Market Roundup
- S&P - Global corporate defaults rise to 100 issuers.
- Japan draws up work reforms to boost growth - Nikkei.
- China Q2 GDP +1.8% q/q, +6.7% y/y, +1.6% and +6.6% eyed, Q1 rev +1.2% q/q, economy still faces relatively big downward pressure, H1 +6.7% y/y, capital formation accounted for 37% of H1 growth, net exports -10.4%, H1 fixed asset investment +9%, +9.4% eyed, property investment +6.1%.
- China June industrial output +6.2% y/y, retail sales +10.6%, +5.9/10% eyed.
- China June money supply M2 +11.8% y/y, new yuan loans +14.3%, +11.5/14% eyed.
- China June net FX sales CNY97.7 bln, end-June FX deposits $656.2 bln.
- Dallas Fed Kaplan – Important to normalize rates but US economy more global than before, must be considered, cautious on rate hikes as neutral rate lower than most people think – Reuters.
- St Louis Fed Bullard – No rush to raise rates, only on good econ news.
- Foreign CB US debt holdings -$7.085 bln to $3.222 trln July 13 week, Treasury holdings -$11.192 bln to $2.905 trln, agencies -$1.116 bln to $260.804 bln, other securities +$5.224 bln to $55.631 bln.
- NY Fed – Swaps w/foreign CBs $2.22 bln July 13 wk, BoJ $220 mln, ECB $2 bln.
- Lipper – US stock funds attract first overall inflows since April.
- New Zealand June REINZ median house prices -1.0% m/m but still +10.5% y/y.
Economic Data Ahead
- (0400 ET/0800 GMT) Italy May trade balance, global/EU; last E4.52 bln, E920 mln surpluses.
- (0430 ET/0830 GMT) Great Britain May construction output, -1.0% m/m, -3.5% y/y eyed; last +2.5%, -3.7%.
- (0500 ET/0900 GMT) Eurozone Jun inflation – final, +0.2% m/m, +0.1% y/y eyed; flash +0.4%, +0.1%.
- (0500 ET/0900 GMT) Eurozone Jun – ex-food/energy, unch m/m, +0.9% y/y eyed; flash +0.2%, +0.8%.
- (0500 ET/0900 GMT) Eurozone May trade balance, E23.0 bln surplus eyed; last E27.5 bln surplus.
- (0830 ET/1230 GMT) United States Jun CPI, +0.3% m/m, +1.1% y/y eyed; last +0.2%, +1.0%, index 240.24.
- (0830 ET/1230 GMT) United States Jun –core, +0.2% m/m, +2.3% y/y eyed; last +0.2%, +2.2%, index 247.07.
- (0830 ET/1230 GMT) United States Jun real weekly earnings; last unch m/m.
- (0830 ET/1230 GMT) United States Jun retail sales/ex-autos, +0.1%, +0.4% m/m eyed; last +0.5%, +0.4%.
- (0830 ET/1230 GMT) United States Jul NY Fed mfg index, 5.0 eyed; last 6.01.
- (0915 ET/1315 GMT) United States Jun industrial output, +0.2% m/m eyed; last -0.4%.
- (0915 ET/1315 GMT) United States Jun capacity utilization, 75.0% eyed; last 74.9%.
- (1000 ET/1400 GMT) United States May business inventories, +0.1% m/m eyed; last +0.1%.
- (1000 ET/1400 GMT) United States Jul U.Mich sentiment index – prelim, 93.5 eyed; last 93.5.
- (1130 ET/1530 GMT) United States Jun Cleveland Fed CPI; last +0.3%.
Key Events Ahead
- (0600 ET/1000 GMT) UK DMO GBP0.5/2.5/3.0 bln 1/3/6-month treasury bill auctions.
- (0800 ET/1200 GMT) BoE Gov Carney speaks at Toronto discussion.
- (1400 ET/1800 GMT) Minny Fed Kashkari, St Louis Fed Bullard in St Louis panel discussion.
FX Beat
DXY: The dollar index, against a basket of currencies trades flat at 96.08, within the sight of a low of 95.83 touched in the previous session.
EUR/USD: The euro rose as markets cheered better-than-expected China's economic data amid improved risk sentiment. The major gained 0.1 percent to 1.1131 and now targets to regain 1.1150 level. On Thursday, it climbed to a high of 1.1164, after the BoE kept its interest rate unchanged. Traders are likely to remain bullish after upbeat Chinese data strengthened the demand for risk assets across the financial markets. Markets now await inflation data from both the continents, and U.S. retail sales and consumer sentiment data for further direction. Immediate resistance is located at 1.1164 (Previous Session High), break above targets 1.1200 handle. On the lower side, support is seen at 1.1090 (10-DMA), break below could take the pair till 1.1052.
USD/JPY: The greenback rose above the 106 handle, on the back of improving risk sentiment and speculation that Japanese policymakers could adopt more drastic monetary stimulus. Traders sold the yen after the prevalent risk sentiment was bolstered by better-than-expected Chinese macro news, which diminished the safe-haven bids for the Japanese currency. The major trades 0.5 percent higher at 105.87 yen, having set a 3-week high of 106.31 earlier. And it is on track to gain more than 5 percent for the week. The pair will be driven broad based market sentiments, ahead of series of U.S. economic data, including CPI, consumer sentiment and retail sales report. Minor resistance is located at 106.81 (Jun-24 High), break above could take it over 107.00. On the lower side, support is seen at 104.68 (5-DMA), break below targets 103.97.
