FINANCIAL MARKET REVIEW FOR NOVEMBER 27, 2017 The first trading session of this week opened with a fall in prices in the Asian shares from the decade high due to weakness in the Chinese and South Korean markets. MSCI’s broadest index of Asia-Pacific shares outside Japan rose early in the session on Friday’s Wall Street gains, but was last down 0.9 percent. The index rose to its highest since 2007 on Thursday as equity markets have enjoyed strong support this year thanks to corporate earnings rising on the back of an improving global economy. Shanghai shares were down 0.9 percent, reaching a three-month low. Chinese shares were already on a shaky footing after last week, hurt by a rout in the domestic bond market and fresh moves to reduce risks in the asset management industry that may bring a sea change for banks. Japan’s Nikkei pared earlier gains and fell 0.3 percent with chip makers suffering losses. Moving to the currency market, in currencies, the euro was little changed at $1.1926 after nudging up to $1.1946 earlier, it’s highest since Sept. 22. The euro hit a two-month high versus the dollar and held firm against other major currencies on Monday thanks to strong German business confidence and reduced anxiety about political instability in Europe’s biggest economy. The euro fetched $1.1929, little changed from late U.S. levels last week after having hit a high of $1.1946, its highest level in two months. The common currency now faces a test at $1.1965. That level is the 76.4 percent retracement of its decline from a 2 1/2-year peak of $1.2092 touched on Sept 8 to a 3-1/2-month low of $1.1553 set on Nov 7. It has gained 3.2 percent from that low. The euro rose to 133.24 yen, its highest since Nov 16 and it firmed on the British pound to 0.8978 pound, edging to near this month’s peak of 0.9014. The German business confidence index compiled by the Ifo economic institute hit a record high in November, in another sign of strong growth in the euro zone’s largest economy. The upbeat data was followed by positive political developments after German Chancellor Angela Merkel whose chances for a fourth term were plunged into doubt a week ago when three-way coalition talks with the pro-business Free Democrats (FDP) and Greens collapsed - was handed a political lifeline by the Social Democrats (SDP). The dollar index stood flat at 92.801, near two-month low of 92.675 touched on Friday. Sterling fetched $1.3325, holding near Friday’s two-month peak of $1.3360.
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Against the yen, the dollar slipped 0.15 percent to 111.35 yen, edging towards Thursday’s two-month low of 111.07, as the yen was aided by softness in Chinese and Asian shares. Because the yen is often used as a funding currency for investment in riskier assets, it tends to be bought back when risk sentiment sours. The yen’s gains were more noticeable against the risk-sensitive Australian dollar, which fell 0.4 percent against the yen to 84.60 yen, threatening to fall below a five-month low of 84.51 touched a week ago. The Aussie dollar shed 0.25 percent against the U.S. dollar to $0.7600. The New Zealand dollar rose 0.2 percent to $0.6861, recovering some of Friday’s losses. Finally in the commodity market, Russia said on Friday it is ready to support extending a deal among oil producers on cutting output, less than a week before OPEC meets in Vienna to discuss policy, although it has yet to say how long it should be for. Russian Energy Minister Alexander Novak said that Russia would discuss the details of an extension of the global deal on Nov. 30, but made no mention of how long this should last beyond its March expiry. “We see that 50 percent of oil stockpiles have been removed, the oil price has reached its balance,” Novak told RBC TV. The Organization of the Petroleum Exporting Countries, Russia and several other major producers have cut their combined output by about 1.8 million barrels per day since January to reduce bloated inventories and boost oil prices. U.S. crude lost a bit of steam and was last down 26 cents at $58.69 per barrel, while Brent crude slipped 3 cents to $63.83. U.S. crude oil futures rose to a 2-1/2-year high of $59.05 per barrel on Friday. A continued shutdown of a U.S.-Canada pipeline triggered supply concerns, while the prospect of OPEC extending production cuts when the group meets this week also boded well for oil. View our full economic calendar for a daily roundup of major economic events.
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