Market Roundup
- Fed to markets: June rate increase is on the table – J. Hilsenrath, WSJ.
- Moody’s – Global growth to remain muted as China slowdown weighs on EM, EM weakness to weigh on US, advanced economies.
- Japan March core machinery orders +5.5% m/m, +3.2% y/y, +0.5% and +0.8% forecast, Q1 core orders +6.7% q/q, -3.5% forecast in Q2.
- MoF flow data week-ended May 14– Japanese sell net Y152.1 bln foreign stocks, buy Y1.1218 trln bonds, Y152.5 bln bills; foreign investors buy net Y71.7 bln Japanese stocks, Y348.4 bln bonds, whopping Y2.3008 trln bills.
- ChiefCabSec Suga – Ultimately up to PM Abe to decide on sales tax – Reuters.
- Japan’s top non-life insurers seen with record combined profit - Nikkei.
- PBOC sets CNY midpoint at 6.5531 vs USD, 3 ½-month low.
- Australia April employment +10.8k, unemployment 5.7%, participation 64.8%, +12.5k, 5.8% and 64.9% forecast, full-time employment -9.3k, labor mkt resilient, unemployment at lowest since October ‘13.
- New Zealand May ANZ/RM consumer confidence index 116.2, April 120.0, well above 100.
- New Zealand April ANZ job ads +1.7% m/m, +4.6% y/y, labor market strong.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Apr retail sales, +0.5% m/m, +2.5% y/y forecast; last -1.3%, +2.7%.
- (0430 ET/0830 GMT) Great Britain Apr - ex-fuel, +0.6% m/m, +1.9% y/y forecast; last -1.6%, +1.8%.
- (0830 ET/1230 GMT) United States Apr Chicago Fed national activity index; last -0.44.
- (0830 ET/1230 GMT) United States May Philly Fed business sentiment index, 3.5 forecast; last -1.6.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 275k forecast; last 294k.
- (1000 ET/1400 GMT) United States Apr leading indicators index, +0.4% m/m forecast; last +0.2%.
Key Events Ahead
- N/A IMF-Bank of Slovenia seminar in Portoroz, various attendees, speakers.
- N/A Norges Bank Gov Olsen parliamentary testimony.
- (0430 ET/0830 GMT) Spain E2-3 bln 0.25/4.8/1.95% 2019/24/30 Bono auctions.
- (0450 ET/0850 GMT) France E5.5-6.5 bln zero% 2019 and 2021 OAT auctions.
- (0500 ET/0900 GMT) Riksbank DepGov Skingsley speech in Stockholm.
- (0550 ET/0950 GMT) France E1.2-1.7 bln 0.1/0.1/0.7% 2021/25/30 index-linked OAT auctions.
- (0730 ET/1130 GMT) ECB April policy meeting minutes.
- (0800 ET/1200 GMT) Ireland CB Gov Lane speaks at Dublin conference.
- (0915 ET/1315 GMT) FOMC ViceChair Fischer speaks at New York conference.
- (1030 ET/1430 GMT) NY Fed Dudley New York press briefing on US economy.
- (1300 ET/1700 GMT) BoE MPC Vlieghe speaks at London Business School.
FX Beat
USD: The dollar index, against a basket of currencies, was at 95.212 after rising to an early high of 95.333, as the FOMC minutes rekindled expectations for a June interest rate hike.
EUR/USD: The euro steadied after falling as low as 1.1214 on Wednesday, it’s weakest since March 29. The greenback advanced to a 3-week high after the minutes of the U.S. Federal Reserve's April policy meeting revived expectations for a June interest rate hike. The Fed minutes showed that if economic data suggested a firm second-quarter growth, as well as strong inflation and employment, then most policymakers were leaning towards tightening. With FOMC minutes effects fading away, markets will now closely watch ECB Monetary Policy Meeting Accounts for further cues. The major trades flat at 1.1216, after making an intra-day high of 1.1229. Immediate resistance is located at 1.1273 (5-DMA), break above could take the pair above the 1.1300 level. On the lower side, support is seen at 1.1211 (Session Low).
