Market Roundup
- Japan July money supply M2 +3.3% y/y, M3 +2.9%, broadest liquidity +1.7%, steady rises continuing, June +3.5%, +2.9% and +2.0%.
- China July CPI +0.2% m/m, +1.8% y/y, +0.1% and +1.8% forecast, food CPI +3.3% y/y, non-food +1.4%.
- China July PPI +0.2% m/m, -1.7% y/y, -2.0% y/y forecast.
- BoE MPC McCafferty – More rate cuts on way if economy worsens, QQE could be stepped up, GBP fall could see CPI “overshoot” relative to target – Times.
- UK July BRC like-for-like retail sales +1.1% y/y, total sales +1.9%, June -0.5%, +0.2%, total retail spending rise largest rise since January.
- London Metal Exchange to launch gold-silver spot-futures contracts in H1 ‘17 – Reuters.
- Australia July NAB business conditions index +8, confidence +4, June +11, +5.
- New Zealand July electronic card retail sales +0.3% m/m, +5.8 y/y, June +1.2%, +6.8%.
Economic Data Ahead
- (0245 ET/0645 GMT) France Jun budget balance; last E65.7 bln deficit.
- (0400 ET/0800 GMT) Norway Jun credit indicator; last +4.8% y/y.
- (0430 ET/0830 GMT) Great Britain Jun trade balance, GBP10.0 bln deficit forecast; last GBP9.88 bln deficit.
- (0430 ET/0830 GMT) Great Britain Jun - non-EU, GBP 2.5 bln deficit forecast; last GBP2.57 bln deficit.
- (0430 ET/0830 GMT) Great Britain Jun ind production, +0.1% m/m, +1.6% y/y forecast; last -0.5%, +1.4%.
- (0430 ET/0830 GMT) Great Britain Jun mfg production, -0.2% m/m, +1.3% y/y forecast; last -0.5%, +1.7%.
- (0600 ET/1000 GMT) United States Jul NFIB business optimism index; last 94.5.
- (0830 ET/1230 GMT) United States Q2 productivity – prelim, +0.4% q/q forecast; last -0.6%.
- (0830 ET/1230 GMT) United States Q2 labor costs – prelim, +1.8% q/q forecast; last +4.5%.
- (1000 ET/1400 GMT) United States Jun wholesale sales, +0.4% m/m forecast; last +0.5%.
- (1000 ET/1400 GMT) United States Jun wholesale inventories, unch m/m forecast; last +0.1%.
- (1000 ET/1400 GMT) United States Aug IBD/TIPP economic optimism index, 47.3 forecast; last 45.5.
- (1000 ET/1400 GMT) Great Britain Jul NIESR GDP estimate, +0.4% forecast; last +0.6%.
Key Events Ahead
- Singapore National Day holiday.
- (0500 ET/0900 GMT) Austria E550 mln 0.75% 2026 RAGB auction.
- (0530 ET/0930 GMT) ECB 7-day zero% refi, E42 bln allotment forecast, E42.989 bln maturing.
- (0540 ET/0940 GMT) Belgium E1.7-2.1 bln 3 and 12-month treasury certificate auctions.
FX Beat
DXY: The dollar index, against a basket of currencies edged up 0.1 percent at 96.48, hovering towards a 1-week high of 96.52, touched on Friday.
EUR/USD: The euro came under renewed selling as the dollar strengthened across the broad on growing expectations that the Federal Reserve could raise interest rates later this year. The European currency trades just below the 1.1100 handle at 1.1084, retreating from session's low of 1.1070. The recovery in the major will remain fragile as markets continue to digest mixed Chinese CPI and PPI releases, while divergent monetary policy outlooks between the Fed and ECB will boost the U.S. dollar, particularly after Friday’s strong U.S. jobs report. Looking ahead, in absence of relevant macro data from the Eurozone, markets attention will remain on the U.S. economic releases for fresh impetus on the pair. Immediate support is located at 1.1052 (Jul-28 Low), break below could take it till 1.1000. On the higher side, resistance is seen at 1.1106, break above targets 1.1154/1.1183.
USD/JPY: The greenback held its ground against the Japanese yen, after having touched a near 1-week high in the previous session. However, the dollar was losing the bullish momentum, as sentiment appears to have turned negative after the Chinese datasets came out mixed. Although, the downside remains capped as upbeat NFP report increased speculations of near-term Fed interest rates hike. The major trades at 102.47, hovering towards a 1-week high struck on Monday. It will continue to be driven by persisting risk sentiments, ahead of series of economic data from the U.S. Immediate support is seen at 101.80 (5-DMA), break below could drag it till 101.20. On the higher side, resistance is located at 103 handle, break above targets 103.40/ 104.00
GBP/USD: The sterling slumped to a 1-month low below the 1.3000 handle on speculation of further policy easing in the United Kingdom. The major declined as low as 1.2977 after Bank of England policymaker Ian McCafferty noted that more quantitative easing might be required if Britain's economy deteriorated. Sterling trades 0.3 percent lower at 1.2998, attempting to regain the 1.3000 handle. Investors will closely watch UK's trade balance, industrial and manufacturing production figures for further cues on the major. Immediate support is seen at 1.2971 (Jul-12 Low), break below could take it till 1.2875/ 1.2800. On the higher side, resistance is located at 1.3106 (5-DMA), break above targets 1.3150. Against the euro, the pound trades 0.3 percent lower at 85.25 pence, it’s lowest since July 11.
