Market Roundup
- Bank of Canada holds rate at 0.5%, says reorientation of economy toward non-resource activity being helped by US demand, lower CAD & accommodative monetary conditions.
- U.S. December housing starts fall 2.5 percent, consumer prices fall (-0.1%) on lower energy prices.
- USD near 1-yr low vs yen, equities sink as oil rout shows no signs of abating, oil falls to new low sub-27.
- World stocks (MSCI) enters technical 'bear market', down 20 percent from 2015 peak.
- Copper slips on weak oil but China stimulus hopes curb losses, China's central bank plans to launch its own digital currencies.
- Bridgewater Assoc Dalio: USD will be strong temporarily, Fed next move QE not tightening.
Looking Ahead - Economic Data (GMT) - 21:30 New Zealand Manufacturing PMI* Dec 54.7-previous
- 23:50 Japan Foreign Bond Investment* w/e 323.1b-previous
- 23:50 Japan Foreign Invest JP Stock*w/e -746.5b-previous
- 00:00 Australia HIA New Home Sales m/m* Nov-3.00%-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 1.0885 levels. The pair has made session high at 1.0936 and hit lows at 1.0876 levels. The dollar declined against euro on Wednesday, after US Stock declined sharply with the S&P 500 hitting its lowest since February 2014 and extending this year's selloff as oil prices continued to hit new lows. The euro made modest gain against U.S. dollar at $1.09055. However, the dollar rose sharply against oil-linked currencies like the Brazilian real, Norwegian crown and Russian rouble, which fell to its lowest since re-denomination in 1998. Meanwhile,U.S. consumer prices unexpectedly fell in December as the cost of gasoline dropped and rents rose moderately, signs of weak inflation that further diminish expectations of a Federal Reserve interest rate hike in March. The Labor Department said its Consumer Price Index slipped 0.1 percent after being unchanged in November. Despite that drop, the CPI increased 0.7 percent in the 12 months through December, the biggest rise in a year. That followed a 0.5 percent gain in November.
GBP/USD is supported in the range of 1.4100 and currently trading at 1.4167 levels. It reached session high at 1.4219 and hit low at 1.4145 levels. Sterling rose against dollar on Wednesday, pulling away from seven-year low against the dollar, after data showed Britain's unemployment rate unexpectedly dropped to its lowest in a decade. The pound had fallen to a fresh trough just before the data, extending its 8 percent slide against the greenback over the past two months as investors push back bets on when UK interest rates will start to rise. Concerns over a possible of Brexit from Europe have also weighed on the currency. But Wednesday's data provided sterling with some breathing room. The jobless rate unexpectedly fell to 5.1 percent, its lowest since early 2006, although wage growth was at its slowest in almost a year. Having earlier fallen to $1.4125, its weakest since March 2009, sterling recovered to trade at $1.4177, leaving it up just 0.1 percent on the day.
USD/JPY is supported around 115.90 levels and currently trading at 116.88 levels. It peaked to hit session high at 117.02 and made session lows at 116.20 levels. The dollar fell to a more than one-year low against the Japanese yen on Wednesday as crude oil prices dropped near 13-year lows and risk appetite waned. Japanese yen was further boosted after data showed U.S. consumer prices unexpectedly fell in December suggesting inflation may be slow to rise toward the U.S. Federal Reserve's target and that the dollar's value will be unlikely to increase. Wednesday's weaker-than-expected data on U.S. consumer prices and housing starts supported worries about slowing domestic growth and bets the Federal Reserve would refrain from raising interest rates in the first quarter. The Commerce Department said housing starts dropped 2.5 percent to a seasonally adjusted annual pace of 1.15 million units. Building permits declined 3.9 percent to a 1.23 million-unit rate in December, pulled down by an 11.4 percent plunge in permits for multi-family buildings. Permits for the construction of single-family homes rose 1.8 percent last month.
USD/CAD is supported at 1.4419 levels and is trading at 1.4486 levels. It has made session high at 1.4660 and lows at 1.4472 levels. The Canadian dollar pared losses on Wednesday after the Bank of Canada left rates on hold, although the rebound from a fresh 12-year low was constrained by a worsening rout in crude oil prices and an extended selloff in global stocks. The rapid depreciation in the currency was seen by some as a reason for the Bank of Canada to leave rates on hold, even as the central bank marked down its economic projections. On the data front, Canadian manufacturing sales printed better than expected figures at 1.0 percent in November, breaking three consecutive negative streaks. Meanwhile, U.S. oil prices crashed to below $27 for the first time since 2003, caught in a broad slump across world financial markets. The currency's strongest level of the session was C$1.4491, while it hit its weakest since April 2003 at C$1.4689.
Equities Recap
European stocks dropped on Wednesday as a relentless slide in oil prices hit world markets, with a leading European index falling to a 15-month low.
Britain's blue-chip FTSE 100 index was down by 3.61 percent, France's benchmark CAC-40 index was down by 3.61 percent, Germany's DAX ended down 3.11 percent, meanwhile the pan-European FTSEurofirst 300 index was down by 3.44 percent.
Wall Street moved deep into the red on Wednesday, with the S&P 500 hitting its lowest since February 2014 and extending this year's selloff as oil prices continued dip towards lower levels.
Dow Jones closed down by 1.54 percent, S&P 500 ended down by 1.15 percent, Nasdaq finished the day down by 0.13 percent.
Treasuries Recap
U.S. Treasuries prices rose on Wednesday, with 30-year yields hitting their lowest levels in five months, as a deepening rout in global stock and oil markets stoked a fresh wave of purchases of low-risk government debt.
Benchmark 10-year Treasuries notes were up 13/32 in price for a yield of 1.991 percent, down 4.5 basis points from late on Tuesday.
The 30-year bond gained 26/32 in price to yield 2.766 percent, down 8 basis points on the day. The 30-year yield hit 2.711 percent, the lowest level since Aug. 24.
The five-year yield fell to 1.373 percent, its lowest level since late October, while the two-year yield slipped below 0.80 percent to its lowest point since early November.
Commodities Recap
Gold rose 2 percent on Wednesday, benefiting as global equity markets fell to 2-1/2-year lows and oil prices continued their relentless slump to a 13-year low, leading other commodity markets broadly lower.
Spot gold climbed to a session high of $1,109.20 an ounce and was up 1.5 percent at $1,103.36 an ounce at 2:42 p.m. EST (1942 GMT).
U.S. gold for February delivery settled up 1.6 percent at $1,106.20 an ounce.
U.S. oil prices crashed below $27 dollars a barrel on Wednesday for the first time since 2003, caught in a broad slump across world financial markets with traders also worried that the crude supply glut could last longer.
U.S. crude for February delivery, which expired at the end of the day, slid $1.91, or 6.7 percent to settle at $26.55.
New front month March futures fell nearly 4 percent on the day to close at $28.35 a barrel.
