Market Briefs
- Japan officials silent Monday as USD/JPY hits multi-month low.
- USD/JPY falls to low not seen since October 2014.
- Fin Min Aso: Yen's strength extremely concerning - Japanese media (weekend comment).
- Japan back on holiday from Tuesday until Friday = Golden Week.
- Nikkei tumbles to near 3-week low on stronger yen.
- Japan Apr Nikkei manufacturing PMI 48.2 vs 48.0 previous.
- EUR/USD hits new 2016 peak.
- Euro zone Apr Markit manufacturing PMI 51.7 vs 51.5 previous, 51.5 expected.
- German Apr Markit/MME manufacturing PMI 51.8 vs 51.9 previous, 51.9 expected.
- Swiss Mar Retail sales -1.3%y/y vs -0.2% previous.
- Swiss Apr Manufacturing PMI 54.7 vs 53.2 previous, 52.8 expected.
- UK bank holiday Monday sucks liquidity and interest.
Economic Data Preview
- (0930 ET/1330 GMT) The RBC Canadian Manufacturing Purchasing Managers' index (PMI) for April, a measure of manufacturing business conditions, is scheduled for release. The index rose to a seasonally adjusted 51.5 in March from 49.4 in February.
- (1000 ET/1400 GMT) The ISM manufacturing Purchasing Managers' Index is likely to have dropped to 51.4 in April from 51.8 in March. The index for prices paid probably rose to 52.0 from 51.50.
- (1000 ET/1400 GMT) The U.S. Commerce Department's construction spending report is expected to show outlays rebounded 0.5 percent in March, after dropping 0.5 percent in February.
Key Events Ahead
- (0850 ET/1250 GMT) Atlanta Fed President Dennis Lockhart gives welcome remarks before the Federal Reserve Bank of Atlanta Financial Markets Conference in Amelia Island, Florida.
- (1000 ET/1400 GMT) ECB President Draghi speaks.
- (1045 ET/1545 GMT) Fed Trade Operation 30-year Ginnie Mae, max $1.35bn.
- (1325 ET/1725 GMT) SNB Chairman Jordan Speaks.
- (1730 ET/2130 GMT) San Francisco Fed President John Williams, who has said the Fed is well on its way to prevent future bank bailouts through beefed up capital requirements and forcing banks to plan for winddowns, participates in a panel presentation, "Systemic Risk: Inevitable or Preventable?" before the Milken Institute 2016 Global Conference, in Beverly Hills, California.
Equities Recap
The global financial mood was gloomy on Monday as Tokyo stocks dropped 3 percent and a slide in European banking shares pushed oil prices lower and the dollar to an 18-month low against the yen.
The Euro Stoxx 50 opened up 0.3 pct, Germany's DAX rose around 1 pct, France's CAC 40 climbed 0.7 pct, Italy’s FTSE MIB and Spain's IBEX both gained 0.5 percent in early deals. The European banking index lost 0.6 percent, while UK's FTSE closed for bank holiday.
The Tokyo's Nikkei closed down 3.11 pct at 16,147.38, Seoul shares ended down 0.76 pct, while Australian shares fell 0.2 percent after disappointing results from Westpac Banking Corp. Chinese stock markets were closed on account of labor day. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent.
Commodities Recap
Gold hit 15-month high on Monday, was near $1,300 resistance level as fresh dollar weakness lent support, but holiday-trimmed trade muted the moves. Spot gold was up 0.4 percent at $1,299.31 an ounce at 0935 GMT, off an earlier peak of $1,299.90, its highest since January last year.
Oil prices dropped from 2016 highs as rising production in the Middle East outweighed a decline in U.S. output and a sliding dollar. Brent crude fell more than 1 percent to $46.78 a barrel from its last settlement. U.S. crude was down 40 cents at $45.52 a barrel.
Treasuries Recap
The U.S. sovereign bonds were trading modestly lower on Monday ahead of manufacturing PMI data. Also, investors keep a close eye on Federal Reserve’s President Lockhart and Williams’s speech in an attempt to estimate the Fed's likely next step to raise interest rate. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved up 0.30 pct to 1.825 pct.
The Japanese government bonds rallied on Monday as investors pour into safe-haven assets amid deepening global growth fears after reading weak economic data last week. Also, weak oil prices pushed investors towards safe-haven assets. The yield on the benchmark 10-year bonds, which moves inversely to its price, fell 40.79 pct to -0.107 pct.
