Market Roundup
- Fed's Beige Book: US economy growth hampered by dollar, energy prices; economic activity expanded in 9/12 districts.
- Fed's Kaplan: US, world need to adjust to slower China growth, inflation has been stubbornly low.
- Fed's Rosengren: Lack of inflation & GDP growth near potential justify only gradual hikes, four rate hikes in '16 subject to downside risks.
- Fed's Evans says he's nervous on China, inflation expectations.
- Oil reverses early gains, falls toward $30 as U.S. crude/gasoline inventories rise.
- US bond prices add to gains after strong 10-year sale, equities slide with oil.
- Bond sales (approx EUR 35b from Germany/Italy/Belgium), Chinese data surprise hold euro zone yields in check.
- Chile traders see BCCh holding key rate at 3.5 percent on Thursday.
Looking Ahead - Economic Data (GMT)
- 23:50 Japan Corp Goods Price MM* Dec forecast -0.4%, -0.1%- previous
- 23:50 Japan Corp Goods Price YY*Dec forecast -3.5%, -3.6%- previous
- 23:50 Japan Machinery Orders MM* Nov forecast -7.9%, 10.7%- previous
- 23:50 Japan Machinery Orders YY* Nov forecast 6.3%, 10.3%- previous
- 00:30 Australia Employment* Dec forecast -12.5k, 71.4k- previous
- 00:30 Australia Full Time Employment* Dec 41.6k-previous
- 00:30 Australia Participation Rate* Dec forecast 65.2%, 65.3%- previous
- 00:30 Australia Unemployment Rate* Dec forecast 5.9%, 5.8%- previous
Looking Ahead - Events, Other Releases (GMT)
- No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.0850 levels and currently trading at 1.0880 levels. The pair has made session high at 1.0885 and hit lows at 1.0819 levels. US dollar rose against euro on Wednesday as the Chinese yuan stabilized and oil prices jumped, increasing the market's appetite for assets that provide higher yield. Positive Chinese trade data eased some concerns about the world's second-largest economy, bringing some calm into financial markets following heavy intervention by Beijing to stem recent declines in the Chinese currency. On the data front, Euro zone industrial production declined more than anticipated in November. Industrial production in euro zone declined 0.7 percent lower in November than in October, the European Union's statistics body Eurostat said, although year-on-year there was still a 1.1 percent increase. In mid-morning trading, the dollar rose 0.4 percent against the yen to 118.12 JPY=, while the euro was down 0.1 percent at $1.0848.
GBP/USD is supported in the range of 1.4380 levels and currently trading at 1.4435 levels. It reached session high at 1.4467 and hit low at 1.4407 levels. Sterling reached a 5 1/2-year low against the dollar on Wednesday, after the pound was broadly sold off across the board. The pound slipped by more than 1 percent on Tuesday after data showed British industrial output suffered its steepest fall since early 2013 in November. That raised the concerns of slowing of Britain's economy and confirmed the view that the Bank of England will not raise interest rates in the near future. The BoE is expected to announce its monetary policy decision on Thursday, with most analysts expecting no change in voting with 8-1 majority. However, some expect Ian McCafferty, who voted for an increase in December, might change his mind. Against the US dollar, sterling fell to $1.4380, its weakest since June 2010. Against the euro, it weakened 0.1 percent on the day to 75.035 pence, close to an 11-month low of 75.55 pence hit on Monday.
USD/JPY is supported around 117.00 levels and currently trading at 117.64 levels. It has hit session high at 118.35 and made session lows at 118.63 levels. The Japanese yen gained against dollar Wednesday, after U.S. stocks were sold off broadly in late Wednesday trading, pushing the S&P 500 below 1,900 for the first time since early October, after the market failed to hold its early rally. Volatility in oil prices overshadowed better-than-feared trade data out of China that initially lifted sentiment in equities and commodities. The deepening slide in oil prices and concerns about China's economy have rattled equity markets, which have failed to sustain any significant rallies in early in the day Stock markets in Europe and Asia rose after Chinese trade data cooled concerns over the world's second-biggest economy, steadying money and currency markets in Shanghai and Hong Kong. The currency's strongest level of the session was $118.35, while its weakest level was $117.63.
USD/CAD is supported at 1.4240 levels and is trading at 1.4350 levels. It has made session high at 1.4382 and lows at 1.4206 levels. The Canadian dollar declined sharply against its U.S. counterpart on Wednesday after crude oil inventories data which showed a rise in weekly U.S crude inventories fueling more bearish sentiment about the deepening oil supply glut. The currency hit fresh 12 year highs at 1.4382 reaching for first time since May 2003 as speculation intensified that the Bank of Canada will cut rates as early as next week. Brent crude declined by 2 percent on Wednesday, slipping below $30 a barrel for the first time since April 2004 as a growing inventory of oil in the United States increased bearish pressure on crude oil prices. The currency's strongest level of the session was C$1.4188, while its weakest level was C$1.4382.
Equities Recap
European shares rose on Wednesday but ended off their highs on some profit taking and after a rise in U.S. crude oil inventories added to concerns about a deepening supply glut.
UK's benchmark FTSE 100 closed up by 0.33 percent, the Pan-European FTSEurofirst 300 ended the day up by 0.32 percent, Germany's Dax closed down at 0.25 percent, and France's CAC finished the day up by 0.17 percent.
U.S. stocks sold off sharply on Wednesday as a brief rally in beaten-down oil prices stalled after U.S. data added to concerns about an oversupplied energy market.
Dow Jones closed down by 2,21 percent, S&P 500 ended the day down by 2.50 percent, Nasdaq finished the day down by 3.40 percent.
Treasuries Recap
The U.S. Treasury debt market rallied on Wednesday with benchmark yields hitting their lowest levels in over two months as tumbling stock and oil prices stoked investor anxiety, rekindling safe-haven bids for bonds.
In late U.S. trading, benchmark 10-year Treasuries notes were up 9/32 in price for a yield of 2.066 percent, down 3 basis points.
The 10-year yield hit 2.042 percent, which was its lowest since Oct. two-year yield slipped 2 basis points to 0.903 percent after touching its lowest in a month.
The 30-year yield hit 2.817 percent, its lowest since early October. It was last down 3 basis points at 2.844 percent.
Commodities Recap
Brent crude ended 2 percent lower on Wednesday after falling below $30 a barrel for the first time since April 2004 as growing stocks of oil in the United States stoked market fears about demand.
Brent fell to a new 12-year low at $29.96 a barrel before settling at $30.31 a barrel, down 55 cents or 1.8 percent.
U.S. crude settled at $30.48, up 4 cents or 0.1 percent after dropping as low as $30.10. On Tuesday, it dropped as low as $29.93, which was last seen in December 2003.
Gold turned higher on Wednesday as the dollar fell, U.S. stocks dropped and a Federal Reserve president raised concerns about inflation expectations.
Spot gold was up 0.6 percent at $1,093.25 an ounce at 3:40 p.m. EST (2040 GMT), while U.S. gold futures settled up 0.2 percent at $1,087.10.
