Markets Edge into Holiday Weekend

<br /> Markets Edge into Holiday Weekend – Marc to Market<br />


Japanese markets were closed
in Europe is light, and the same is
expected in North America today. Japanese markets will open on December
26, while the US and European markets
re-open on Tuesday, December 27.  
Banks dominate
the light news stream.
  Deutsche Bank agreed to a $7.2 bln
settlement with the Department of Justice, while Credit Suisse agreed to a $5.3
bln settlement  A lawsuit against Barclays was
announced when the bank balked at the terms it was offered, seemingly
preferring to take its chances with the new administration.  
The Italian
government will inject 20 bln euros into three banks, Monte Paschi, Veneto
Banca and Popolare di Vicenza. 
Some retail bondholders will be able to seek compensation. Monte Paschi
was only able to raise about half of the five
bln euros it sought, and European
officials had refused to grant it an extension.   Italian bank share index
(FTSE Italia All-Share Banks Index) is up
about 1.6% near midday in Milan. Barring a reversal in the waning hours,
it will close higher on the week for the fourth consecutive weekly advance.
It is far from
clear that this is any meaningful closure to the long-troubled banking sector.
  Italian banks have an estimated 360
bln euros of troubled loans.  The next major challenge is the capital
raising exercise by Unicredit, Italy’s largest bank.  It seeks to raise
about 13 bln euro early next year, while is a little less than its market
In terms of
economic data, investors learned that the UK economy
expanded by 0.6% in Q3 rather than 0.5%. 
 However, the year-over-year pace
slipped to 2.2% from 2.3%.  The current account also grew in Q3 to 5.2% of
GDP from 4.6% in Q2. Separately, the UK reported October services
expanded by 0.3% maintained the September pace.  
The US reports
new home sales and the University of Michigan consumer confidence (with
inflation expectations). 
 Canada reports October GDP. Although
many expect a flat report, we suspect there is some risk to the downside.
Asian shares
trade heavily. 
 The MSCI Asia-Pacific Index ex-Japan fell 0.4%.  It is the fourth lower close this week and brings the
loss to 1.75% for the week.  It is fallen
in seven of the past nine weeks.  The Dow Jones Stoxx 600 is little
changed on the session and is nursing a minor loss on the week and could snap a
two-week advance.   The S&P 500 has eased for the past two sessions,
but it is holding on to less than a 0.15%
gain on the week coming into today’s session.  
Asian bond
yield was mostly higher, but in Europe,
led by Italy and Portugal yields are lower. 
Premiums over Germany are slightly
narrower.  At 2.54%, the US benchmark 10-year yield has risen less than a
single basis point this week.  
The euro is roughly confined to a 15-tick range on
either side of $1.0450.
  If it closes higher, it would be the
third consecutive advance, but it has to close above the midpoint of today’s
range if it is to snap a two-week decline.  Sterling continues to
struggle.  It has fallen every day this week, which will be the third
consecutive weekly decline.  Six months after the referendum and the risks
of a hard exit remain.  The $1.22 area represents the next retracement
target of the rally since the early-October flash crash.  The dollar is
trading a touch heavier against the yen.  The greenback is edging lower
for the third consecutive session and the fifth decline in the past six sessions.  It is snapping a six-week
advance, though it remains well above the JPY116.55 low seen at the start of
the week.  
The dollar-bloc
remains under pressure
 The Australian dollar is pinned
near $0.7200. It has risen only once in the past eight sessions and is
set to finish lower for the third consecutive week.  A move above $0.7230
would help stabilize the technical tone.  The US dollar poked through
CAD1.35 yesterday and is consolidating in tight ranges ahead of the opening of
the local markets and the GDP figures.  The US dollar has fallen only once
in the past nine sessions.  The upside momentum does not appear to have been
exhausted, and a retest on the
mid-November high near CAD1.3590 appears likely, perhaps before the end of the


Markets Edge into Holiday Weekend
Markets Edge into Holiday Weekend

Reviewed by Marc Chandler

December 23, 2016

Rating: 5

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