Market Roundup
- Japan Jan services PMI 52.4, 5-month high, Dec 51.5.
- Japan FinMin suspends 10-year JGB sales to individuals - Kyodo.
- Japan BTMU may impose fees on big company deposits - Nikkei.
- US Jan light vehicle sales 1.15 mln units, 17.58 mln AR, Dec 17.34 mln.
- UK NIESR - Growth of 2.3% forecast in '16 despite global upheaval.
- UK Jan BRC shop prices -1.8% y/y, Dec -2.0%, food prices up.
- Australia Dec trade def A$3.535 bln, A$2.5 bln forecast, exp -5% m/m, imp -1%.
- Australia export earnings in hole as commodities crater - Reuters.
- Australia Dec bldg approvals +9.2% m/m, +5% forecast, priv-sector houses +5.4%.
- Australia Jan PSI +2.1 pts to 48.4, still in contraction, wages contract.
- Australia Jan VFACTS new vehicle sales +2.7% y/y, strong, '15 stellar.
- More central bank rate cuts coming before any hike - Reuters.
- BoJ Gov Kuroda - No limits to easing steps, will do whatever it takes/ "unwavering determination" to achieve 2% inflation goal, upping QQE/more negative rates, new tools on table, concedes taking longer than forecast in achieving CPI target, China-EM uncertainties up, markets less stable, China fears overblown - Reuters.
- BoJ Policy Board Dec 17-18 minutes - Government clearly apply pressure for more ease, supplementary measures to allow BoJ to swiftly ease if needed, most agreed but no need to ease immediately, firms positive on CAPEX but holding back on labor costs, price trend improving.
- RBNZ Gov Wheeler - Will keep flexible approach, inappropriate to offset low oil price through OCR, policy to remain accommodative, core CPI in range, downside risks mostly, more easing may be needed over course of year.
- NZ Q4 unemployment 5.3%, employment +0.9%, participation 68.4%, 6.1%/+0.8%/ 68.9% forecast; LCI priv-wages ex-o'time +0.4% q/q, +1.6% y/y, +0.5/1.6% forecast.
Economic Data Ahead
- (0230 ET/0730 GMT) Sweden Jan PMI services; last 58.0.
- (0315 ET/0815 GMT) Spain Jan PMI services, 54.4 forecast; last 55.1.
- (0345 ET/0845 GMT) Italy Jan PMI services, 54.2 forecast; last 55.3.
- (0350 ET/0850 GMT) France Jan PMI services, 50.6 forecast; flash 50.6, composite 50.5.
- (0355 ET/0855 GMT) Germany Jan PMI services, 55.4 forecast; flash 55.4, composite 54.5.
- (0400 ET/0900 GMT) Eurozone Jan PMI services, 53.6 forecast; flash 53.6.
- (0400 ET/0900 GMT) Eurozone Jan PMI composite, 53.5 forecast; flash 53.5.
- (0400 ET/0900 GMT) Norway Jan housing prices; last +5.0% y/y.
- (0400 ET/0900 GMT) Norway Nov labor force survey - unemployment, 4.7% forecast; last 4.6%.
- (0430 ET/0930 GMT) Great Britain Jan PMI services, 55.3 forecast; last 55.5.
- (0500 ET/1000 GMT) Eurozne Dec retail sales, +0.3% m/m, +1.5% y/y forecast; last -0.3%, +1.4%.
- (0500 ET/1000 GMT) Italy Jan CPI - prelim, -0.2% m/m, +0.3% y/y forecast; last unch, +0.1%.
- (0500 ET/1000 GMT) Italy Jan HICP - prelim, -2.3% m/m, +0.3% y/y forecast; last -0.1%, +0.1%.
- (0815 ET/1315 GMT) United States Jan ADP national employment, +195k forecast; last +257k.
- (0945 ET/1445 GMT) United States Jan Markit PMI services/composite - final; flash 53.7, 53.7.
- (1000 ET/1500 GMT) United States Jan ISM PMI non-mfg, 55.1 forecast; last 55.8.
Key Events Ahead
- N/A Buba Frankfurt conference, ECB Pres Draghi, others to attend (till tom).
- N/A Currency seminar in Oslo, various attendees; OECD Paris conference.
- N/A Sweden SEK2bln each 5/2.5% 2020/25 bond, Greece E625mln 3-mo bill sales.
- (0500 ET/1000 GMT) UK ChancExch Osborne, Italy EconMin Padoan debate in Rome.
- (0530 ET/1030 GMT) Germany E5 bln 2021 Bobl auction.
- (0915 ET/1415 GMT) BoE PRA Bailey testimony at UK Tsy Select Committee hearing.
- (1615 ET/2115 GMT) Canada Senate hearing on CAD fall, BoC, FinMin officials to testify.
FX Beat
USD: The dollar edged down against the yen as declining oil prices sparked an investor flight into safer assets, driving down U.S. debt yields to 10-month lows and fading the greenback's appeal. Against a basket of currencies, the dollar index was 0.01 percent down at 98.80.
EUR/USD: The euro trades 0.04 percent up at 1.0922 levels against its U.S. counterpart. Earlier in the session the pair to rose to 1.0935, nearing previous sessions high of 1.0939. It is likely to hold on to its overnight gains after a sharp slide in crude oil prices fueled risk aversion, driving down U.S. debt yields to 9-month lows and further weighing on greenback's appeal. Investors draw their attention towards Eurozone economies final services PMI data and U.S. economic releases scheduled for the day ahead. The U.S. ISM non-manufacturing PMI is expected to drop to 55.1 in January from 55.8 in December. Recording its lowest print in almost two years, however, still above the 50 mark that separates contraction and expansion. Currently the pair trades at 1.0921 levels, having touched session low of 1.0911. Immediate support is located at 1.0900 (5- DMA), while resistance is seen at 1.0939 (Previous Session High).
