Market Roundup
- US private sector adds most jobs (+257k) in a year in December -ADP.
- US factory orders, inventories fall in November.
- Fed raised rates even as inflation debate continued, saw hike as close call with inflation below target.
- Fed members expect solid consumer spending driven by wage growth & job gains, took note of widening spreads in corporate bond market attributing it to a general re-pricing of riskier assets.
- Risk exited as global equities bashed by China worries, North Korea nuclear test, USTs rally.
- US gasoline stocks surge most since 1993; crude draws down (crude ends NY -5.7%) -EIA.
- Canada's November trade deficit narrows, as exports edge up for first time in 4 months.
- Fed's Fischer: four rate hikes in 2016 is 'in the ballpark'.
- Canada's Trudeau sets sights on free-trade deal with China -The Globe and Mail.
- Massive gasoline & distillate inventory builds tower over unexpected crude stocks drop.
Looking Ahead - Economic Data (GMT)
- 23:50 Japan Foreign Bond Invest *w/e 147.2b- previous
- 23:50 Japan Foreign Invest JP Stock*w/e -226.2b- previous
- 00:30 Australia Building Approvals* Nov forecast -3%, 3.9%-previous
- 00:30 Australia Private House Approvals* Nov -2.1%- previous
- 00:30 Australia Trade Balance G&S (A$)* Nov forecas-3100m, -3305m- previous
- 00:30 Australia Goods/Services Imports*Nov 0%- previous
- 00:30 Australia Goods/Services Exports*Nov -3%- previous
Looking Ahead - Events, Other Releases (GMT)
- No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.0700 levels and currently trading at 1.0782 levels. The pair has made session high at 1.0797 and hit lows at 1.0730 levels. Euro inched higher against dollar on Wednesday from one-month lows as minutes of the Federal Reserve's policy meeting in December suggested further U.S. rate increases would be gradual because of concerns about the present low inflation. Despite volatility in the market since the start of 2016 and data that signaled a cooling in U.S. business activities, a top Federal Reserve official said on Wednesday the central bank remains on track for four more rate increases in 2016. The dollar index, which measures the greenback against a group of six currencies, was down 0.2 percent in late trading at 99.160, a shade below the one-month peak set on Tuesday. The currency's strongest level of the session was $1.0797, while it hit its weakest level of the session at $1.0720.
GBP/USD is supported in the range of 1.4600 and currently trading at 1.4667 levels. It reached session high at 1.4648 and hit low at 1.4600levels. British pound declined to its weakest since April against the dollar on Wednesday, after weak UK services PMI data fed the view the Bank of England will not raise interest rates any time soon. The pound was further pressured by worries over a potential "Brexit" from Europe, following a referendum on the issue that could come as soon as June and that is likely to complicate the timing of any BoE rate hike. Sterling fell by as much as half a percent on the day, to a nine-month low of $1.4602, before recovering to trade around $1.4620 in the late US session. That still left it just half a cent away from a 5-1/2-year low. Against the euro, the pound fell 0.4 percent to 73.57 pence.Prime Minister David Cameron has promised a vote on Britain's membership of the European Union by the end of , sterling is likely to face uncertainty and, therefore, volatility in coming days.
USD/JPY is supported around 118.00 levels and currently trading at 118.48 levels. It hit session high at 118.72 and made session lows at 118.27 levels. Japanese yen continued to appreciate against US dollar on Wednesday as the Japanese yen continued to attract investors as the concerns related to Chinese economy remained on Wednesday following nuclear test by North Korea added to a growing list of geopolitical worries. Meanwhile, dollar further weakened in the US session after ISM-Non manufacturing index fell to 55.3 percent in December from a reading of 55.9 percent in November, the Institute for Supply Management said on Wednesday. On the other hand, Payrolls processor ADP said private-sector employment rose by 257,000 last month, the largest gain since December 2014, after increasing by 211,000 in November. The greenback fell 0.5 percent to 118.49 yen,while the euro slipped 0.1 percent to 127.79 yen.
USD/CAD is supported at 1.4000 levels and is trading at 1.4081 levels. It has made session high at 1.4101 and lows at 1.4048 levels. The Canadian dollar declined to hit fresh 11 year lows against its U.S. counterpart on Wednesday after risk aversion hit financial markets and crude oil prices tumbled, despite positive Canada's trade deficit data. Canada posted a smaller-than-expected trade deficit of C$1.99 billion in November from a revised C$2.49 billion gap in October on increased exports to the United States, data from Statistics Canada showed. Oil prices slid to set 11-year lows on Wednesday as geopolitical tension between Saudi Arabia and Iran remained high ruling out any cooperation between two unlikely. Meanwhile, stronger-than-expected U.S. private employment data for December helped support the greenback. The currency's strongest level of the session was C$1.3973, while it hit its weakest level since August 2003 at C$1.4109.
Equities Recap
European stocks declined to hit a three-week low on Wednesday, as the stocks were hit by weakness in the commodity sector as concerns over the Chinese economy resurfaced after it allowed the yuan to weaken further and poor services sector data was reported.
UK's benchmark FTSE 100 closed down by 1.2 percent, the pan-European FTSEurofirst 300 ended the day down by 1.31 percent, Germany's Dax closed down at 0.9 percent, and France's CAC finished the day down by 1.3 percent.
U.S. stocks extended losses on Wednesday as energy shares dropped with oil prices and minutes from the last Federal Reserve meeting added to investor concerns about the economy.
Dow Jones closed Down by 1.44 percent, S&P 500 ended the day down by 1.28 percent, Nasdaq finished the day down by 1.14 percent.
Treasuries Recap
U.S. Treasury yields fell on Wednesday, with benchmark yields hitting over three-week lows, on safe-haven demand and on signs that a lack of inflationary pressures could slow the pace of Federal Reserve interest rate hikes this year.
U.S. 10-year Treasury notes were last up 20/32 in price to yield 2.177 percent, from a yield of 2.250 percent late Tuesday.
U.S. 30-year bonds were last up 1-12/32 in price to yield 2.941 percent, from a yield of 3.011 percent late Tuesday.T
Two-year notes were last up 2/32 in price to yield 0.984 percent, near a two-week low of 0.980 percent touched earlier.
Commodities Recap
Gold prices hit a seven-week high on Wednesday, rising for a third session as persistent concerns over the Chinese economy battered stock markets, while tensions simmered in the Korean peninsula and the Middle East.
Spot gold was up 1.5 percent at $1,093.62 an ounce at 2:55 p.m. EST (1955 GMT), off a peak of $1,095.30, its highest since Nov. 16. U.S. gold futures for February delivery settled up 1.3 percent at $1,091.90 an ounce prior to the release of the minutes.
Crude oil prices were more than 5 percent lower on Wednesday after tumbling below $35 per barrel for the first time since 2004, as a sharp rise in U.S. gasoline stocks reinforced a bleak picture that the market was awash with plenty of oil.
Brent futures fell $2.19 a barrel to settle at $34.23 a barrel. Earlier, it fell to as low as $34.26, its lowest level since the start of July 2004.
U.S. crude futures were down $2.00 to settle at $33.97 a barrel, its lowest close since February 2009
