Europe tries buying again as risks keep coming

Summary

Investors are staging another attempted bounce at the end of yet another tumultuous week.

Every little helps

Europe's retail shares are leading. An almost across-the-board rise among big sector components includes Carrefour, Inditex and Delivery Hero. The latter was 4% higher a while ago whilst Tesco added as much as 5%. A brokerage upgrade of the largest supermarket operator in Europe accounts for the swing of interest into the sector. Without firmer underpinnings it's difficult to overlook the rotation-like feel of the move. It has all the hallmarks of a short-lived one.

China steps up demands for Meng release

For one negative omen, it's a Friday; and it's a U.S. monthly payrolls Friday to boot. It's also the day on which the situation that triggered the latest flight from risk will come to an inflection point of sorts. Huawei's arrested CFO, Meng Wanzhou, will face a bail hearing in Vancouver. China's foreign ministry is reiterating Beijing demands that she be released. The authority for conveyance of China's displeasure is going up the official food chain. China's embassy in Ottawa was the highest agency to have issued a reproach before last night. The progression shows Beijing is prepared to keep a tacit link with trade negotiations and Huawei going, regardless of official optimism that Saturday's accord will lead to a lasting deal. Investors will be alert to any sign that the Commerce Ministry could weigh in. That would be another deleterious signal for chances of a deal.

Answers unlikely for Huawei

As for the hearing, reports suggest it could be procedural rather than intended to decide whether Meng receives bail immediately. Canada's Crown Counsel is likely to argue flight risk. She will be released if her lawyers successfully demonstrate that she will not flee. The case will probably be heard during U.S. market hours, adding another key watchpoint for risk buyers. European stock markets were mostly around a percentage point higher approaching the middle of the session. That means they're reclaiming less than half of losses made the day before. Wall Street futures are flagging a red cash open. It's worth noting that a late comeback of key indices like the Dow and S&P 500 cleared most losses from a violent sell-off earlier in Thursday's session. In keeping with heightened volatility though, the upwards correction may also have gone too far. Investors are sensitive to conditions that don't gel with the return of risk appetite.

Saudi losing hope on OPEC deal

Among these, the oil market continues to flail. Buyers are showing up for Brent as it sits just above the $60 handle, though oil stock investors will remain nervous about the demand outlook as the global economy flickers. February Brent was last up a dollar after losing 3% on Thursday. Russia has stopped being a blocker of an output cut, signaling it could reduce output more than indicated earlier. But another key obstacle has emerged, Iran. With much of its production shut in by sanctions, Tehran seeks an exemption. Saudi Arabia has yet to agree. Oil minister Khalid al-Falih went as far as to say he wasn't confident a deal could be reached. It's the last day of OPEC's meeting. A cut that traders judge to be insufficient still looks a high probability. Again, news could coincide with other hot watch points.

Tuesday looms

Increasingly, Brexit is back among these. Not just for UK investors, but internationally too. The crunch vote in Parliament looms next Tuesday. There's still a lot of grind to go through before we get there though. Downing Street has been making it clear the vote will go ahead after a possible postponement was reported. At the same time, loyal MPs have proposed an amendment to the Bill that would enable Parliament to vote on the backstop issue, the most contentious part. The move "won't cut it", says the DUP. Plenty of sterling volatility continues to be stoked by a seemingly inexhaustible string of permutations, ahead of Tuesday. Nevertheless, the pound has been constrained in a clear range for three weeks now. For many participants, particularly in sterling, it's a ‘see you see on Tuesday' situation.

Technical analysis chart: sterling/U.S. dollar and euro/sterling – 30-minute intervals: 07/12/2018 12:23:36

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