Market Roundup
- Capital investment aside, Japan Inc spends big on acquisitions – Nikkei.
- Japan June core machinery orders +8.3% m/m, -0.9% y/y, +3.1% and -4.2% forecast, Q2 -9.2% q/q, first drop in 3 qtrs, +5.2% forecast for Q3, CAPEX recovery forecast.
- Japan July domestic corp goods prices unch m/m, -3.9% y/y, -0.1%, -4.0% forecast, June -0.1%, -4.2%.
- RBA Gov Stevens –Limits to monetary easing, current inflation target regime flexible, still useful, debt levels worrying, growth trend off touch.
- Australia June owner-occupied housing finance +1.2% m/m, +2.4% forecast, value of investment housing finance +3.2%.
- Australia Aug Westpac/MI consumer sentiment index 101.1, July 99.1.
- New Zealand July REINZ median house prices +2% m/m, +8% y/y.
Economic Data Ahead
- (0245 ET/0645 GMT) France Jun industrial output, +0.1% m/m forecast; last -0.5%.
- (0330 ET/0730 GMT) Sweden Jun industrial output, +0.6% m/m forecast; last -0.8% m/m, +1.7% y/y.
- (0330 ET/0730 GMT) Sweden Jun mfg new orders; last -0.5% y/y.
- (0400 ET/0800 GMT) Norway Jul CPI, unch m/m, +3.8% y/y forecast; last +0.6%, +3.7%.
- (0400 ET/0800 GMT) Norway Jul – core, +0.1% m/m, +3.1% y/y forecast; last +0.3%, +3.0%.
- (0400 ET/0800 GMT) Norway Jul PPI; last -9.7% y/y.
- (1000 ET/1400 GMT) United States Jun JOLTS job openings, 5.57 mln forecast; last 5.5 mln.
Key Events Ahead
- N/A Sweden SEK2.5 and 1.0 bln 2.5% and 3.5% 2025 and 2039 bond auctions.
- (0500 ET/0900 GMT) Italy E6 bln 12-month BoT, Greece E875 mln 13-week bill auctions.
- (0530 ET/0930 GMT) Germany E5 bln zero% 2026 Bund auction.
- (0700 ET/1100 GMT) Finland budget talks begin.
- (1700 ET/2100 GMT) RBNZ policy announcement, 25 bp OCR cut to 2.0% forecast.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.4 percent lower at 95.78, hovering towards a 5-day low of 95.95 after soft U.S. productivity data slashed Fed interest rate hike prospects.
EUR/USD: The euro gained as the dollar weakened against its peers after weaker-than-expected U.S. productivity data hampered the ongoing upward momentum it had gained from strong U.S. jobs report last week. On Tuesday, the U.S. Labor Department stated that non-farm productivity for the second quarter declined at a 0.5 percent annual rate in the April-June period, recording it’s the third straight quarter of decline. Moreover, market participants have reduced their bets on Federal Reserve interest rate hike this year. The euro trades 0.3 percent higher at 1.1153, extending its recovery from Friday's 1-week low of 1.1045. In absence of relevant data from the Eurozone, markets will closely watch U.S. Jolts Job Openings figures for fresh impetus on the pair. Immediate resistance is located at 1.1183 (Aug-1 High), break above targets 1.1200/1.1233. On the downside, support is seen at 1.1081 (20-DMA), break below could drag it till 1.1052.
USD/JPY: The greenback extended losses, pulling further away from a 1-week high touched on Monday. The dollar continues to decline as markets do not expect the Fed to hike this year, strengthening the bid tone around the Japanese yen. The yen was also underpinned by better-than expected Japanese core machinery orders and tertiary industry index for the month of June, which rose by 8.3 percent and 0.8 percent, respectively, surpassing projections and previous readings. The Japanese yen trades 0.6 percent higher at 101.27, hovering towards a high of 100.87 touched last week. The major will continue to track the broader market sentiment, ahead of U.S. JOLTS job openings data due later in the day. Immediate support is located at 100.74 (Aug-3 Low), break below could drag it near 100.52/ 100.20. On the higher side, resistance is seen at 102.52, break above targets 103.00.
GBP/USD: Sterling recovered after declining to a near a 1-month low struck in the previous session on Bank of England policymaker Ian McCafferty comments. BoE's McCafferty stated that more monetary easing was needed if Britain's economic conditions deteriorated. Data released overnight by National Institute of Economic and Social Research showed UK's GDP estimate over the last 3 months to July at 0.3 percent versus previous 0.6 percent. Sterling trades 0.5 percent higher at 1.3064, retreating from a low of 1.2956, its lowest since July 11. Investors attention will remain on U.S. job opening data and Britain’s' RICS Housing Price Balance for further cues on the major. Immediate resistance is located at 1.3100, break above targets 1.3150/ 1.3200. On the lower side, support is seen at 1.2956 (Previous Session Low), break below could drag it till 1.2850. Against the euro, the pound was 0.1 percent up at 85.36 pence, its lowest in a month.
