US bourses finished the opening session of the week little changed. Energy shares lagged as oil price declined with US crude futures settling at $47.37, down by $1.14. Geopolitical tensions continued to play a role after the US and South Korea held a joint military exercise over the weekend – much to the annoyance of the North Korean government. As such, perceived safe-haven assets gained with Treasuries, gold and the Japanese Yen all ahead. Another potential risk event, namely the US debt ceiling, is also coming into play and US officials made some remarks on the issue – US Treasury Secretary Mnuchin said they aim to work with congress to raise the debt limit, adding that they have a strong preference for a clean bill, while Senate majority leader McConnell stated there is zero chance that Congress would fail to raise the debt ceiling by late September.
Ahead of the Asian open, Kuwait’s Oil Minister said at the November meeting, OPEC will discuss extending or ending its production cuts, adding oil inventories over the past week declined more than expected, one week forecasts were 2 Mln barrels a day, down from 6.5 Mln. In later comments, he said an oil leak offshore has been detected and the source of the leak is being investigated, adding Iran and Saudi Arabia have informed Kuwait that they have not detected any oil spillage in their waters. Meanwhile, ahead of his address to the nation at 02:00 BST, a Senior US Official informed Fox News that President has signed off on sending an extra 4000 troops to Afghanistan.
Asian stocks were higher as risk sentiment improved with tensions on the Korean peninsula taking a breather, while markets while markets also reacted favourably to comments from US President Trump who laid out the US’s strategy for Afghanistan. Despite earlier comments from US officials, Trump declined to comment on specific numbers of troops that will be deployed or on plans for further military actions, adding they will not say when we will attack, but we will attack. Trump did however call on both Pakistan and India to do more in the region. Meanwhile, US Defence Secretary Mattis said President Trump has provided strategic guidance for US-South Asia strategy after a rigorous interagency review, adding he has directed joint Chiefs of Staff to make preparations for the strategy to be carried out. In currency space, the US Dollar index held steady in Asian trade, while the Yen snapped a four-day winning streak amid the improving risk sentiment. Data wise, Australia’s weekly consumer confidence index declined to 109.2, its third fall in as many weeks. In other news, the PBoC set the yuan mid-point at 6.6597 against the Dollar, its strongest fixing in 11-months.
Ahead of the European open, Norwegian consumer confidence rose to 16.2 in Q3, while Dutch consumer spending rose 2.2% y/y in August.
Looking ahead, at 07:00 BST, we get Switzerland’s trade balance and Finland’s unemployment rate, followed by Danish retail sales and Spain’s trade balance at 08:00 BST. Up next at 09:30 BST, we get the UK’s public sector net borrowing, followed by Germany and the Euro Zone’s ZEW surveys at 10:00 BST. Then at 10:30 BST, we get the ECB MRO result, followed by the UK’s CBI trend data and Irish PPI at 11:00 BST.