Market Roundup
- CFTC IMM CTA data – Specs pare back net long USD bets 2nd straight week, GBP net shorts record high 90k, JPY longs up to 48.8k, 1-month high.
- Japan FinMin Aso – Q2 consumer spending lacked strength, exports weak, govt stimulus package to help address this, structural reforms needed too, govt and BoJ working together to defeat deflation – Reuters.
- EconMin Ishihara – Concerned over EM slowdown, market developments, Brexit fall-out, souring biz sentiment – Reuters.
- Japan Q2 GDP unch q/q, +0.2% AR, +0.2% and +0.7% forecast, private consumption +0.2% q/q, as forecast, CAPEX -0.4%, -0.1% forecast, external demand contribution -0.3%, unch forecast, subtracts from growth for first time in 4 qtrs, housing investment +5.0%, private residential investments rise at best pace since Q3 ’11 GDP deflator +0.8% y/y.
- Japan megabanks seen taking 300 bln yen hit from subzero rates - Nikkei.
- Japan Inc takes to perpetual loans – Reuters (TRLPC).
- 56% of major firms expect temporary lull in Japan economy – Kyodo survey.
- PBOC ViceGov – RMB development exceeding expectations, market driven
- China PBOC sells net CNY190.5 bln in FX in July – Reuters calculation.
- Wall St banks ask Fed for 5 more years to comply with Volcker rule – Reuters.
- BoE ChiefEcon Haldane – MPC not under illusions it can fully insulate against long-term effects of Brexit, structural shift in UK trading regime, monetary policy only short-term balm – Times.
Economic Data Ahead
- (0315 ET/0715 GMT) Switzerland Jul producer/import prices; last +0.1% m/m, -1.0% y/y.
- (0830 ET/1230 GMT) United Stated Aug NY Fed Empire State mfg index, 2.5 forecast; last 0.55.
- (1000 ET/1400 GMT) United Stated Aug NAHB housing market index, 60.0 forecast; last 59.0.
Key Events Ahead
- (0530 ET/0930 GMT) Netherlands E1-2 bln 3 and 6-month DTC auctions.
- (1600 ET/2000 GMT) United Stated Tsy June int’l capital flows (TIC report), last net $11 bln outflow.
FX Beat
DXY: The dollar index, against a basket of currencies trades flat at 95.71, having touched a low of 95.25 following weak U.S retail sales and producer price index figures on Friday.
EUR/USD: The euro opened up on a bullish gap, however, failed to extend gains as the dollar attempted a minor recovery across the broad. On Friday, the major rose as high as 1.1221 after weak U.S. retail sales and producer price index numbers lowered expectations of a near-term interest rate hike by the Federal Reserve. Trading in the pair will remain subdued amid holiday-thinned markets. The European currency trades at 1.1160, having touched session's low of 1.1153. In absence of relevant data from the Eurozone, markets will continue to track broad market sentiment, ahead of U.S. Housing Market Index data. Immediate support is seen at 1.1141 (10-DMA), break below could take it ill 1.1112. On the higher side, resistance is located at 1.1200 handle, break above targets 1.1235.
USD/JPY: The Japanese yen edged down after rising as much as 0.6 percent to a high of 100.83 after soft U.S. economic data tempered speculation of U.S. Federal Reserve interest rate hike. The bid tone around the yen strengthened after Japan’s Ishihara noted that the economy was on a moderate recovery path; while Aso stated that positive effects from negative rates are seen emerging. However, the gains remained capped as data releases overnight showed that Japan's economy expanded by an annualized 0.2 percent in the second quarter missing projections of 0.7 percent, which underpinned the sentiment around the dollar. The dollar trades flat at 101.29, attempting to sustain gains above the 101.00 handle. Immediate support is seen at 100.67 (Jul-29 Low), break below could drag it near 100.00. On the upside, minor resistance is located at 101.66, break above targets 102.00.
