Asia Roundup: RBA stays pat, Aussie whiplash post rate decision, Asian shares plunge as oil resumes slump - Tuesday, February 2nd, 2016

Market Roundup

• India Cash Reserve Ratio Stays Flat At 4.00 % (Fcast 4.00 %) Vs Prev 4.00 %
  
  
• India Reverse Repo Rate Stays Flat At 5.75 % Vs Prev 5.75 %
  
  
• India Repo Rate Stays Flat At 6.75 % (Fcast 6.75 %) Vs Prev 6.75 %
  
  
• RBA leaves OCR as is at 2% as forecast, scope for more ease if needed, policy needs to be accommodative, AUD adjusting to declines in commodity prices, China growth continuing to moderate, inflation to remain low.
  
  
• New Zealand Jan ANZ commodity price index -2.3% m/m, -14.7% y/y, Dec -1.8%, -12.9%.
  
  
• Japan FinMin Aso - Closely monitoring impact of BoJ negative rate policy on banks - Nikkei.
  
  
• EconMin Ishihara - Wants BoJ to continue to work to meet price target, important for stocks to remain stable, support wage increases - Reuters.
  
  
• Japan Jan monetary base rises to another record high, trln - Kyodo.
  
  
• China PBOC injects trln liquidity before Lunar New Year - Reuters.
  
  
• PBOC Wang Yong - Warns of abnormal increase in January loan volume - China Securities Times.
  
  
• Ted Cruz wins Iowa Republican caucuses with 28%, Trump 24%; Clinton, Sanders in virtual tie on Democrats side - Washington Post, Financial Times et al.
  
  
• US Treasury expects to borrow net $250 bln in Q1, pay down $112 bln in Q2.

• (0315 ET/0815 GMT)  Switzerland Dec retail sales; last -3.1% y/y.
  
  
• (0355 ET/0855 GMT)  Germany Jan unemployment, 6.3%, -7k sa forecast; last 6.3%, -14k.
  
  
• (0355 ET/0855 GMT)  Germany Jan unemployment, 2.95 mln nsa forecast; last 2.68 mln nsa, 2.76 mln sa.
  
  
• (0400 ET/0900 GMT)  Italy Dec unemployment, 11.2% forecast; last 11.3%.
  
  
• (0430 ET/0930 GMT)  Great Britain Jan construction PMI, 57.5 forecast; last 57.8.
  
  
• (0500 ET/1000 GMT)  Eurozone Jan unemployment, 10.5% forecast; last 10.5%.
  
  
• (0500 ET/1000 GMT)  Eurozone Dec producer prices, -0.6% m/m, -2.8% y/y forecast; last -0.2%, -3.2%.
  
  
• (0945 ET/1445 GMT)  United States Jan ISM - New York index; last 716.6.
  
  
• (1330 ET/1830 GMT)  United States Jan total vehicle sales, 17.4 mln AR forecast; last 17.34 mln.
  
  

• N/A   Italy March '47 bond syndication, DB-GS-HSBC-JPM-MPS lead managers.
  
  
• N/A   ESM E2 bln 3-mo bill, Belgium E2.1-2.5 bln 3/6-mo tsy certificate sales.
  
  
• (0315 ET/0815 GMT)  ECB Coeure speech in Frankfurt.
  
  
• (0400 ET/0900 GMT)  Fathom Consulting/ThomsonReuters London qtrly forum, various attendees.
  
  
• (0430 ET/0930 GMT)  ECB 0.05% 7-day refi tender, E65 bln allotment forecast, last bln.
  
  
• (0500 ET/1000 GMT)  SNB Chair Jordan speech in Geneva.
  
  
• (0530 ET/1030 GMT)  Buba Dombret speech in Paris.
  
  
• (0600 ET/1100 GMT)  NIESR quarterly forecasts, press conference in London.
  
  
• (1300 ET/1800 GMT)  KC Fed George speech in Kansas City.

USD: The greenback edged down against the yen on Tuesday as drop in oil prices weighed on equities and risk appetite. Against a basket of currencies, the dollar index was 0.06 percent down at 98.98.

EUR/USD: The euro extended gains as Asian shares turned red following overnight slump in oil prices and downbeat China manufacturing data. Trading was subdued with cautious commentary from ECB's Draghi and Fed's Fischer keeping investors sidelined. Draghi highlighted the risks facing the eurozone and reiterated the ECB was ready to review its monetary policy stance in early March, while Fisher stated that it was difficult to judge the likely implications of recent volatility in global financial markets. The pair will be influenced by stocks and oil market turmoil, while markets await for employment data from Germany as well as Eurozone economies for fresh cues for the pair. Currently it trades at 1.0899 levels, having touched sessions high of 1.0918. Immediate resistance is located at 1.0927 (Jan 18 High), while support is seen at 1.0875 (20- DMA).

