Market Roundup
- PM Abe could become Japan’s longest-serving post-war leader – Nikkei.
- Japan Post Insurance (Kampo) to up holdings of both domestic-foreign stocks, currency-hedged foreign bonds/no hedges on JPY strength, alternative investments, to reduce JPY fixed income assets, aims to reach 10% risk-asset target by end-March – Reuters, Nikkei.
- Japan Sept corporate service price index unchanged m/m, +0.3% y/y.
- China tightens capital controls amid yuan’s continuing slide – Nikkei.
- PBOC CNY fix 6.7705 vs USD, offshore CNH holds below 6.7882 high yesterday.
- Australia Q3 CPI +0.7% q/q, +1.3% y/y, trimmed mean +0.4%, +1.7%, weighted median +0.3%, +1.3%, +0.5/+1.1%, +0.4/+1.7% and +0.4/+1.3% eyed, headline data strong but underlying data not as strong, RBA ease nixed.
- Over-optimism seen getting ahead of Asia’s actual profit recovery
- Oil prices fall as concerns over global fuel glut re-emerge
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Sep trade balance; last SEK10.3 bln deficit
- (0400 ET/0800 GMT) Italy Aug retail sales; last -0.3% m/m sa, -0.2% y/y nsa.
- (0430 ET/0830 GMT) Great Britain Sep BBA mortgage approvals, 37.3k eyed; last 37k.
- (0830 ET/1230 GMT) United States Sep wholesale inventories +0.1% m/m eyed; last -0.2%.
- (0945 ET/1345 GMT) United States Oct Markit PMI services – flash, 52.3 eyed; last 52.3.
- (0945 ET/1345 GMT) United States Oct Markit PMI composite – flash; last 52.3.
- (1000 ET/1400 GMT) United States Sep new home sales, 600k AR, -1.0% m/m eyed; last 610k, -7.6%.
- (1745 ET/2145 GMT) New Zealand Sep trade balance, NZ$1.145 bln deficit eyed; last NZ$1.265 bln def.
Key Events Ahead
- N/A China Communist Party Plenum (till Thursday).
- N/A Riksbank begins two-day policy meeting.
- (0400 ET/0800 GMT) Estonia CB financial stability review, ECB/Estonia CB Hansson speaks.
- (0500 ET/0900 GMT) Italy E0.75-1.5 bln 2.35% and 3.1% 2024 and 2026 BTPei auctions.
- (0530 ET/0930 GMT) Germany E3 bln 0% ‘21 Bobl, Portugal E0.75-1 bln 3.85% ‘21 bond auctions.
- (0800 ET/1200 GMT) BoS DepGov Restoy speaks at Madrid seminar.
- (1000 ET/1400 GMT) ECB CSO Diemer parliamentary testimony in Strasbourg.
- (1300 ET/1700 GMT) ECB ChiefEcon Praet speaks at Brussels dinner conference.
FX Beat
DXY: The dollar eased on weak consumer confidence reading, however, expectations of Fed raising rates by year-end remained intact. The greenback against a basket of currencies trades flat at 98.74, after rising to a near 9-month high of 99.12 on Tuesday.
EUR/USD: The euro recovered as the dollar took a breather after the European Central Bank President Mario Draghi stated the ECB was aware of the rising costs to the financial sector of its ultra-loose monetary policy and would rather not keep interest rates negative for too long. Draghi supported the central bank's policy of aggressive bond buying and ultra-low rates against the accusations of growing inequality and a shift of financial income from stronger to weaker economies. The major traded flat at 1.0889, after recovering from a near 8-month low of 1.0851 hit in the previous session. Investors now await US advance goods trade balance, Markit services PMI and new home sales release for further cues on the pair. Immediate resistance is located at 1. 0900, a break above could take it till 1.0930/ 1.0955. On the downside, support is seen at 1.0860, a break below could drag it till 1.0820.
USD/JPY: The dollar regained as renewed buying interest seen behind the greenback against a basket of currencies strengthened markets sentiment. On Tuesday, it rose to a near 3-month high of 104.87 yen, however, it trimmed gains after data released by the Conference Board showed the consumer confidence index declined to 98.6 in October from a downwardly revised 103.5 in September. Moreover, expectations of a year-end rate hike by the Federal Reserve will continue to the bid tone around the pair intact. The major trades 0.1 percent up at 104.34, having touched an early low of 104.02. Markets will closely watch the US services PMI, new home sales data and goods trade balance for further USD moves. Immediate resistance is located at 104.70, a break above targets 105.00. On the downside, support is seen at 103.80, a break below could take it near 103.50/ 103.20.