GBP/USD: Sterling continues to decline on expectations that weak economic data will lead the Bank of England to ease monetary policy again in the coming months. The major rose above the 1.3000 handle, to a high of 1.3034 following downbeat U.S. economic data on Friday, but closed lower at 1.2916 on BoE easing speculation. Data released overnight showed that Britain's Rightmove House Price Index declined 1.2 percent in August from a drop of 0.9 percent in July. Sterling trades at 1.2920, having touched an early low of 1.2900. Immediate support is seen at 1.2850, break below could take it till 1.2800. On the higher side resistance is located at 1.2960 (5-DMA), break above targets 1.3068. Against the euro, the pound trades at 86.36 pence, hovering towards a 3-year low of 86.52 pence touched on Friday.
AUD/USD: The Australian dollar edged down, extending previous session losses as last week's disappointing economic data from China continued to weigh on investor sentiments. The major was also undermined by upbeat Fed Bullard’s comments, which strengthened the bid tone around the U.S. dollar. The Aussie trades at 0.7652, having touched a low of 0.7636 earlier in the session, though that was still not far from a 3-1/2 month high of 0.7759 hit last week. Markets will closely watch the Reserve Bank of Australia's August meeting minutes due on Tuesday for further clues about its monetary policy outlook. Immediate resistance is located at 0.7686, break above targets 0.7700. On the downside, support is seen at 0.7621, break below could take it lower 0.7600 handle.
NZD/USD: The New Zealand dollar declined as the US dollar attempted a minor recovery across the broad, after slumping on weak retail sales figure on Friday. The Kiwi was trading 0.1 percent down at 0.7179, having touched session's high of 0.7197, just short of 0.7200 handle. The monetary policy divergence and China's economic slowdown will continue to weaken the major. However losses will remain capped as a rally in oil prices strengthened investors sentiments. Market will continue to track broad based market sentiment ahead of U.S. economic data and the Reserve Bank of New Zealand Governor Graeme Wheeler's speech. Immediate resistance is located at 0.7229, break above targets 0.7300. On the lower side, support is seen at 0.7140, break below could take it near 0.7100.
Equities Recap
Asian shares edged down from 1-year highs as a rally in Chinese stocks aided to offset losses triggered by news of slowdown in Japan's economic growth in the last quarter.
MSCI's broadest index of Asia-Pacific shares outside Japan recouped early losses.
Tokyo's Nikkei declined 0.30 pct at 16,869.56, Australia's S&P/ASX 200 index rose 0.24 pct at 5,544.10 points and South Korea's KOSPI trades 0.1 percent up at 2,050.47 points.
Shanghai composite index added 2.6 percent at 3,132.53 points, while CSI300 index was trading 3.4 percent higher at 3,405.28 points.
Hong Kong’s Hang Seng was trading 0.7 percent higher at 22,943.52 points. Taiwan shares were flat at 9,148.51 points.
Commodities Recap
Crude oil prices extended gains above the $47 a barrel mark, having risen more than 10 percent since the start of the month on increasing speculation about potential producer action to support prices in an oversupplied market. International Brent crude oil was trading 0.2 percent higher at $47.24 per barrel at 0346 GMT, while U.S. West Texas Intermediate crude was at $44.81 a barrel, up 0.3 percent from its last close.
Gold edged up as weak U.S. retail sales figures released on Friday lowered expectations of Federal Reserve interest rate hike in near-term. Spot gold rose 0.3 percent at $1,339.08 an ounce at 0400 GMT, after rising as much as 1.4 percent to a high of $1,355.80 on Friday, however, ended the session slightly lower on profit-booking. U.S. gold was also nearly flat at $1,342 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5051 percent down by 0.01 bps, while 5-year was 0.013 bps lower at 1.0876 percent.
The benchmark 10-year Japanese government bond futures were down 0.10 point, extending losses slightly after Japan GDP data.
Australian government bond futures were higher, with the 3-year bond contract up 1 tick at 98.62, while the 10-year contract rose 1.5 ticks to 98.095.
New Zealand government bonds gained, sending yields 3.5 basis points lower across the curve.
