Market Roundup
• US productivity falls for 3rd consecutive quarter -0.5 v -0.6% previous.
• US labor costs increase at 2.0 percent pace, Q1 unit labor costs revised sharply down to -0.2 from +4.5%.
• US June wholesale inventories revised to +0.3% from flat.
• After resuming QE, BoE fails for the first time to meet bond-purchase target.
• BoE said it would announce its response to the shortfall on Wednesday at 08:00 GMT.
• Sterling at 1-month low as BoE's McCafferty open to more stimulus; stocks gain globally.
• Latin America/Emerging Market currencies, bonds & equities up on global search for yield.
• Atlanta Fed model for Q3 downticks to 3.7% from 3.8% on Aug 5.
• U.S. household debt rises to $12.29 trillion in Q2, 4.8% of household debt in delinquency -NY Fed survey.
Looking Ahead - Economic Data (GMT)
• --:-- China New Yuan Loans* Jul forecast 800.0b, 1380.0b-previous
• 23:50 Japan Machinery Orders MM* Jun forecast 3.1%, -1.40%-previous
• 23:50 Japan Machinery Orders YY Jun forecast -4.2%, -11.70%-previous
• 00:30 Australia Consumer Sentiment Aug -3.00%-previous
• 01:30 Australia Housing Finance* Jun forecast 2.4%, -1.00%-previous
• 01:30 Australia Invest Housing Finance* Jun 3.90%-previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1055 levels and currently trading at 1.1113 levels. The pair has made session high at 1.1123 and hit lows at 1.1076 levels. The euro inched higher against the dollar on Tuesday as traders were puzzled over likelihood that the U.S. Federal Reserve will raise interest rates this year, with no major new economic indicators due until Friday's retail sales report. A speech by Fed Chair Janet Yellen at the central bank's Aug. 26 symposium in Jackson Hole, Wyoming will be closely watched for any new indications of when an interest rate increase is likely. The greenback had gained since last Friday's jobs report for July showed better-than-expected employment gains, raising expectations that a further rate increase this year is likely. The currency pair gave back some of those gains on Tuesday on no obvious catalyst, with trading volumes expected to be relatively light this week with many traders and investors on summer vacations. The dollar index against a basket of currencies fell 0.24 percent to 96.174. The greenback was 0.53 percent weaker against the Japanese yen at 101.88.
GBP/USD is supported in the range of 1.2932 currently trading at 1.3006 levels. It reached session high at 1.3016 and hit low at 1.2952 levels. The British pound fell to one-month low on Tuesday, hurt by comments from Bank of England policymaker Ian McCafferty who said more monetary easing was likely to be required if the UK's economy worsens. McCafferty, a policy hawk in the nine-member monetary policy committee, wrote in the Times that the bank rate can be cut further, closer to zero, and quantitative easing can be stepped up. He did caution that information on the scale of the economic downturn was still limited. On the data front, British industrial output grew at the fastest rate since 1999 in the second quarter of this year. Industrial output rose 0.1 percent month-on-month in June - in line with economists' forecasts after a 0.6 percent drop in May. Sterling fell 0.6 percent to $1.2956, its lowest since July 11. It recovered a tad to trade at $1.30 after industrial data for June came in line with expectations.
USD/CAD is supported at 1.3100 levels and is trading at 1.3120 levels. It has made session high at 1.3148 and lows at 1.3108 levels. The Canadian dollar strengthened against its U.S. counterpart on Tuesday after as higher oil prices offset recent weak domestic data. The Canadian dollar's more stable performance follows steep losses on Friday as a slump in domestic jobs and a record-wide trade deficit contrasted with a robust U.S. jobs report. Canadian housing starts fell in July from June, as construction of multiple units - typically condos - fell 13.3 percent after an unexpectedly large gain in June, data from the national housing agency showed on Tuesday. The report from the Canadian Mortgage and Housing Corp showed the seasonally adjusted annualized rate of housing starts declined to 198,395 in July, down from a revised 218,326 in June. Economists had forecast 195,000 starts in July. Canadian government bond prices were higher across a flatter maturity curve. The two-year bond rose 0.5 Canadian cent to yield 0.508 percent and the benchmark 10-year climbed 26 Canadian cents to yield 1.038 percent.
AUD/USD is supported around 0.7596 levels and currently trading at 0.7670 levels. It hit session high at 0.7686 and made session lows at 0.7663 levels. The Australian dollar inched higher against US dollar on Tuesday, as rise in oil prices towards $43.47 a barrel and slight weakness in US dollar strengthened commodity-related currencies. The Australian dollar inched to $0.7686 but retreated slightly to trade at $0.7672.A break above $0.7686 would push it to its highest level since early May. It has bounced a cent and a half since it hit a low in the wake of last week's interest rate cut by the Reserve Bank of Australia. Much of the Aussie resilience comes from a lack of U.S. dollar momentum combined with strong recovery in oil prices. Also, underpinning is Australia's relatively high yielding 10-year bonds paying around 2 percent, compared with the negative rates of Japan and Germany. That has encouraged carry trades where the market borrows at low rates in yen, pounds or euros to buy higher-yielding assets such as the Aussie and kiwi.
Equities Recap
European shares advanced for a fifth straight session on Tuesday as companies like Altice continued to report quarterly results that exceeded forecasts.
UK's benchmark FTSE 100 closed up 0.6 percent, the pan-European FTSEurofirst 300 ended the day up by 0.97 percent, Germany's Dax ended up 2.6 percent, France’s CAC finished the day down by 1.2 percent.
The Nasdaq composite rose to a record high close on Tuesday while other major indexes hovered near their own recent all-time highs in a session with thin trading volume.
Dow Jones closed up by 0.02 percent, S&P 500 ended up by 0.03 percent, Nasdaq finished the day up by 0.24 percent.
Treasuries Recap
Longer-dated U.S. Treasury prices rose on Tuesday after a weak report on U.S. productivity and a reverse auction in which the Bank of England failed to meet its long-dated bond purchasing target boosted the appetite for U.S. government debt.
Benchmark 10-year Treasury notes rose 11/32 in price to yield 1.547 percent. The 30-year bond gained 29/32 in price to yield 2.259 percent.
Commodities Recap
Gold prices rose on Tuesday as the dollar slipped lower against a basket of currencies and concerns over the global economic outlook trumped some expectations that the U.S. Federal Reserve could raise interest rates this year.
Spot gold was up 0.4 percent at $1,340.47 an ounce by 2:57 p.m. EDT (1857 GMT), off an earlier low of $1,330.03, while U.S. gold futures for December delivery settled up 0.4 pct at $1,346.7 an ounce.
Oil prices fell 1 percent on Tuesday, extending losses in post-settlement trade after preliminary data showed a surprise U.S. crude stockpile build last week, heightening worries about a global petroleum glut.
WTI, or the West Texas Intermediate benchmark for U.S. crude, settled down 25 cents, or 0.6 percent, at $42.77 a barrel. It fell as much as 55 cents after the release of the API data.
Brent crude settled the session down 41 cents, or almost 1 percent, at $44.98 a barrel. It slid to $44.76 after the API numbers.