GBP/USD: Sterling weakened, pressured by comments from Bank of England Governor Mark Carney. On Tuesday, the major declined below the 1.2100 handle after the BoE governor raised doubts on expectations for more monetary stimulus in Europe, stating that the central bank would certainly take sterling's weakness into account at its rate-setting meeting next week. Sterling trades 0.2 percent lower at 1.2159, having shed 1.2 percent to 1.2082, its lowest since Oct. 7 in the previous session. Investors will continue to digest BoE official's comments, amid a lack of relevant macro-fundamental drivers from the UK docket. Immediate resistance is located at 1.2260, a break above could take it over 1.2300/ 1.2330. 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 89.51 pence, hovering towards a low of 89.80 hit in the prior session.
AUD/USD: The Australian dollar rallied above the 0.7700 handle as inflation rose slightly faster-than-expected, strengthening views that the central bank will stand pat on rates for next year. Data released earlier showed consumer price index rose at an annual rate of 1.3 percent in the third quarter, surpassing estimates of 1.1 percent, while Reserve Bank of Australia's trimmed mean CPI rose 1.7 percent in the same period. The Aussie trades 0.5 percent higher at 0.7687, having touched a near 1-week high of 0.7709 earlier in the session. The major was also supported by a surge in the price of iron ore, after Dalian iron ore futures advanced to a fresh 26-month peak, highlighting demand from China, Australia's export partner. The pair will continue to track sentiment around the USD and commodities prices, ahead of U.S. economic data. Immediate support is seen at 0.7622 (20-DMA), a break below could drag it near 0.7600. On the upside, resistance is located at 0.7720, a break above targets 0.7750.
NZD/USD: The New Zealand dollar edged down as renewed demand for the greenback across the board weighed on the major. Moreover, declining crude oil price and monetary policy divergence between the Federal Reserve and RBNZ continue to dampen the sentiment behind the Kiwi. New Zealand's central bank meets on Nov. 10 and is expected to ease a quarter-point to a record low of 1.75 percent, which could be the last cut in the current cycle. The major trades flat at 0.7161, having hit an intra-day high of 0.7175 and low of 0.7146. Markets attention now remains on series of U.S. economic data followed by NZ trade balance figures. Immediate resistance is located at 0.7180, break above targets 0.7200/ 0.7250. On the downside, support is seen at 0.7135, a break below could drag it lower 0.7100.
Equities Recap
Asian shares declined, following losses on the Wall Street due to overnight disappointing earnings, while the dollar edged down from a near 9-month high amid tumbling oil prices.
MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.6 percent.
Tokyo's Nikkei gained 0.15 percent at 17,391.84 points, Australia's S&P/ASX 200 index declined 1.58 percent to 5,356.70 points and South Korea's KOSPI was trading 1.3 percent lower at 2,010.52 points.
Shanghai composite index lost 0.4 percent at 3,118.80 points, while CSI300 index was trading 0.3 percent lower at 3,357.90 points.
Hong Kong’s Hang Seng was trading 0.7 percent down at 23,385.18 points. Taiwan shares shed 0.3 percent to 9,362.25 points.
Commodities Recap
Crude oil prices declined, as a report of rising U.S. crude inventories, increasing output in Nigeria and disagreement among producers about a planned output cut, raised concerns over a global supply glut. International benchmark Brent crude was trading 0.15 percent lower at $50.17 per barrel at 0405 GMT, having touched more than a 3-week low of $50.15 earlier in the session. U.S. West Texas Intermediate crude traded flat to $48.28 a barrel, after declining to an early 2-week low of $49.19.
Gold prices extended gains after rising to near 3-week highs in the previous session, supported by increasing physical demand ahead of India's late-October festival season. Spot gold edged up about 0.1 percent at $1274.86 an ounce at 0412 GMT, having hit a high of $1,276.56 on Tuesday, its strongest since Oct. 5. U.S. gold futures rose nearly 0.2 percent to $1275.70 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7490 percent down by 0.009 bps, while 5-year was 0.003 bps down at 1.2727 percent.
The Australian government bonds traded mixed after recent data showed that the country’s third-quarter consumer inflation climbed more than the overall market expectations, reducing possibilities for a further easing from the Reserve Bank of Australia. The yield on the benchmark 10-year Treasury note fell 2 basis points to 2.267 percent, the yield on 15-year note dipped 3 basis points to 2.623 percent and the yield on short-term 2-year jumped 2 basis point to 1.693 percent.
Canadian government bond prices were higher across the yield curve, with the 2-year price up 4.5 Canadian cents to yield 0.543 percent and the benchmark 10-year rising 23 Canadian cents to yield 1.14 percent. The 2-year yield fell 3.8 basis points further below its U.S. equivalent to leave a spread of -31.3 basis points, its widest since June 2, as Canadian government bonds outperformed.
