Market Roundup
- RBA August 2 minutes – Ease to help growth, inflation prospects, inflation likely low for some time, housing market cooling, AUD rise could complicate transition from mining boom, Q2 growth likely more modest, China uncertainty.
- Billionaire investors turn bearish as US stocks hit record highs, Soros slashes gold stake in Q2 – Reuters.
- Foreigners sell long-tem US assets in June, net capital outflow $202.8 bln, total net long-term flow -$38.9 bln, foreign holdings of US Tsys -$32.9 bln, China $1.241 bln vs $1.244 trln, Japan $1.148 trln vs $1.133 trln.
- Australia July new motor vehicle sales +1.6% m/m.
- Non-residents held 63.9% of NZ government securities in July, June 64.4%.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Jul CPI, -0.1% m/m, +0.5% y/y forecast; last +0.2%, +0.5%.
- (0430 ET/0830 GMT) Great Britain Jul – core, -0.1% m/m, +1.3% y/y forecast; last +0.2%, +1.4%.
- (0430 ET/0830 GMT) Great Britain Jul RPI, -0.1% m/m, +1.7% y/y forecast; last +0.4%, +1.6%.
- (0430 ET/0830 GMT) Great Britain Jul RPIX; last +0.4% m/m, +1.7% y/y.
- (0500 ET/0900 GMT) Eurozone Jun trade balance, E25.8 bln surplus nsa; last E24.6 bln surplus.
- (0500 ET/0900 GMT) Germany Aug ZEW economic sentiment index, 1.8 forecast; last -6.8.
- (0500 ET/0900 GMT) Germany Aug ZEW current conditions index, 50.0 forecast; last 49.8.
- (0830 ET/1230 GMT) United States Jul CPI, unch m/m, +0.9% y/y forecast; last +0.2%, +1.0%, index 241.04
- (0830 ET/1230 GMT) United States Jul – core, +0.2% m/m, +2.3% y/y forecast; last +0.2%, +2.3%, index 247.50
- (0830 ET/1230 GMT) United States Jul real weekly earnings; last -0.1% m/m.
- (0830 ET/1230 GMT) United States Jul housing starts, 1.18 mln AR forecast; last 1.19 mln, +4.8% m/m.
- (0830 ET/1230 GMT) United States Jul bldg permits, 1.16 mln AR forecast; last 1.15 mln, +1.5% m/m.
- (0915 ET/1315 GMT) United States Jul industrial output, +0.3% m/m forecast; last +0.6%.
- (0915 ET/1315 GMT) United States Jul capacity utilization, 75.6% forecast; last 75.4%.
- (0930 ET/1330 GMT) United States Jul Cleveland Fed median CPI; last +0.2% m/m.
Key Events Ahead
- (0440 ET/0840 GMT) Spain E4.5-5.5 bln 6 and 12-month treasury bill auctions.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E40.5 bln allotment forecast, E41.621 bln maturing.
- (0630 ET/1030 GMT) ESM E1.5 bln 6-month bill auction.
- (0850 ET/1250 GMT) France E2.8-3.2/0.5-0.9/0.5-0.9 bln 3/6/12-month BTF note auctions.
- (1230 ET/1630 GMT) Atlanta Fed Lockhart speaks in Knoxville.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.3 percent lower at 95.30, hovering towards a low of 95.25 touched on Friday following weak U.S retail sales data.
EUR/USD: The euro rose for the third straight session, attempting to re-gain the 1.1200 handle. The greenback continues to remain on the defensive after weaker-than-expected U.S. data released on Friday lowered expectations of Federal Reserve rate hike in the coming months. The European currency trades 0.1 percent higher at 1.1193, hovering towards a more than 1-week high of 1.1221. Investors now await Eurozone trade balance and economic sentiment index, ahead of series of U.S economic data for further cues on the major. Immediate resistance is located at 1.1221 (Aug-12 High), break above targets 1.1250, jump till 1.1300 is possible. On the lower side, support is seen at 1.1155 (Aug-1 Low), break below could drag it till 1.1113/1.1100.
USD/JPY: The greenback slumped to a fresh 5-week low below the 101.00 handle, as markets remain cautious on series of U.S. macro-data for insights on the health of the economy and the likelihood of another rate hike by the Fed in the near term. The cautious tone boosted the bid tone around the yen across the broad as a fresh bout of risk-aversion gripped the markets amid declining oil prices. The dollar trades 0.7 percent lower at 100.49, having touched a low of 100.38, it’s lowest since July 8. The major will continue to track broad based market sentiment, ahead of U.S consumer prices, housing starts and industrial output data. Immediate support is located at 100, break below could take it till 99.78/ 99.57. On the higher side, resistance is seen at 101.47 (10-DMA0, break above targets 102.00.