AUD/USD: The Australian dollar advanced to a 3-month peak, after Reserve Bank of Australia Governor Glenn Stevens stated that there were low chances of the central bank to take unconventional measures such as negative rates and favored retaining the current inflation target of 2 percent to 3 percent. The Aussie trades 0.4 percent at 0.7704, attempting to extend gains above the 0.7700 handle. Data released earlier showed that Australia's consumer confidence for Aug rose by 2 percent against previous -3 percent, while investment lending for homes for June came in at 3.2 percent, versus prior 3.9 percent. Markets now await U.S. economic data and Australia's consumer inflation expectation figures for further momentum. Immediate resistance is located at 0.7729, break above targets 0.7765. On the lower side support is seen at 0.7653 (5-DMA), break below targets 0.7622/0.7600.
NZD/USD: The New Zealand dollar rose above the 0.7200 handle as investors await the Reserve Bank of New Zealand's rates decision on Thursday. The central bank is widely expected to cut rates by 25 basis points to 2.00 percent, given persistently low inflation. The Kiwi trades 0.7 percent higher at 0.7216, hovering towards a 1-week peak of 0.7256 touched last week. Moreover, markets have reduced their bets on Fed rates hike this year, which strengthened the bid tone around the major. Traders will continue to track broad market sentiment, ahead of the RBNZ policy meet. Immediate resistance is located at 0.7246, break above targets 0.7294. On the lower side, support is seen at 0.7115 (20-DMA), break below could take it below 0.7100 handle.
Equities Recap
Asian shares touched a 1-year high, as the dollar declined on weak U.S. productivity data, reducing the expectations of Fed interest rate hike this year.
MSCI's world index covering 46 markets added 0.2 percent, its highest in almost a year, while MSCI's broadest index of Asia-Pacific shares excluding Japan rose 0.35 percent to the highest level since August 2015.
Tokyo's Nikkei declined 0.18 pct at 16,735.12, Australia's S&P/ASX 200 index lost 0.25 pct at 5,538.60 points and South Korea's KOSPI trades flat at 2,042.42 points.
Shanghai composite index trades 0.1 percent down at 3,021.59 points, while CSI300 index was trading 0.2 percent lower at 3,249.51 points.
Hong Kong’s Hang Seng was trading 0.1 percent lower at 22,445.56 points. Taiwan shares rose 0.5 pct at 9,200.42 points.
Commodities Recap
Crude oil prices declined, pulling away from a 2-week highs, as a global fuel oversupply weighed on markets. International Brent crude oil was trading 0.2 percent lower at $44.87 per barrel by 0622 GMT, while U.S. West Texas Intermediate crude oil was at $42.63 per barrel, down by 0.2 percent.
Gold climbed by more than 1 percent, extending its previous session gains as the dollar weakened after downbeat U.S. productivity report reduced prospects a Federal Reserve rate hike this year. Spot gold rose 0.1 percent to $1,354.21 an ounce by 0621 GMT, retreating from a 1-week low of $1329.79 touched on Monday. U.S. gold was up 0.4 percent at $1,352.10 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5350 percent down by 0.01 bps, while 5-year was 0.016 bps lower at 1.0910 percent.
The Australian government bonds gained after the Reserve Bank of Australia Governor Glenn Stevens, in his last speech, urged a slower path of rate cuts and pointed for fiscal action, like most other central bankers. The benchmark 10-year Treasury note's yield, fell 6 basis points to 1.885 percent and the yield on short-term 2-year note dipped 2 basis points to 1.456 percent.
The New Zealand 10-year bond yields closed flat after falling two basis points in wake of RBNZ policy easing hopes. Also, investors are anticipating 25 basis points interest rate cut from the central bank against a backdrop of rising deflationary pressure. 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 Canadian government bond prices were higher across a flatter maturity curve. The 2-year bond edged up 0.5 of a Canadian cent to yield 0.508 percent and the benchmark 10-year climbed 46 Canadian cents to yield 1.017 percent. The 10-year yield touched its lowest since July 14 at 1.001 percent. It fell 1.5 basis points farther below the yield on its U.S. equivalent, leaving the spread at -53.6 basis points, its largest gap since June 2, as Canadian government bonds outperformed.
