European cash equity markets are mixed ahead of the midway stage having pared back from the opening highs (FTSE +0.5%, DAX 0.0%, CAC +0.2%, FTSE MIB -0.6%). The Euro Stoxx 600 rose to its best level since December 4th in the early exchanges but is now flat for the day, dragged lower by heavy declines in bank stocks – Deutsche Bank have dropped over three-percent amid reports that they are bracing for a merger with Commerzbank. Unilever, Siemens and Nokia have also fallen sharply post earnings while gains for Royal Dutch Shell and Diageo have propped up the FTSE after their respective updates. We saw a similar morning for US equity futures with S&P E-Mini’s now back to unchanged as support from yesterday’s dovish FOMC message begins to fade. Both the US 10-year yield and Dollar Index fell to fresh three-week lows this morning although the latter has since recovered back to flat. Core European bond yields are also firmly in the red with some weak macro data also providing a weight; German retail sales and unemployment figures were both soft while Italian GDP confirmed a technical recession with a -0.2% contraction in the fourth quarter. Elsewhere in FX, the Australian Dollar is leading the G10’s following stronger-than-expected Chinese PMI data on the back of yesterday’s domestic CPI beat. The Japanese Yen is not far behind while Sterling has also managed to creep higher despite the ongoing standoff between the UK government and the EU Commission. In commodity space, oil pieces are little changed on the day with US crude futures down -0.2% as they look to consolidate yesterday’s jump. Spot gold has edged up +0.2%. Looking ahead, futures are pointing to a relatively flat open on Wall Street although we expect some minor outperformance in the tech sector after Facebook posted record profits after the bell yesterday. On the data front, US personal income and PCE data are likely to have been delayed by the government shutdown but we still expect Chicago PMI plus Canadian GDP.
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