GBP/USD: Sterling extended gains after Bank of England surprised markets by leaving interest rates unchanged against expectations of easing policy on Thursday. The BoE stated that it was likely to deliver stimulus in three weeks' time, after it has assessed Brexit vote impact on the economy. Sterling trades 0.7 percent higher at 1.3438, attempting to sustain gain above the 1.3400 handle. It was on track for a more than 2.9 percent weekly rise, its best performance since 2009. Markets attention will remain on Britain's construction output report and BoE Governor Mark Carney's speech for insights on the financial and monetary conditions of the economy. Immediate resistance is located at 1.3533 (Jun-29 High), break above targets 1.3600 handle. On the downside, support is seen at 1.3224 (5-DMA), break below could take the pair lower 1.3200 handle. Against the euro, the pound was trading 0.3 percent higher at 83.00 pence.
AUD/USD: The Australian dollar touched a 2-1/2 month high on the back of improved risk sentiment, strengthened by upbeat Chinese data release. China's economy grew 6.7 percent in the second quarter from a year earlier, easing worries about a slowdown, while retail sales and industrial production surpassed expectations. The Aussie broke 0.7650 resistance and rose to 0.7676, it’s highest since May 3. The major trades at 0.7631 and is set for seventh straight week of gains. Markets attention now shifts towards data sets from the U.S. Immediate resistance is located at 0.7690 (Apr-12 High), break above targets 0.7700 handle. On the lower side, support is seen at 0.7607 (Session Low), break below could take the pair till 0.7577.
NZD/USD: The New Zealand dollar slumped for the third consecutive session, despite improvement in the risk sentiment and better-than-expected Chinese economic data. The Kiwi trades 0.6 percent lower at 0.7149, pulling further away from its 2016 peak of 0.7324 struck earlier in the week. The major weakened after the Reserve Bank of New Zealand announced that it will release its update on economic outlook next week, just a few days after the economy's inflation figures are published, which are expected to be weak. Immediate support is located at 0.7115, break below could take the pair lower 0.7100. On the upside, resistance is located at 0.7218 (10-DMA), break above targets 0.7250 level.
Equities Recap
Asian shares advanced to 8-month highs and were on course for a strong weekly gain, after better-than-expected economic data from China boosted risk sentiment across the financial markets.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.9 percent, and was set to gain more than 5 percent for the week.
Tokyo's Nikkei climbed 0.68 pct at 16,497.85 and Australia's S&P/ASX 200 index gained 0.34 pct at 5,429.90 points.
Shanghai composite index trades flat at 3,055.00 points, while CSI300 index was at 3,278.18 points.
Hong Kong’s Hang Seng was trading 0.2 percent higher at 21,618.54 points. Seoul shares added 0.43 pct.
Commodities Recap
Crude oil prices recovered from early low as investors cheer slightly better than expected Chinese economic data reflecting government efforts to stabilize growth, however, market still wary over renewed concerns about a global oil glut. Brent crude oil was up 0.1 percent at $47.22 a barrel at 0352 GMT. It gained 2.4 percent in the previous session, supported by short covering. U.S. West Texas Intermediate futures also rose by 0.1 percent at $45.56 a barrel having earlier fallen to $45.05. The contract rose 2.1 percent in the previous session and is heading for a weekly gain of 1.1 percent.
Gold declined as risk-appetite improved across the market, which put the metal on course for its first weekly decline since May, after dropping to a 2-week low in the previous session. Spot gold fell 0.4 percent to $1,328.90 per ounce by 0403 GMT. It fell to a low of $1,320.04 on Thursday, its worst since June 30. The metal has fallen about 2.5 percent so far this week and is on track for its first weekly decline in seven weeks. U.S. gold slipped 0.2 percent to $1,330.20 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5321 percent up by 0.002 bps, while 5-year was 0.002 bps higher at 1.0925 percent.
The Australian government bonds slumped, following U.S. stronger-than-expected producer prices data for June, coupled with maintained improvement in jobless claims. The yield on the benchmark 10-year Treasury note, rose nearly 6 basis points to 2.003 percent and the yield on short-term 2-year note jumped 3 basis points to 1.665 percent.
The New Zealand 10-year bond yield ended nearly flat as investors await second quarter consumer inflation data and RBNZ brief update on the economic outlook. The yield on benchmark 10-year bond, which moves inversely to its price hovered around 2.355 percent mark, the yield on 7-year note remained flat at 2.105 percent and the yield on short-term 2-year note ended 1 basis point lower at 2.020 percent.
Canadian government bond prices were lower across the maturity curve in sympathy with U.S. Treasuries as improved risk appetite reduced the appeal of safe-haven assets. The 2-year price fell 9.5 Canadian cents to yield 0.542 percent and the benchmark 10-year dropped 47 Canadian cents to yield 1.053 percent.
