Market Roundup
- GBP/USD 0.13%, USD/JPY -0.02%, EUR/USD 0.31%
- Japan Post Insurance (Kampo) to up holdings of both domestic-foreign stocks
- Kampo to up holdings of currency-hedged foreign bonds/no hedges on JPY strength
- PM Abe could become Japan’s longest-serving post-war leader
- Tusk says CETA signing summit still possible on Thursday
- ECJ may help EU sidestep lone-wolf resistance to trade deals
- Germany gives green light for rise in minimum wage in 2017
- German Nov GfK Consumer Sentiment 9.7 vs 10 previous, 10 expected
- German Sep Import Prices m/m 0.1% vs -0.2 previous, 0 expected
- German Sep Import Prices y/y -1.8% vs -2.6 previous, -1.9 expected
- UK PM has warned Brexit could cause businesses to exit the UK
- UK Sep BBA mortgage approvals 38.252k vs 36.997 previous,
Economic Data Ahead
- (0830 ET/1230 GMT) The United States releases goods trade balance data for the month of September. The economy's trade deficit is expected to expand to $60.6 billion after posting a deficit of $58.0 billion in the previous month.
- (0945 ET/1345 GMT) Markit Economics will release preliminary U.S. composite PMI for the month of October. The index posted a final reading of 52.3 in the prior month.
- (0945 ET/1345 GMT) Financial firm Markit Economics is likely to report that preliminary U.S. service PMI business activity index remained unchanged for the month of October.
- (1000 ET/1400 GMT) The U.S. new single-family home sales are expected to have declined 1.0 percent to a seasonally adjusted annual rate of 600,000 units in September. New home sales dropped 7.6 percent in August to a seasonally adjusted annual rate of 609,000 units.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending October 21.
- (1845 ET/2245 GMT) The Statistics New Zealand releases its trade balance data for the month of September. The economy posted an annual trade deficit of $3.1 billion in August.
- (1950 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending October 21.
- (1950 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending October 21.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade operation 30-year Ginnie Mae, max $1.375bn
- (1145 ET/1545 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac, max $2.750bn
FX Beat
DXY: The dollar lost ground across the board, as investors seem inclined to reduce bullish USD bets ahead of this week's key US macro releases. The greenback against a basket of currencies trades 0.2 percent lower at 98.54, pulling away from a near 9-month high of 99.12 hit on Tuesday.
EUR/USD: The euro rose above the 1.0900 handle, retreating from near 8-month low as the renewed selling pressure continued to weigh on the greenback. The major remained supported by recent upbeat Eurozone PMIs and the German IFO survey released earlier in the week, which seem to have kept the bid tone around the major intact. The European currency trades 0.2 percent higher at 1.0912, having recovered from a low of 1.0851, its weakest since March 10. The short term trend is slightly bullish as long as support 1.0850 holds. Any violation below this level confirms minor trend reversal, a decline till 1.08200/1.0775 is possible. On the higher side, any break above 1.0955 will take the pair to next immediate resistance at 1.0970/1.100 level in the short term.
USD/JPY: The dollar edged lower as prevalent risk-off sentiment surrounding the European equity market drove investors towards the safe-haven yen. Moreover, the selling pressure intensified, dragging the pair near the 104.00 handle after a Bloomberg report showed Republican Donald Trump had a 2-point lead over Democrat's Hillary Clinton in the state of Florida. However, expectations of Fed would eventually raise interest rates before the end of this year provided support to the greenback. The major trades 0.1 percent up at 104.28, having touched a near 3-month high of 104.87 yen on Tuesday. The major resistance is around 105 and break above targets 105.80/106.30. On the lower side, major support is around 104.01 (daily Tenken- Sen) and any break below targets 103.02 (100- day MA) /102.80/102.20.
GBP/USD: Sterling rose above the 1.2200 handle on expectations that the central bank will not further ease its monetary policy at the upcoming meeting. BoE Governor during his testimony before the House of Lords economic affairs committee yesterday stated that the bank would certainly take sterling's weakness into account at its rate-setting meeting next week. Sterling trades 0.1 percent higher at 1.2202, after declining as low as 1.2082 on Tuesday, its weakest since Oct. 7. The short-term trend is bearish as long as resistance 1.2250 holds and any violation above this level will take the pair to next level till 1.2275/1.2332 (Oct 19 High). The immediate support stands at 1.2200 and any indicative break below targets 1.2170/1.2150/1.20880 (Oct 11 Low). The short term trend reversal is only above 1.3325 level. Against the euro, it fell 0.2 percent at 89.48 pence.
USD/CHF: The Swiss franc rose, retreating from a near 7-month high struck in the previous session, as renewed risk-off market sentiment drove investors towards safe-haven assets. The dollar trades 0.3 percent lower at 0.9915, pulling away from a peak of 0.9998, its highest since March 10. The temporary top around 1.000 will be acting as major resistance and slight jump can happen only above that level. Any violation above 1.000 will take the pair to next level till 1.0390/1.0750. On the lower side, any break below 0.9902 (10-day MA) will drag the pair down till 0.9845/0.9780.
