedy vaccine roll out will help its economy rebound from the biggest contraction in 300 years.

Johnson set out a phased plan on Monday to end England’s COVID-19 lockdown, with schools returning on March 8 when only minimal socialising outdoors would be allowed.

The so-called roadmap would then pass through four stages, with the final step, when most restrictions would be lifted, not starting until June 21 at the earliest.

In early London trade, sterling rose to $1.4098 versus the dollar, its highest level since April 2018. It was up 0.3% at $1.4080 at 0904 GMT

Versus the euro, it also edged 0.1% higher at 86.32 pence, its highest level since March 5, 2020.

“Sterling continues to trade firm on the vaccine label and associated easing of lockdown expectations opening the doors to recovery,” said Neil Jones, Head of FX Sales at Mizuho Bank.

“My sense is the stage is set for $1.45”.

Sunak said he would set out more details of job support measures in his budget next week, after official figures showed unemployment had risen to its highest since early 2016.

“The extended roadmap puts increased pressure upon the Chancellor into next week’s budget, employment support will surely have to extend beyond the current April end date,” said Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets.

Stretch said that even if at this point cable looks increasingly overbought, “we can expect a test of $1.4095-$1.4100, and above there $1.4145-$1.4155”.

(Editing by William Maclean)

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