Market Roundup
- China yuan holding at 6-year lows, 6.7810-82 vs USD.
- PBOC DepGov Yi Gang – Yuan remains broadly stable – People’s Daily.
- Japan auto-makers Mazda, Fuji Heavy take hit from stiffer yen – Nikkei.
- US Treasury – Favorable trends in US bond market – Reuters.
- BoC Gov Poloz – US-Canada economic-monetary policies could diverge, further Canada rate cut would bring unconventional tools closer – Reuters.
- The economy could reshape UK as the Japan of Europe - Financial Times.
- IMF - Migrants bring economic benefits for advanced economies.
- RBNZ – To publish future projections for OCR instead of 90-day bill –Reuters.
Economic Data Ahead
- (0245 ET/0645 GMT) France Oct business climate index, 103.0 forecast; last 103.0.
- (0330 ET/0730 GMT) Sweden Sep PPI; last +1.0% m/m, -0.3% y/y.
- (0400 ET/0800 GMT) Germany Oct Ifo business climate index, 109.5 forecast; last 109.5.
- (0400 ET/0800 GMT) Germany Oct Ifo current conditions index, 114.9 forecast; last 114.7.
- (0400 ET/0800 GMT) Germany Oct Ifo expectations index, 104.5 forecast; last 104.5.
- (0400 ET/0800 GMT) Italy Aug ind orders/sales; last -10.8% m/m, -11.8% y/y, +2.1%, -0.7%.
- (0830 ET/1230 GMT) United States Oct Philly Fed non-mfg survey sentiment index; last 16.7.
- (0900 ET/1300 GMT) United States Aug CaseShiller 20 +0.4% m/m nsa, +5.0% y/y forecast; last +0.6%, +5.0%.
- (0900 ET/1300 GMT) United States Aug FHFA monthly home prices; last +0.5% m/m, +5.8% y/y, index 236.1.
- (1000 ET/1400 GMT) United States Oct CB consumer confidence index, 101.0 forecast; last 104.1.
- (1000 ET/1400 GMT) United States Oct Richmond Fed mfg ship, services, comp indices; last -4, 13, -8.
Key Events Ahead
- N/A China Communist Party Plenum (till Thursday).
- N/A UK E3 bln 2.5% 2065 bond syndication, Austria 2023 bond syndication.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E35 bln allotment forecast, E33.4 bln maturing.
- (0600 ET/1000 GMT) Finland E1 bln 0.75% 2031 RFGB auction.
- (0945 ET/1345 GMT) Europe Economics Seminar in Brussels, Brexit focus.
- (1035 ET/1435 GMT) BoE Gov Carney parliamentary testimony.
- (1130 ET/1530 GMT) ECB Pres Draghi speaks in Berlin.
- (1320 ET/1720 GMT) Atlanta Fed Lockhart speaks in Atlanta.
FX Beat
DXY: The dollar held gained as upbeat U.S. manufacturing activity and comments from Federal Reserve official boosted expectations of a U.S. rate hike by year-end. The greenback against a basket of currencies held gains near 9-month highs of 98.85 and was trading at 98.70.
EUR/USD: The euro edged slightly lower as the dollar strengthened following solid U.S. manufacturing activity and Federal Reserve officials' comments. On Monday, Preliminary Markit survey showed U.S. manufacturing activity levels reached a 1-year high of 53.2 this month, while Chicago Fed President Charles Evans stated that the central bank could raise rates three times between now and the end of 2017, as long as inflation expectations and the labor market conditions improved. The euro trades lower at 1.0877, having touched an intra-day low of 1.0867. The major is likely to consolidate between a narrow range, ahead of the German Ifo surveys, the US consumer confidence and Richmond manufacturing data due later in the day. However, markets attention will remain on the ECB Chief Draghi’s speech at the German Institute for Economic Research, in Berlin. Immediate resistance is located at 1. 0909 (5-DMA), a break above could take it till 1.0930/ 1.0955. On the downside, support is seen at 1.0850, a break below could drag it till 1.0820.
USD/JPY: The dollar rose, extending gains above the 104.00 handle, as upbeat U.S. manufacturing activity and comments from a Federal Reserve officials' strengthened the case of Fed interest rate hike by year-end. Moreover, recent polls showed Hilary Clinton leading in the U.S. presidential elections, prompting markets to price out the possibility of a victory by Donald Trump. The major trades 0.2 percent higher at 104.40, hovering just below a 2-1/2-month high of 104.63 set earlier this month. The pair is likely to remain on the upside as board based risk-on market sentiment weakened the bid tone around the safe-haven yen. Investors now await U.S. house price data along with consumer confidence, ahead of FOMC's Lockhart speech. Immediate resistance is located at 104.65, a break above targets 105.00. On the downside, support is seen at 103.94 (5-DMA), a break below could take it near 103.50/ 103.20.