USD/JPY: The greenback dropped about 0.42 percent against its Japanese counterpart to 120.46 yen, but remained underpinned by the BoJ's surprise move on Friday to adopt negative interest rates. The yen found momentum in the previous session after the greenback was broadly sold-off on the back of weaker than expected U.S. manufacturing data. The ISM print showed that the U.S. manufacturing PMI declined to 48.2 in Dec versus 48.5 consensus, recording a contraction for consecutive three months. The demand for the Japanese yen is seen strengthening as the overnight slump in oil prices continued to rattle investors confidence. Markets now shift their attention towards tomorrow's BoJ Kuroda's speech and the U.S. ADP jobs data in absence of significant data release for today. Currently the pair trades at 1201.68, after going as low as 120.35 earlier in the session. Immediate support is located at 120.04 (5- DMA), while on the upside, resistance is seen at 121.03 (Sessions High).

AUD/USD: The Australian dollar pared early gains on Tuesday after the Reserve Bank of Australia kept rates unchanged at it first policy meeting of the year but left the door open to further easing. However, interbank futures imply 50-50 chance of a rate cut by May. The Aussie dropped by 0.48 percent to 0.7073, hovering towards sessions low of 0.7063. It initially rallied to 0.7129 levels before the RBA's announcements. However, the pair is trading off previous lows after the RBA did not sound as dovish as the markets had anticipated. Immediate support is located at 0.7048 (Jan 6 Low), while on the downside, resistance is seen at 0.7140 (Jan 29 High).

NZD/USD: The New Zealand dollar edged down to 0.6520 levels, having touched sessions high of 0.6554 earlier in the session. BNZ FX Strategist stated that the NZD had performed relatively well in the current risk-off environment and it seemed to reflect portfolio flows, rather than fundamentals. Consolidation around current levels is expected as the fair value estimate has risen a cent to $0.63, he added further. The pair continues to hover towards sessions low of 0.6513. Immediate support is located at 0.6501 (20- DMA), while the pair faces resistance at 0.6559 (Jan 21 High).

USD/CNY: China's yuan barely moved against the dollar on Tuesday as massive central bank liquidity injections aided to avoid a cash crunch ahead of the long Lunar New Year holiday and as authorities reiterated they would keep the currency stable. The PBoC set the midpoint rate at 6.551 per dollar prior to the market open, 0.04 percent firmer than the previous fix of 6.5539. In the spot market, yuan opened at 6.5785 per dollar and was at 6.5794 by midday, only 0.02 percent softer than the previous close. The offshore yuan was trading 0.58 percent weaker than the onshore spot at 6.6175 per dollar.

Equities Recap

Asian shares dropped on Tuesday as crude oil prices plunged on rekindled oversupply fears and after downbeat manufacturing data raised concerns about sluggish global economic growth.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 percent, while Taiwan stocks edged down 0.3 pct at 8,131.24 points.

Australia's S&P/ASX 200 Index closed down 1.19 pct at 4,983.40 points, while Nikkei edged down 0.64 pct at 17,750.68, while Seoul shares dropped 0.92 pct.

Commodities Recap

Gold edged up to a 3-month high on Tuesday as weak global manufacturing activity underscored the challenges for the world economy, pushing investors towards safe-haven assets. Spot gold touched $1,130.11 an ounce, and was trading down 0.2 percent at $1,126.55 by 0226 GMT. U.S. gold for April delivery was flat at $1,127.30 an ounce. Spot platinum dropped 1 percent to $860.85 an ounce, palladium was firm at $500.16, while silver was at $14.31.

Oil prices dropped for a second session in Asian trade on Tuesday as worries about top energy consumer China and rising oil supply weighed on markets, although possible talks between OPEC and Russia on output cuts offered some support. Brent for April delivery had dropped 56 cents to $33.68 a barrel as of 0358 GMT, after settling down $1.75, or 4.9 percent, in the previous session. The front month contract for West Texas Intermediate was down 67 cents at $30.95 after falling $2.00, or 5.9 percent, the session before.

Treasuries Recap

U.S. 10-Year Treasuries yield stood at 1.9364 percent down by 0.03. 

Australian government bond futures were lower, with the 3-year bond contract off 1 tick at 98.130. The 10-year contract dropped half a tick to 97.3750, while the 20-year contract was 1 tick lower at 96.8600.

New Zealand government bonds gained, sending yields between 0.5 and 3 basis points lower.

Canadian government bond prices were lower across the maturity curve, with the 10-year benchmark dropping 7 Canadian cents to yield 1.231 percent, while the 2-year priced down 0.5 Canadian cent to yield 0.421 percent. The Canada-U.S. 2-year bond spread was 2.6 basis points more negative at -38 basis points as recent underperformance by Canadian government bonds was pared.