Market Roundup
- GBP/USD -0.36%, USD/JPY +0.2%, EUR/USD -0.05%
- Fed's Dudley: Likely to raise rates before election if economy improves quickly
- Fed's Kaplan: Normalising policy will be very challenging-Bbg
- Kaplam: Reiterates Fed should take a gradual approach-Bbg
- China Jul NBS Non-Mfg PMI 53.9 vs 53.7 previous
- China Jul NBS Manufacturing PMI 49.9 vs 50 previous, 50 expected
- Australia Jun HIA New Home Sales m/m 8.2% vs -4.4 previous
- AFR-Why the RBA should cut by 50bp Tuesday
- China Jul Caixin Mfg PMI Final 50.6 vs 48.6 previous, 48.7 expected
- Japan Jul Nikkei Mfg PMI 49.3 vs 49 previous
- Rajan wants monetary policy panel formed before he departs RBI
- German Jul Markit/BME Mfg PMI 53.8 vs 53.7 previous, 53.7 expected
- Euro zone Jul Markit Mfg Final PMI 52 vs 51.9 previous, 51.9 expected
- UK Jul Markit/CIPS Mfg PMI 48.2 vs 49.1 previous, 49.1 expected
- SNB chief says CHF overvalued, more room to intervene in fx market
- UK and China regulators discuss framework for financial projects
- Jim O’Neill may quit UK government over China, re: Hinkley Point project-FT
- Roger Bootle: How a lower pound will help us to escape cloud cuckoo land-Telegraph
Economic Data Ahead
- (0945 ET/1345 GMT) The Markit Economics releases U.S. Manufacturing Purchasing Managers Index (PMI) reading for the month of July. The index posted a final reading of 52.9 in the prior month.
- (1000 ET/1400 GMT) The Commerce Department is likely to report that construction spending for June rose 0.5 percent after posting a 0.8 percent decline in May.
- (1000 ET/1400 GMT) The Institute for Supply Management is expected to show that its national factory index gained to 53.0 in July from 53.2 in June.
- N/A The Federal Reserve releases its Loan Officer Survey.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 15-year Fannie Mae / Freddie Mac, max $650 mn.
- (1230 ET/1630 GMT) FedTrade operation 30-year Ginnie Mae, max $1.375bn.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent higher at 95.73, pulling away from a near 1-month low of 95.38, touched on Friday.
EUR/USD: The euro retreated from session highs, despite Eurozone posting better-than-expected Manufacturing Purchasing Managers Index. Eurozone's Markit Manufacturing Purchasing Managers Index (PMI) for the month of July came in at 52.0, surpassing consensus and expectations of 51.9. The major trades lower at 1.1160, hovering towards a low of 1.1155 touched earlier in the session. The pair should break above 1.1183 (38.2% retracement of 1.16163 and 1.09115) will take it to next level till 1.11976 (Jul-29 High). It should break above 1.1200 for the further jump till 1.1236 (38.2% retracement of 1.0463 and 1.1714)/1.12650 (50% retracement of 1.14213 and 1.09115)/1.1300. On the lower side, minor support is around 1.11570 (90 day EMA) and any break below targets 1.1100/1.0740 (200 DMA).
USD/JPY: The Japanese yen failed to extend gains as the dollar rebounded from 101.97 Friday's Low. However, gains in the major were capped as bout of risk-aversion gripped the markets after oil prices fell below the $43 a barrel mark, which strengthened the safe-haven yen across the board. The greenback trades 0.3 percent higher at 102.28, having touched an intra-day high of 102.68. Investors now shift their focus on U.S. PMI figures for further momentum on the pair. The short term trend is slightly weak as long as resistance 103 holds. The major resistance is around 103 and any break above confirms minor trend reversal, a jump till 103.83/104 is possible. On the lower side, minor support is around 101.80 and any break below 101.80 will drag it till 101/100.
GBP/USD: Sterling failed to sustain gains above the 1.3200 handle, after downbeat manufacturing sector survey increased worrying signs on the economy ahead of a Bank of England meeting. Britain's Markit Manufacturing Purchasing Managers Index (PMI) for the month of July declined to 48.2, against consensus and previous 49.1. Sterling trades 0.4 percent lower at 1.3170, pulling away from a high of 1.3301, struck in the previous session. On the higher side, minor support is around 1.3160 (200 HMA) and break below targets 1.3100/1.3060/1.3000. Technically any break above 1.3300 will take the pair till 1.3480. Against the euro, the pound trades 0.4 percent lower at 84.73 pence.
USD/CHF: The Swiss franc was little changed, having touched a 1-month high of 0.9635 on Friday. The greenback trades flat at 0.9686, after rising to an early high of 0.9702. Earlier in the day, Swiss National Bank Chairman stated that the bank's current approach was appropriate, given the current challenges and the Swiss franc was overvalued against the euro. On the lower side, major support is around 0.9630 and any indicative break below 0.9630 targets 0.9580/0.9500 in the short term. The major resistance is around 0.9750 and any break above targets 0.9800/0.9850.