USD/JPY: The yen edged higher against the dollar on Wednesday as declining oil prices strengthened the safe- haven yen appeal. The dollar dropped 0.26 percent to 119.64 yen, drifting away from a 6-week high of 121.70 yen set on Friday after the Bank of Japan adopted a negative interest rate policy.The pair is likely to maintain its downside momentum against the backdrop of the renewed sell-off in oil prices, further strengthening the demand for the safe-haven yen. The recovery in the pair seems to be weak as the persisting risk-aversion across the financial markets is likely to favour the yen. As the oil price action continues to lead the financial markets, traders await for U.S. economic releases for fresh cues. The pair currently trades at 119.62 levels, hovering towards sessions low of 119.41. Support is seen at 119.22 (10- DMA), while resistance is located at 120.08 (5- DMA).
AUD/USD: The Australian dollar trades 0.13 percent down at 0.7028 as sharp decline in oil prices returned the focus back to global growth concerns. The Aussie is likely to remain defensive after the Reserve Bank of Australia stood pat on monetary policy but left the door open for future easing. Australia's December trade balance data failed to impress the markets as it came in worse-than-expected at -3535m versus consensus of -2450m. Exports stood at -5 percent against previous 1 percent, while imports remained at -1 percent. Currently the pair trades at 0.7029 levels, having touched sessions low of 0.7002. Immediate support is located at 0.6986 (20- DMA), while on the upside, resistance is seen at 0.7068 (5- DMA).
NZDUSD: The New Zealand dollar stood tall against its U.S. peer following a strong jobs report. The kiwi trades at 0.6563 levels, drifting away from a 4-month trough touched in January. The surprising plunge in the unemployment rate in the fourth quarter of 2015, decreases the chances that the Reserve Bank of New Zealand will reduce interest rates further, however, RBNZ Governor clearly left the door open for more easing in a speech on Wednesday. The pair continues to advance, hovering towards sessions high of 0.6574. Immediate resistance is located at 0.6590 (Jan 13 High), while support is seen at 0.6496 (20- DMA).
USD/CNY: China's yuan was firm on Wednesday as regulatory capital control measures helped cushion the usual increased demand for the dollar ahead of the Lunar New PBoC set the midpoint rate at 6.5521 per dollar prior to market open, only 0.02 weaker than the previous fix 6.551. The spot market opened at 6.5824 per dollar and was at 6.5798 at midday, little changed from the previous close. The offshore yuan was trading at 6.6287 per dollar, 0.74 percent weaker than the onshore spot rate. China has taken a series of steps to stabilise its foreign exchange market, including imposing limits on cross-border flows from yuan-denominated capital pools. The Chinese foreign exchange market will be closed all next week for the Lunar New Year holiday.
Equities Recap
Asian shares plunged on Wednesday as oil prices dropped for a third day, prompting investors to seek shelter in safe-haven assets and lifting bonds and gold to multi-month highs.
The MSCI's broadest index of Asia-Pacific shares outside Japan dropped 2.1 percent，led by a 3.0 percent fall in Hong Kong shares, while Taiwan stocks edged down 0.8 pct at 8,063.00 points.
Australia's S&P/ASX 200 Index dropped 2.33 pct at 4,877.20 points, while Nikkei closed down 3.15 pct at 17,191.25, with Seoul shares edged down 0.81 pct.
Commodities Recap
Gold was firm near a 3-month peak early on Wednesday, its safe-haven appeal kept intact by concerns over a wobbly global economy that has put share markets under pressure. Spot gold was flat at $1,128.12 an ounce by 0216 GMT, not far below Tuesday's peak of $1,130.30, while U.S. gold for April delivery was up 0.2 percent at $1,128.90 an ounce. Spot silver was also flat at $14.30 an ounce, while palladium was at $489.31, with platinum gained 0.7 percent to $856.05 per ounce.
Oil futures extended losses into a third session in Asian trade on Wednesday, as U.S. crude stocks last week surged to more than half a billion barrels and as Iran plans to boost exports from March. Brent for April delivery plunged 17 cents to $32.55 a barrel as of 0344 GMT, after settling down $1.52, or 4.4 percent. West Texas Intermediate dropped 15 cents to $29.73, having ended the previous session down $1.74, or 5.5 percent.
Treasuries Recap
The benchmark 10-year U.S. Treasury note yield dropped to 1.874 percent, its lowest since April 2015.
Australian government bond futures rose to near 4-month peaks, with the 3-year bond contract up 4 ticks at 98.180. The 10-year contract advanced 7 ticks to 97.4500, while the 20-year contract was steady at 96.9300.
New Zealand government bonds climbed in line with a global rally in safe-haven assets, sending yields 7 basis points lower at the long end of the curve.
Canadian government bond prices were higher across the maturity curve on the flight to safety. The benchmark 10-year surged C$1.03 to yield 1.118 percent, while the 2-year price was up 8.5 Canadian cents to yield 0.377 percent. The Canada-U.S. 2-year spread was 2.7 basis points less negative at -36.1 basis points.