AUD/USD: The Australian dollar gained, as better-than-expected inflation reading eased prospects of an interest rate cut in the near-term. Australia's consumer prices rose by more than forecast in the third quarter, while the annual rate of core inflation edged up for the first time in over a year, indicating investors to price out chances of a cut in rates next week. The Aussie advanced to a high of 0.7709 following the data release but trimmed gains to trade at 0.7684, still 0.5 percent for the day. On the higher side, major resistance is around 0.7730 and any break above will take the pair till 0.7760/0.7800. The major support is around 0.7590 (cloud bottom) and a break below will drag it till 0.7530/0.7480.
NZD/USD: The New Zealand dollar edged up, as the greenback struggled to gain further bullish traction and extended its corrective fall from multi-month high. However, monetary policy divergence between the Federal Reserve and RBNZ and prevalent risk-off investor sentiment capped gains. The Kiwi trades 0.1 percent up at 0.7169, recovering from a 6-day low of 0.7109 hit in the previous session. Immediate resistance is located at 0.7200, break above targets 0.7220/ 0.7250. On the downside, support is seen at 0.7135, a break below could drag it lower 0.7100.
Equities Recap
European shares slumped, weighed down by mixed results from the continent's banking sector and losses in the mining sector, amid increasing concerns about a global oil glut.
The MSCI world equity index which tracks shares in 46 countries was down 0.08 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.8 percent
The pan-European STOXX 600 index decreased 0.76 percent at 340.45 points, while the FTSEurofirst 300 index shed 0.75 percent at 1,344.39 points.
Britain's FTSE 100 trades 0.9 percent lower at 6,955.00 points, while mid-cap FTSE 250 slumped 0.96 percent at 17,631.31 points.
Germany's DAX tumbled 1.02 percent at 10,646.99 points; France's CAC 40 trades 0.76 percent down at 4,506.19 points.
Tokyo's Nikkei gained 0.15 percent at 17,391.84 points, Australia's S&P/ASX 200 index declined 1.58 percent to 5,356.70 points and South Korea's KOSPI shed 1.14 percent at 2,013.89 points.
Shanghai composite index fell 0.5 percent at 3,116.31 points, while CSI300 index lost 0.4 percent at 3,354.80 points. Hong Kong’s Hang Seng declined 1.0 percent to 23,325.41 points.
Commodities Recap
Crude oil prices declined, extending losses for the third day after a report showed U.S. inventories surprisingly increasing and as investors remained uncertain that OPEC members will agree to cut output. Global benchmark Brent crude was trading 0.2 percent lower at $50.15 per barrel at 0952 GMT, having touched more than a 3-week low of $50.01 earlier in the day. U.S. West Texas Intermediate crude traded 0.2 percent up at $49.39 a barrel, after declining to a low of $49.14, the weakest level since Oct. 5.
Gold prices remained firm, after rising to near 3-week highs on Tuesday, as stronger physical demand, ahead of India's late-October festival season supported the safe-haven metal. Spot gold traded flat at $1,273.00 an ounce by 1015 GMT, having hit $1276.59 in the previous session, its highest since Oct. 5. U.S. gold futures settled up 0.16 percent at $1,275.6 an ounce.
Treasuries Recap
The U.S. Treasuries saw sideway trading as markets took in stride a mixed run of economic data, highlighted by stronger than expected S&P/Case-Shiller home prices and weaker than expected Conference Board consumer confidence data. The yield on the benchmark 10-year Treasury note rose 2-1/2 basis points to 1.781 percent, the yield on long-term 30-year Treasury jumped 2 basis points to 2.523 percent and the yield on short-term 2-year note climbed 1 basis point to 0.872 percent.
The UK gilts slumped after surging during the first half of the month and continued to hover around 1.05 percent to 1.15 percent range lately. The yield on the benchmark 10-year gilts rose 5 basis points to 1.138 percent (hits 4-months high), the super-long 40-year bond yield also jumped 5 basis points to 1.683 percent and the yield on short-term 2-year bond climbed 4 basis points to 0.291 percent.
The German bund yields traded between 0.01 percent to 0.05 percent mark, but we expect them to rise and trade around 0.06 percent to 0.10 percent range as and when Treasury yields make their next move higher. The yield on the benchmark 10-year bond rose 2 basis points to 0.046 percent, the yield on long-term 30-year note also climbed 1-1/2 basis points to 0.665 percent and the yield on short-term 3-year bond also bounced 1-1/2 basis points to -0.638 percent.
The Japanese government bonds traded nearly flat as investors await the September consumer inflation data in an attempt to estimate the BoJ's most likely policy step. The benchmark 10-year bond yield hovered around -0.06 percent mark, the yield on long-term 30-year Treasury remained steady at 0.48 percent and the yield on short-term 2-year note stood flat at -0.24 percent.
The New Zealand government bonds closed lower after recent data showed that the world’s second-largest economy’s consumer sentiment climbed to a six-month high in October. The yield on the benchmark 10-year bond rose 1-1/2 basis points to 2.635 percent, the yield on 7-year note ended 2 basis points higher at 2.313 percent and the yield on short-term 2-year note climbed 1/2 basis point to 1.970 percent.
The Australian government bonds traded mixed after recent data showed that the country’s third-quarter consumer inflation climbed more than the overall market expectations, reducing possibilities for a further easing from the Reserve Bank of Australia. The yield on the benchmark 10-year Treasury note fell 2 basis points to 2.267 percent, the yield on 15-year note dipped 3 basis points to 2.623 percent and the yield on short-term 2-year jumped 2 basis points to 1.693 percent.