AUD/USD: The Australian dollar failed to hold gains above the 0.7600 handle, as fresh selling in the oil prices renewed weakness in the major. The Aussie trades 0.3 percent lower at 0.7575, pulling away from a 2-week high of 0.7615 touched earlier in the session. Investors now await the Reserve Bank of Australia policy meeting due tomorrow, which is likely to cut rate to a new low of 1.5 percent. Markets also expect for more stimulus, largely to reduce slowdown in inflation. On the higher side, any break above 0.7625 will take the pair to next level till 0.7680/0.7725. The major support is around 0.7480 and break below will drag the pair till 0.7420/0.7380.
NZD/USD: The New Zealand dollar slumped below the 0.7200 handle, as markets price in for a Reserve Bank of New Zealand rate cut on 11 August. The RBNZ is likely to cut the OCR to 2 percent as deteriorating inflation outlook continues to hamper the economic growth. The Kiwi trades 0.2 percent lower at 0.7189, having touched an early 2-week high of 0.7229. The major will continue to track broad based market sentiment, ahead of U.S. PMI figures. Immediate support is seen at 0.7150, break below could drag it till 0.7119/ 0.7100. On the higher side, resistance is located at 0.7250, break above targets 0.7294/ 0.7300.
Equities Recap
World shares touched their highest in almost a year as investors reduced expectations of U.S. interest rates hikes, while European shares declined despite results of Europe-wide lenders stress tests delivered no negative surprises.
MSCI's all-country world share index rose to its highest since mid-August 2015, while MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.3 percent, touching its highest level in about a year.
The pan-European STOXX 600 index declined 0.3 percent, while the FTSEurofirst 300 index shed 0.3 percent to 1,342.47 points.
Europe's STOXX 600 banking index fell 1.7 percent, weighed down by losses in Raiffeisen, Unicredit, Bank of Ireland.
Germany's DAX edged up 0.1 pct, France's CAC up 0.7 pct slumped 0.5 pct, while Britain's FTSE and mid-cap FTSE 250 index both traded flat.
Tokyo's Nikkei gained 0.40 pct at 16,635.77, Australia's S&P/ASX 200 index rose 0.37 pct at 5,582.90 points and South Korea's KOSPI added 0.7 pct.
Shanghai composite index closes declined 0.9 pct at 2,953.39 points, while CSI300 index lost 0.8 pct at 3,176.81 points. Hong Kong's Hang Seng index climbed 1.1 pct at 22,129.14 points.
Commodities Recap
Crude oil prices declined, reversing earlier gains, as a rise in U.S. oil rig count and increases in OPEC production continued to weigh on the market sentiments. Brent crude oil dropped 0.9 percent to $42.97 a barrel at 1025 GMT, after touching an intra-day high of $43.82 in earlier trade. U.S. West Texas Intermediate crude was 0.7 percent lower at $41.10 a barrel, after hitting an intra-day high of $41.88 earlier.
Gold slumped after gaining over 1 percent to a near 3-week high in the previous session, as dollar recovered marginally from recent lows following disappointing U.S. growth figures last week. Spot gold trades 0.2 percent lower at $1,347.02 an ounce at 1030 GMT, having touched $1,355.10 on Friday, its highest level since July 12. U.S. gold eased 0.2 percent at $1,354.3 an ounce.
Treasuries Recap
The US Treasuries slumped on hawkish remarks from the Dallas Fed President Robert Steven Kaplan (non-voter for 2016) in Beijing. The yield on the benchmark 10-year Treasury note rose 3 basis points to 1.489 percent, the yield on 5-year note jumped 2-1/2 basis points at 1.057 percent and the yield on short-term 2-year note climbed 2 basis points to 0.687 percent.
The UK gilts plunged on Monday as investors did not react to the weak manufacturing PMI data. The 10-year gilt yield followed Treasuries and hit a new record low below 0.68 percent on Friday. The yield on the benchmark 10-year gilts rose nearly 2 basis points to 0.705 percent, the yield on super-long 40-year bond also jumped 2 basis points to 1.421 percent and the yield on short-term 2-year bonds bounced 3 basis points to 0.144 percent.
The German bunds plunged as global equities rose to 11-month high. The yield on the benchmark 10-year bond increased basis points to -0.098 percent, the yield on long-term 30-year note also jumped nearly 2 basis points to 0.356 percent and the yield on short-term 3-year note bounced 1 basis point to -0.648 percent.
The Japanese government bonds continued to trade lower after the Bank of Japan in its monetary policy meeting disappointed investors by keeping its key policy rate unchanged along with no additional bonds buying programme. The benchmark 10-year bond yield rose 3-1/2 basis points to -0.134 percent, the yield on 5-year note also jumped 2 basis points to -0.225 percent, the yield on super long 30-year note bounced 1-1/2 basis points to 0.297 percent and the short-term 2-year JGB yield climbed 1/2 basis point to -0.239 percent.
The New Zealand government bonds gained after reading weaker than expected United States second-quarter gross domestic product (GDP) figure. The yield on the benchmark 10-year bond slid 5 basis points to 2.165 percent (fresh record low), the yield on 7-year note also dipped 5-1/2 basis points to 1.920 percent (new record low) and the yield on short-term 2-year note ended 5 basis points lower at 1.795 percent (fresh record low).
The Australian government bonds rallied as investors are pricing a 25 basis points rate cut from the Reserve Bank of Australia in the wake of subdued second-quarter inflation figure and sluggish economic growth. The yield on the benchmark 10-year Treasury note fell 7 basis points to 1.835 percent and the yield on short-term 2-year note dipped 6-1/2 basis points to 1.474 percent.