USD/JPY: The Japanese yen edged up after declining in the previous three sessions. It trades 0.1 percent higher at 110.08 yen, pulling away from a low of 110.25 touched in the previous session. The dollar soared overnight, to its strongest level since April 28, following the FOMC minutes. The Japanese officials were relieved following the dollar's rebound against the yen, as they were concerned that yen's recent strength would restrain Japan's economic recovery. The major will continue to track the broader market sentiment ahead of series of economic data from the U.S. and Fed speeches due later in the day. Immediate support is seen at 109.42, break below could breach the 109.00 level. On the higher side, resistance is seen at 110.27 (Session's High).
GBP/USD: Sterling edged up after hitting a 2-week high against the dollar. On Wednesday, it rose to a high of 1.4634 after a poll showed that the "In" camp had an 18-point lead just over a month before Britain's referendum on European Union membership. Sterling trades flat at 1.4600, having touched an early high of 1.4605. Markets now await U.K's retails sales data for further momentum on the pair. Immediate support is seen at 1.4565 (Session Low), break below could drag it down to 1.4497 (20-DMA). On the higher side, resistance is located at 1.4634 (Previous Session High). Against the euro, it trades at 76.93 pence, after it strengthened to a 10-week high of 76.82 pence per euro in the previous session.
AUD/USD: The Australian dollar slumped to a two-and-a-half month low after mixed jobs data spurred speculative selling. The Aussie declined as low as 0.7191, a level last seen since early March. It trades 0.2 percent lower at 0.7209 from an early high of 0.7241. Australia's net new jobs grew by a total of 10,800, however, lower than markets forecast of 12,500, with the unemployment rate staying at its lowest in more than two years. With the Australia's economic calendar absolutely data empty, markets attention will remain on series of data from the U.S. economy, including jobless claims. Immediate support is seen at 0.7161 (Mar-2 Low), while on the upside, resistance is seen at 0.7241 (Session Low).
NZD/USD: The New Zealand dollar declined to 0.6727, after rising to a high of 0.6764 earlier in the session. The kiwi dropped nearly 1 percent overnight, after FOMC minutes revived expectations for a June interest rate. The major received some support after an ANZ survey showed that New Zealand’s job ads added 4.6 percent from a year ago, suggesting growth in the labor market. The pair continues to decline, hovering towards session’s low of 0.6724. Markets attention will remain on U.S. jobless claims ahead of New Zealand’s visitor’s arrivals data for further direction. Immediate support is located at 0.6716 (May-10 Low), break below could drag the pair to further losses. On the upside, resistance is located at 0.6764 (Session High).
Equities Recap
Asian stocks slumped as the dollar rose on the possibility of another interest rate hike by the Federal Reserve as early as June.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8 percent in early trade.
CSI300 index trades lower at 3,065.68 points, Hong Kong’s Hang Seng was trading 0.6 percent lower at 19,705 points and Taiwan stocks slumped 0.8 pct at 8,095.98 points.
Australia's S&P/ASX 200 index closed down 0.60 pct at 5,324.00 points, Tokyo's Nikkei was flat at 16,646.66 and Seoul shares lost 0.58 pct.
Commodities Recap
Oil prices declined, pulling away from 2016 highs, weighed down by increasing U.S. crude inventories and surging output from Iran to Europe and Asia. Brent crude futures were trading 0.8 percent down at $48.09 per barrel at 0628 GMT. U.S. crude futures were down 1.5 percent, at $47.45 a barrel.
Gold was trading near a 3-week low as the dollar strengthened after the Federal Reserve policy meeting minutes showed that the central bank could raise rates as soon as next month. Spot gold was trading lower at $1,254.50 per ounce at 0630 GMT. It declined 1.7 percent in the previous session, hitting a 3-week low of $1,254.95. U.S. gold futures fell 1.2 percent to $1,259.30.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.8730 down by 0.007 bps.
Australian government bond futures extended losses, with the 3-year bond contract off 3 ticks at 98.380. The 10-year contract shed 6 ticks to 97.6550, while the 20-year contract dropped 6.5 ticks to 97.0200.
New Zealand government bonds eased, sending yields 6.5 basis points higher at the long end of the curve.
Canadian government bond prices were lower across the maturity curve, with the benchmark 10-year down 44 Canadian cents to yield 1.365 percent, while the 2-year price declined 9.5 Canadian cents to yield 0.635 percent.