GBP/USD: Sterling edged up, recovering some of its previous session losses as the greenback weakened against most of its major peers. The British pound declined to a 5-week low against the dollar and 3-year low against the euro on Monday on rising expectations that the upcoming first round of national data would come in weak, which would lead the Bank of England to ease monetary policy again in the near-term. Sterling trades 0.2 percent higher at 1.2903, pulling away from a low of 1.2866 touched in the previous session. Markets will close watch UK CPI report release, as it will take into account the real impact of Brexit on the economy. Immediate resistance is located at 1.2932 (5-DMA), break above could take it till 1.3000. On the lower side, support is seen at 1.2850, break below targets 1.2789 (31-year low hit in June after the Brexit referendum).
AUD/USD: The Australian dollar rose, extending gains from the previous session, amid rising commodity prices. The major declined to an early low of 0.7653 after minutes of the Reserve Bank of Australia's August policy meeting reiterated that an interest rate cut by quarter point earlier in the month was necessary in order to strengthen the economic growth. The RBA eased its cash rate for the second time this year, as it sought to defend the economy from rising deflation and restrain a floating currency. The Aussie trades 0.3 percent higher at 0.7692, attempting to regain the 0.7700 handle. The pair will continue to track the broad based sentiment ahead of U.S. CPI, building permits, industrial production and housing starts data. Immediate resistance is located at 0.7724, break above targets 0.7760. On the lower side, support is seen at 0.7636, break below could take it near 0.7600.
NZD/USD: The New Zealand dollar extended gains above the 0.7200 handle, following its fellow-antipodean. The Kiwi trades 0.5 percent higher at 0.7244, hovering away from a low of 0.7164 touched in the previous session. The movements in the major will be driven by broader market sentiment, ahead of most awaited Global Dairy Trade auction and U.S. economic data for further momentum on the pair. Immediate resistance is located at 0.7270, break above would take it over 0.7300. On the lower side, support is seen at 0.7178 (10-DMA), break below targets 0.7150.
Equities Recap
Asian shares advanced to 1-year highs, extending gains this year to almost 10 percent, facilitated by a rise in oil prices and investor expectations of an extended stage of easy monetary policy.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent, bringing its gains so far this year to 9.8 percent.
Tokyo's Nikkei slumped 1.62 pct at 16,596.51, Australia's S&P/ASX 200 index edged down 0.13 pct at 5,532.80 points and South Korea's KOSPI trades flat at 2,050.46 points.
Shanghai composite index shed 0.4 percent at 3,110.92 points, while CSI300 index was trading 0.4 percent lower at 3,378.75 points.
Hong Kong’s Hang Seng was trading flat at 22,930.51 points. Taiwan shares declined 0.4 pct at 9,110.36 points.
Commodities Recap
Crude oil prices edged down, pulling away from 5-week highs touched on Monday, as investors cashed in gains on a 16-percent rally since early August largely triggered by talk of producers price action to support prices in an oversupplied market. International Brent crude oil was trading 0.5 percent lower at $48.02 per barrel at 0358 GMT, hovering around a monthly high of $48.50 per barrel. U.S. West Texas Intermediate crude was trading at $45.43 a barrel, down 0.6 percent from its previous close, but still over 16 percent above its $39.19 monthly low from Aug. 3.
Gold rose for a second consecutive session, as lower prospects of the U.S. Federal Reserve interest rates hike this year due to mixed macroeconomic, strengthened the safe-haven metal. Spot gold was up 0.5 percent at $1,346.02 an ounce at 0404 GMT, having gained 0.2 percent on Monday. U.S. gold rose 0.3 percent to $1,351 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5372 percent down by 0.015 bps, while 5-year was 0.015 bps lower at 1.1152 percent.
The Japanese Government Bond prices remain mixed, with 20yr and 30yr JGBs extending their earlier losses moderately. The yield on the current 5 year JGBs was down 1bp at -0.17 percent, while the 10 year yield was down 1bp at -0.095 percent, vs -0.08 percent (+0.5bp) earlier.
Australian government bond futures eased, with the 3-year bond contract down 1 tick at 98.62. The 10-year contract fell 1 tick to 98.105.
New Zealand government bonds fell slightly, sending yields 1 basis point higher across the curve.
Canadian government bond prices were lower across the maturity curve. The 2-year bond dipped 4.5 Canadian cents to yield 0.549 percent and the benchmark 10-year fell 37 Canadian cents to yield 1.044 percent. The curve steepened as the spread between the 2-year and 10-year yields widened by 1.6 basis points to 49.5 basis points, indicating underperformance for longer-dated maturities.