GBP/USD: Sterling nudged down, but held ground above the 1.2200 handle, as the greenback continued to rise across the board. The major gained on Monday despite data showed Britain's CBI industrial trends survey - manufacturing orders weakened sharply in October to –17 from –5 in September while growth in output slowed. Sterling trades 0.2 percent lower at 1.2215, attempting to sustain gains above the 1.2200 level. In absence of macro-fundamental drivers from the UK, investors will focus on Bank of England Gov Mark Carney's speech. BoE Carney is scheduled to testify about Brexit Vote's consequences on the economy before the House of Lords Economic Affairs Committee, in London. Immediate resistance is located at 1.2300, a break above could take it over 1.2330/ 1.2370. On the downside, support is seen at 1.2100, break below targets 1.1900. Against the euro, the pound was trading 0.2 percent lower at 89.02 pence.
AUD/USD: The Australian dollar gained, as investors expect inflation data due tomorrow to ease the prospects of another rate cut by the Reserve Bank of Australia this year. Investors speculate that the RBA easing cycle could be over if the consumer price index figures showed underlying inflation steadied around 1.5 percent in the third quarter. Moreover, the recovery is also helped by a rebound in the price of iron ore and coal, keeping the bid tone around the Aussie intact. The major trades 0.26 percent up at 0.7630, hovering towards high of 0.7650 struck on Friday. The movements in the pair will be driven by overall market sentiment, ahead of U.S. economic data and Atlanta Fed Lockhart's speech. Immediate support is seen at 0.7580, a break below could drag it till 0.7530. On the upside, resistance is located at 0.7638 (5-DMA), a break above targets 0.7650.
NZD/USD: The New Zealand dollar rose, halting its three days losing streak after the Reserve Bank of New Zealand announced it would start making projections for the OCR instead of 90-day bank bill rate. The major initially declined to 1-week low on board based greenback strength, however, it reversed losses following RBNZ announcement. The Kiwi trades 0.2 percent higher at 0.7153, pulling away from a low of 0.7109, it’s lowest since October 17 but is on track for its first monthly loss since May as investors’ narrows the odds on a rate hike from the U.S. Federal Reserve. Immediate resistance is located at 0.7176 (5-DMA), break above targets 0.7200/ 0.7250. On the downside, support is seen at 0.7109 (Session Low), a break below could drag it lower 0.7100.
Equities Recap
Asian shares were little changed, despite Japanese shares hitting a 6-month peak, as factory surveys in the United States and Europe strengthened investor risk sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan traded flat.
Tokyo's Nikkei gained 0.7 percent at 17,365.25 points, Australia's S&P/ASX 200 index rose 0.60 percent to 5,441.00 points and South Korea's KOSPI was trading 0.5 percent lower at 2,037.54 points.
Shanghai composite index was little changed at 3,127.06 points, while CSI300 index was trading 0.1 percent lower at 3,362.79 points.
Hong Kong’s Hang Seng was trading flat at 23,600.04 points. Taiwan shares added 0.7 percent to 9,322.50 points.
Commodities Recap
Crude oil prices declined as a disagreement within producer cartel OPEC on the production proportion cut to coordinate reduction to balance prices, weighed on markets. International benchmark Brent crude was trading 0.2 percent lower at $51.35 per barrel at 0406 GMT, having touched a 3-week low of $50.48 hit in the previous session. U.S. West Texas Intermediate crude traded flat to $50.47 a barrel, after declining to a 1-week low of $49.60 on Monday.
Gold prices edged marginally higher as the U.S. dollar gained on increasing expectations of a December interest rate hike by the Federal Reserve. Spot gold was trading 0.1 percent up at $1265.32 an ounce at 0410 GMT, while U.S. gold futures eased nearly 0.1 percent at $1263 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7630 percent, while 5-year was 0.004 bps up at 1.2726 percent.
The Australian government bonds traded nearly flat as investors await the third-quarter consumer inflation data, in an attempt to estimate the RBA's most likely policy step. The yield on the benchmark 10-year Treasury note remained steady at 2.277 percent, the yield on 15-year note hovered around 2.63 percent mark and the yield on short-term 2-year slid 1 basis point to 1.672 percent.
The New Zealand government bonds closed modestly higher as investors remained cautious ahead of the Reserve Bank of New Zealand’s (RBNZ) survey of inflationary expectations report, scheduled to be released next week, which could be the catalyst for rate cut from the central bank. The yield on the benchmark 10-year bond fell 1 basis point to 2.610 percent, the yield on 7-year note ended ½ basis point lower at 2.288 percent and the yield on short-term 2-year note slid 1 basis point to 1.955 percent.
Canadian government bond prices were lower across the maturity curve, with the 2-year price down 7.5 Canadian cents to yield 0.56 percent and the benchmark 10-year falling 30 Canadian cents to yield 1.163 percent.
