Paris Under Terror Attack

Daily Analysis - 21/04/2017

ISIS Claims Responsibility

A police officer was killed, while two others were seriously injured, when a gunman opened fire in central Paris late Thursday. The Islamic State has claimed responsibility for the attack, an event that may potentially change the stakes for the first round of election voting set to begin this weekend.

Le Pen Odds Boosted Ahead of Sunday Vote

The attack on the famed Champs-Élysées could bolster National Front leader Marine Le Pen's odds in the first round of France's presidential election, political analysts suggest.

Thursday's assault will reinforce security as the primary theme on voters' minds ahead of polls on Sunday. The right-wing Le Pen has strongly campaigned on security issues, and has called for an outright ban on immigration as a way to prevent radicalized youths from entering into the country.

A leading opinion poll, conducted earlier in the week, showed the more centrist Emmanuel Macron clinching the first round of vote. Last night’s shooting could now tilt the balance in Le Pen’s favour, adding to heightened volatility in European assets that has prevailed over the last two weeks.

As a result, CAC 40 futures are down in early Friday trade, and were last seen trending around 4950.

Euro Area Consumer Confidence at 2-year High

Helped by a dip in inflation and moderation in energy prices, Euro Area consumer confidence grew more than expected in April. The preliminary reading of April consumer confidence came in at -3.6 points, compared to -5.0 in March, Thursday’s European Commission figures showed, easily topping expectations of -4.8. After a brief drop in February, confidence has resumed its upward trend.

At the start of the year, most economists feared that an unusually busy election season could spook consumers and curb spending. Separately, figures from the European Union's statistics agency showed output in the construction sector jumped 6.90% in February on a month-on-month basis.

Both these key data points should reinforce the ongoing view that the region’s modest economic recovery is gaining fresh momentum.

After falling in the previous session, EURUSD is largely unchanged early Friday, trading just north of 1.0700.

Philadelphia Fed Index Drops in April

The Philadelphia Federal Reserve’s monthly measure of manufacturing activity in the US Mid-Atlantic fell to a four-month low in April during the latest report. Its widely-followed manufacturing index fell to 22.0 from 32.8 in March, after hitting a 33-year peak of 43.3 in February.

Analysts surveyed by Reuters had forecast an April reading of 25.0.

The new orders index, a key gauge of future activity, also slid to 27.4 from 38.6 in March. The Philadelphia Fed figures are consistent with recent data that showed manufacturing has lost momentum after a post-election surge.

Figures released earlier in the week by the Federal Reserve mirrored this development after manufacturing output fell by -0.40% in March.

In a significant divergence from other major US equity benchmarks, Nasdaq futures are sitting just below the two-week high of 5455, hit during the prior trading session.

Gold Remains Steady

Amid an increase in global uncertainty ahead of this weekend’s French presidential election, gold is holding firm above the strong support around $1270 per troy ounce.

However, the upside seems capped as investor appetite for equities improve, with benchmark indices in both the US and Europe edging higher yesterday.

Furthermore, as the US dollar appears to find increased support amid a better bid in the USDJPY pair, pressure may be sustained near-term.

Holdings of New York-listed SPDR Gold Shares, the world's biggest gold-backed exchange-traded fund, surged by 11.8 tonnes on Wednesday, marking the largest one-day uptick since last September.

Technical analysts reckon that as long as $1270 remains intact, the bullion trend will remain bullish.

However, until $1300 is convincingly broken on a daily closing basis to the upside, buyers are expected to remain skittish.

Gold was last seen trending near $1280 an ounce ahead of the European open.