Market Roundup
- North Korea suspected to have conducted nuclear test – Various media.
- BoJ Gov Kuroda – No special instructions from PM Abe after meeting
- Tensions emerge as US allows Japanese rules for some swaps – Reuters.
- Japan Aug money supply M2 +3.3% y/y, M3 +2.8%, broadest liquidity +1.7%, July rev +3.4%, +2.9%, +1.9%.
- China Aug CPI +0.1% m/m, +1.3% y/y, +0.3% and +1.7% forecast, y/y inflation slowest since October ’15, food CPI +1.3% y/y, non-food +1.4%.
- China Aug PPI +0.2% m/m, -0.8% y/y, -0.9% y/y forecast.
- Foreign CB US debt holdings -$4.488 bln to $3.184 trln Sept 7 week, Treasury holdings -$4.963 bln to $2.861 trln, agencies +$289 mln to $262.854 bln.
- NY Fed – Swaps with foreign CBs $350 mln Sept 7 week, all with ECB.
- ABS issuers plan $8 bln in trades amid huge flows into funds – IFR.
- Lipper – US taxable bond funds net $3.4 bln in latest week, US investors seen betting against near-term Fed rate hike.
- Australia July owner-occupied housing finance -4.2% m/m, -1.5% forecast, June rev +1.7%, value of investment housing finance +0.5%.
- New Zealand Aug electronic card retail sales -0.4% m/m, +3.7% y/y.
Economic Data Ahead
- (0300 ET/0700 GMT) Spain Jul industrial output, +0.4% y/y forecast; last +0.8%.
- (0400 ET/0800 GMT) Norway Aug CPI, -0.3% m/m, +4.1% y/y forecast; last +0.6%, +4.4%.
- (0400 ET/0800 GMT) Norway Aug – core, -0.4% m/m, +3.4% y/y forecast; last +0.7%, +3.7%.
- (0400 ET/0800 GMT) Norway Aug PPI; last -7.2% y/y.
- (0430 ET/0830 GMT) Great Britain Jul trade bal, GBP11.75 bln deficit forecast; last GBP12.41 bln deficit.
- (0430 ET/0830 GMT) Great Britain Jul - non-EU, GBP 3.70 bln deficit forecast; last GBP 4.16 bln deficit.
- (0430 ET/0830 GMT) Great Britain Jul construction output, -0.8% m/m, -3.2% y/y forecast; last -0.9%, -2.2%.
- (1000 ET/1400 GMT) United States Jul wholesale sales/inventories, +0.2%/unch m/m forecast; last +1.9%/unch.
Key Events Ahead
- N/A EcoFin meeting in Bratislava (till tom), Riksbank Gov Ingves in London.
- (0600 ET/1000 GMT) UK DMO GBP1.5/1.5/3.0 bln 1/3/6-month treasury bill auctions.
- (0700 ET/1100 GMT) ECB/Latvia CB Rimsevics speaks at Riga conference.
- (0745 ET/1145 GMT) Boston Fed Rosengren speaks in Quincy, Massachusetts.
- (0920 ET/1330 GMT) Dallas Fed Kaplan speaks at Austin conference.
- Sat Dallas Fed Kaplan speaks at Irving, Texas conference.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent lower at 94.89, having touched a 2-week low of 94.46 in the previous session and was set to slip 1 percent for the week.
EUR/USD: The euro extended gains, hovering towards a 2-week high hit in the previous session after the European Central Bank kept interest rates on hold as expected. The major rose as high as1.1327 after ECB kept the door open to more stimulus, however, it trimmed gains to close at 1.1258 as the central bank gave no explicit hints about its next move and refrained from expanding its asset-purchase program. The European currency trades 0.2 percent higher at 1.1277, attempting to regain the 1.1300 handle. Investors now await series of data from the eurozone economies, ahead of Fed official Rosengren’s speech for fresh insights on the US interest rates outlook. Immediate resistance is located at 1.1297, break above could take it near 1.1330. On the lower side, support is seen at 1.1239 (20-DMA), break below could drag it till 1.1200.
USD/JPY: The dollar reversed its previous session gains and was set for weekly losses in a week as investors remained uncertain about U.S. monetary policy outcome in the near-term. On Thursday, the major attempted a minor recovery to hit a high of 102.60 from 101.40 level, however, the rebound ran out of steam as the yen buyers made a comeback and pushed the dollar lower to near 102.00 handle. The dollar trades 0.4 percent lower at 102.09, attempting to sustain above the 102.00 level. The major will be drive by broad market sentiment as data calendar in the US is light, but market will closely watch Fed official speech for fresh cues on the US monetary policy outlook. Immediate resistance is located at 102.71 (10-DMA), break above targets 103.00. On the downside, support is seen at 101.74 (Aug 30- Low), break below could take it near 101.00.