AUD/USD: The Australian dollar declined after rising to a fresh 3-week high in the previous session. Investors ignored Chinese consumer price inflation data, which accelerated at its weakest pace in six months. However, National Australia Bank's (NAB) poor business confidence and conditions data supported further Reserve Bank of Australia rate cut to 1 percent. NAB's July business conditions index came in at 8 against previous 12, while business confidence index stood at 4 versus prior 6. The Aussie edged down 0.2 percent to 0.7633 but was still near a 3-week peak of 0.7672 set on Monday. Markets will continue to digest NAB's dataset, ahead of U.S. fundamental news. Immediate support is seen at 0.7600 handle, break below targets 0.7557. On the higher side, resistance is located at 0.7672, break above could take it till 0.7700.
NZD/USD: The New Zealand dollar edged lower after rising to an early high of 0.7159. The weakness came in after New Zealand’s July electronic card retail sales rose by 0.3 percent m/m, versus previous 1.2 percent gain, while on annual basis it increased 5.8 against prior 6.8 percent. The Kiwi trades 0.3 percent lower at 0.7115, but was up from the previous day's low of 0.7086. The Reserve Bank of New Zealand is likely to cuts rates by 25 basis points to 2.00 percent at a policy meeting on Thursday. The major will continue to track broad based market sentiments, ahead of economic data from the U.S. Immediate support is seen at 0.7100 handle, break below could drag it near 0.7086 (Previous Session Low). On the higher side, resistance is located at 0.7188, break above targets 0.7200 handle.
Equities Recap
Asian shares touched 1-year peaks as investors' sentiments were strengthened on growing expectations that the U.S. Federal Reserve could raise interest rates later this year.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.1 percent, having already risen for three sessions in a row.
Tokyo's Nikkei gained 0.69 pct at 16,764.97, Australia's S&P/ASX 200 index added 0.27 pct at 5,552.80 points and South Korea's KOSPI 200 rose 0.6 percent at 2,043.70 points.
Shanghai composite index trades 0.4 percent up at 3,015.53 points, while CSI300 index also traded 0.4 percent higher at 3,246.42 points.
Hong Kong’s Hang Seng was trading 0.2 percent lower at 22,444.52 points. Taiwan shares edged up 0.1 pct at 9,155.08 points.
Commodities Recap
Crude oil prices edged down, pulling away from a 2-week high touched in the previous session, on speculation that OPEC would try to restrain output as global oil glut continue to weigh on markets. International Brent crude oil was down 0.5 percents at $44.95 a barrel by 0409 GMT, after rising as high as $45.68, a level last seen since July 25. NYMEX crude for September delivery was down 19 cents at $42.83 a barrel, after gaining $1.22, or 2.9 percent, on Monday.
Gold was little changed, after having touched a 1-week low hit in the previous session, as investors using the correction in prices to hunt for bargains. Spot gold was mostly flat at $1,334.56 an ounce by 0412 GMT, having touched its lowest since July 29 at $1,329.79 on Monday. U.S. gold was nearly flat at $1,341.40 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5798 percent down by 0.005 bps, while 5-year was 0.003 bps lower at 1.1347 percent.
The Australian government bonds traded nearly flat, succumbing to thin trading activity during a relatively quiet session that saw data of little significance. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 1.95 percent mark and the yield on short-term 2-year note remained steady at 1.49 percent.
The New Zealand government bonds traded modestly higher as investors sought refuge in the safe-haven instruments ahead of the Reserve Bank of New Zealand monetary policy decision. The yield on the benchmark 10-year bond fell 1/2 basis point to 2.230 percent, the yield on 7-year note also dipped 1/2 basis point to 1.930 percent and the yield on short-term 2-year note ended 1-1/2 basis points lower at 1.780 percent.
The Chinese sovereign bonds rallied after data showed that the country’s both consumer and producer inflation continued to remain weak, creating pressure on the PBOC for a further innovative monetary policy easing. The yield on the benchmark 10-year note, which moves inversely to its price, dipped nearly 1 basis point to 2.762 percent, the yield on super-long 30-year bond fell nearly 3 basis points to 3.327 percent and the yield on short-term 3-year note slid 1 basis point to 2.407 percent.
Canadian government bond prices were slightly higher across the maturity curve, with the 2-year price up 2 Canadian cents to yield 0.51 percent and the benchmark 10-year rising 4 Canadian cents to yield 1.067 percent. The yield on Canada's 10-year bond widened 1.1 basis points further below the yield on its U.S. equivalent, leaving the spread at -52.1 basis points, its largest gap since June 3, as Canadian government bonds outperformed.