The European bonds gained as investors shifted to safe-haven assets amid tracking weak cues emerging from crude oil futures. Also, investors demand for European bonds were underpinned by weak China’s manufacturing PMI figure, released on Sunday. The benchmark German 10-year bonds yield moved down 8.57 pct to 0.256 pct. The U.K markets are closed today on account of bank holiday, so investors will return on Tuesday to focus on the April sectoral PMI surveys published by Markit.
The Australian bonds were trading flat as investors were cautious ahead of Reserve Bank of Australia’s (RBA) monetary policy meeting. The yield on the benchmark 10-year Treasury note which moves inversely to its price stood flat at 2.516 pct, while the 20-year contract eased 1.5 ticks to 96.8750. New Zealand government bonds eased, sending yields 1.5 basis points higher at the long end of the curve.
FX Beat
USD: The U.S. non-farm payrolls on Friday, potentially limiting stronger bets on the dollar over the next few days. The dollar index was 0.2 percent lower to 92.899 in early trade in Europe. The greenback touched a new low of 106.14 yen at the start of Asian trade and steadied marginally by the start of a European session thinned out by a holiday in London.
EUR/USD: The euro was trading steady at $1.1460 having touched a fresh 6-1/2-month high of $1.14815 in Asian session. It was trading around 1.14670 at the time of writing. The short term trend is slightly bullish as long as support 1.1370 holds. On the lower side any break below 1.1370 will drag the pair down till 1.1335/1.1300. Any break above 1.1465 confirms major trend reversal, a jump till 1.1500/1.1545/1.1600 is possible. The short term weakness only below 1.1270 (low formed after Fed meeting).
USD/JPY: The Japanese yen touched a fresh 18-month high against the greenback early after its biggest weekly gain in more than seven years, as traders bet that Tokyo policymakers have limited capacity to stem the yen's gains. The yen reached 106.14 yen per dollar in early Asian trade before steadying on the day. It was trading around 106.49 at the time of writing. The short term trend is slightly bearish as long as resistance 108 holds. On the lower side any break below 106 will drag the pair down till 104.85/103. The minor resistance is around 108 and break above targets 108.85/109.50.
USD/CHF: The pair has broken major support 0.9630 and declined till 0.95680, it was trading around 0.9575. The short term trend is slightly bearish as long as resistance 0.9670 holds. Any violation above 0.9700 will take it to next level till 0.9760/0.9800. On the lower side any break below 0.9630 will drag the pair down till 0.9575/0.9500. The short term trend reversal is only below 0.9500 level.
GBP/USD: The Cable has reached Feb 4th high and slightly declined from that level, it was trading at 1.46057. The movement is expected to range bound for the day as U.K market remains closed today in observance of May Day. The short term trend is bullish as long as support 1.4570 (Kijun-Sen) holds. On the higher side major resistance is around 1.4670 (Feb 4th high) and break above targets 1.47000/1.4755/1.4800 levels. On the lower side major support is around 1.4570 and break below targets 1.4530/1.4490 level. The Sterling hit its strongest $1.4665 in 12 weeks against the dollar on Friday, as investors sold the U.S. currency on expectations that the Federal Reserve will not hurry to raise interest rates in coming months.
AUD/USD: The Australian dollar edged up to $0.7615, from $0.7603 late on Friday, with markets hesitant to take large positions ahead of an interest rate decision by the Reserve Bank of Australia (RBA) on Tuesday. The short term trend is slightly bearish as long as resistance 0.7700 holds. On the higher side major resistance is around 0.7700 and break above targets 0.7760/0.7800/.The minor resistance is around 0.7650/0.7680. The pair’s major support is around 0.7500 and break below will drag the it till 0.7485/0.7435, the minor support is around 0.7540. The Aussie slipped 1.4 percent last week after a surprisingly low inflation read in the first quarter prompted investors to price in a greater chance of a cut in interest rates.
NZD/USD: The New Zealand dollar traded at around $0.6990, rising from around $0.6960 on Friday and near the levels it soared to last week after the country's central bank skipped a chance to cut interest rates. The Kiwi rose 0.7 percent on the day to 74.56 yen, from a one-month trough.