GBP/USD: Sterling steadied after declining from a 7-week peak of 1.3445 stuck on Tuesday following hawkish comments from Bank of England Governor Mark Carney. The governor reiterated his view that the central bank was ready to take whatever action is required in order to help the economy from the effects of Brexit shock vote. The pound fell to a 1-week low against the euro after ECB President Mario Draghi said an extension of its asset purchase plan had not been discussed. Sterling trades 0.3 percent higher at 1.3327, pulling away from a 1-week low of 1.3283 touched in the previous session. Investors will closely watch UK's consumer inflation expectations and trade balance figures for further cues on the pair. Immediate resistance is located at 1.3375 (Previous Session High), break above could take it near 1.3400. On the downside, support is seen at 1.3257 (10-DMA), break below targets 1.3200. Against the euro, the pound trades 0.1 percent up at 84.62 pence, having touched a 1-week low of 84.95 pence, in the previous session.
AUD/USD: The Australian dollar edged up, after declining from a 3-week peak hit above the 0.7700 handle as European Central Bank offered no cues of further near-term easing, However, the ongoing recovery is likely to remain fragile as weak macro news from China and Australia dampened investor sentiments. China's CPI dropped 1.3 percent y/y in August, against consensus of 1.7 percent and previous 1.8 percent, while the monthly reading was at 0.1 percent. The PPI figures came in at -0.8 percent y/y, slightly higher than -0.9 percent expected and prior -1.7 percent. Separately, Australia's home loans slumped -4.2 percent in July versus expectations of -1.5 percent and last 1.7 percent. The Australian dollar trades 0.2 percent higher at 0.7654, attempting to extend gains above the 0.7650 level. Immediate support is seen at 0.7615 (20-DMA), break below could drag it lower 0.7600. On the upside, resistance is located at 0.7700, break above targets 0.7730.
NZD/USD: The New Zealand dollar rose above the 0.7400 handle, as markets ignored a weaker-than-expected China CPI data. The major is in a corrective mode after having touched a 1-year high of 0.7484 largely on the back of yield differential and stronger global dairy prices. The Kiwi trades 0.1 percent higher at 0.7405, having gained 1.5 percent for the week. The major will be driven by overall market sentiment, amid lack of relevant data from both the economies. Investors await New Zealand's GDP figures due next week which are likely to show the economy sped ahead in the second quarter, which should keep the kiwi underpinned. Immediate resistance is located at 0.7425, break above targets 0.7450. On the downside, support is seen at 0.7383 (Previous Session Low), break below could drag it till 0.7350.
Equities Recap
Asian shares declined after the European Central Bank did not provide any cues on future easing steps it may take, while oil prices advanced on an unexpected drawdown in U.S. stockpile.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent from Thursday's 13-month high.
Tokyo's Nikkei ended 0.32 pct down at 16,958.77 points, Australia's S&P/ASX 200 index declined 0.75 pct at 5,383.30 points and South Korea's KOSPI shed 1.2 percent at 2,037.48 points.
Shanghai composite index lost 0.3 percent at 3,084.83 points, while CSI300 index was trading 0.4 percent down at 3,324.23 points.
Hong Kong’s Hang Seng was trading 1.1 percent higher at 24,194.40 points. Taiwan shares ended 1.06 percent down at 9,164.88 points.
Commodities Recap
Crude oil prices edged down on profit-taking after rising more than 4 percent higher in the previous session as government data showed U.S. crude stocks fell 14.5 million barrels last week to 511.4 million barrels, the biggest weekly decline in stockpiles since January 1999. Global benchmark Brent crude oil was 0.3 percent down at $49.52 a barrel by 0403 GMT, having touched a 2-week high of $50.10 on Thursday. U.S. West Texas Intermediate crude was at $47.20, lower by 0.2 percent.
Gold prices steadied as the dollar continues to weaken across the broad and were on course for its second successive weekly gain. Spot gold gained 0.1 percent at $1,338.50 an ounce by 0408 GMT, having declined to a low of $1335.17 in the previous session, but was set for a 1-percent gain this week. U.S. gold futures were steady at $1,342.20.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.6163 percent, while 5-year was at 1.1883 percent down by 0.002 bps.
The Australian government bonds plunged as fewer Americans filed applications for unemployment benefits last week, highlighting the United States job market remains healthy. The yield on the benchmark 10-year Treasury note rose 10-1/2 basis points to 2.023 percent and the yield on short-term 2-year jumped 7 basis points to 1.578 percent.
The New Zealand government bonds closed lower as investors cashed in profits relishing previous gains. The yield on the benchmark 10-year bond increased 6-1/2 basis points to 2.345 percent, the yield on 7-year note ended 4-1/2 basis points higher at 2.040 percent and the yield on short-term 2-year note climbed 2 basis points to 1.875 percent.
Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The 2-year bond fell 5 Canadian cents to yield 0.572 percent and the benchmark 10-year tumbled 78 Canadian cents to yield 1.087 percent. The 10-year yield touched its highest since Aug. 22 at 1.117 percent.
