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Big banks weigh on global equities as Sterling declines

Global equity markets are trading lower today as the world’s biggest banks have agreed to pay fines related to FX rigging. Overnight headlines include Japan is weighing a December general election while the UK showed another drop in unemployment claims before the Bank of England Inflation Report. The world’s biggest banks are weighing on global indices as  they have agreed to pay $3.3 billion in fines related to benchmark manipulation. The US dollar is seeing a modest boost amid safe haven buys as markets look for direction amid a quiet data week. Despite more positive UK jobs data, sterling weakened as the BoE warned inflation could drop below 1%. The euro and other major currencies tracked this move lower at the dollar’s expense as the greenback found a new reason to strengthen.

The Japanese yen briefly traded as high as 116 on the news it is highly likely PM Abe will call for an election on December 14th. There was some discussion in circles on a delay to the hotly contested sales tax hike but most headlines out of Japan were positive as domestic firms seem to have advanced amid the weakness of the yen, boosting exports.

In China, President Obama met with Chinese President Xi Jinping to discuss climate change and specifically the relationship between the world’s two largest economies. Meeting at the Asia-Pacific Economic Cooperation Summit, the US and China have agreed to a “historic” climate change agreement, leaving other serious differences off the table. Markets have largely ignored this meeting.

North American trade will most likely be led by stock performance and the residual hangover from overnight stories. Data is limited this week in the US and Canada. The Canadian dollar is trading higher this morning as traders continue to digest the strong jobs numbers presented last Friday. It is a wonder as to how much longer Bank of Canada Governor Stephen Poloz can remain dovish after Canada added more than 100,000 new jobs over the last two months. The equivalent would be the US adding nearly 1 million jobs over the same period of time. As USD/CAD trades close to five-year highs, it is becoming fair to ask whether to the Loonie is a touch oversold – even if oil prices dip below $75 per barrel.