Market Roundup
- GBP/USD 0.07%, USD/JPY 0.05%, EUR/USD 0.02%
- Dollar at 9-month high on bets for Fed hike, Clinton victory
- China's yuan hits 6-yr low; state banks seen selling dollars to stabilise
- Chinese firm Oceanwide has agreed to buy US insurer Genworth for $2.7bn cash
- TD Ameritrade & TD Bank nearing $4bn deal to buy Scottrade-source
- Gold pressured by Fed rate hike prospects
- BOJ frets about real estate lending boom, watchful of bubble risk
- Japan Sep Exports y/y -6.9% vs -9.6 previous, -10.4 expected
- Japan Sep Imports y/y -16.3% vs -17.3 previous, -16.6 expected
- Japan Sep Trade Balance Total Yen 498.3bn Japan vs -18.7 previous, 341.8 expected
- Japan Oct Nikkei Mfg PMI Flash 51.7 vs 50.4
- Saxo Bank increases margin requirements ahead of U.S. elections
- Eurozone Oct Markit Mfg Flash PMI 53.3 vs 52.6 previous, 52.6 expected
- Eurozone Oct Markit Serv Flash PMI 53.5 vs 52.2 previous, 52.4 expected
- Eurozone Oct Markit Comp Flash PMI 53.7 vs 52.6 previous, 52.8 expected
- EU sets Belgium Monday deadline to back Canada trade deal
- Bundesbank: German inflation could exceed 1 pct at year-end
- German Oct Markit Mfg Flash PMI 55.1 vs 54.3 previous, 54.3 expected
- German Oct Markit Service Flash PMI 54.1 vs 50.9 previous, 51.5 expected
- German Oct Markit Comp Flash PMI 55.1 vs 52.8 previous, 53.3 expected
- UK Oct CBI Trends Orders -17 vs -5 previous, -4 expected
Economic Data Ahead
- (0830 ET/1230 GMT) The Federal Reserve Bank of Chicago will release its Chicago Fed National Activity Index (CFNAI) for the month of September. The index stood at -0.55 in the prior month.
- (0945 ET/1345 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of October. The index posted a final reading of 51.5 in September.
- (0830 ET/1230 GMT) Statistics Canada releases wholesale trade data for the month of August. The indicator came in at 0.3 percent in the previous month.
Key Events Ahead
- (0900 ET/1300 GMT) Jerome Powell and William Dudley of the Fed, Mary Jo White of the SEC, and Antonio Weiss of the Treasury will meet at the forum, called the evolving structure of the U.S. Treasury market.
- (0905 ET/1305 GMT) St. Louis Fed President James Bullard gives a presentation on the U.S. economy and monetary policy before a conference co-sponsored by the Association for University Business and Economic Research (AUBER), in Fayetteville, Arkansas.
- (1115 ET/1515 GMT) The Swiss National Bank Chairman of the Governing Board Thomas J. Jordan's speech.
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae, max $1.375bn
- (1230 ET/1630 GMT) FedTrade operation 15-year Fannie Mae / Freddie Mac, max $675mn
- (1330 ET/1730 GMT) Chicago Fed President Charles Evans discusses current economic conditions and monetary policy at the Civic Affairs Society of the University Club of Chicago Luncheon.
- (1400 ET/1800 GMT) Federal Reserve Board Governor Jerome H. Powell's speech.
- (1530 ET/1930 GMT) Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins will appear before a parliamentary committee.
FX Beat
DXY: The dollar stood tall versus its major counterparts on expectations that the Federal Reserve will raise interest rates this year and on a higher probability of Hillary Clinton becoming U.S. president at the upcoming Presidential election in November.
EUR/USD: The euro rose, retreating from a 7-month low following the release of stronger PMI readings from the Eurozone. The recovery was largely attributed to better-than-expected preliminary manufacturing and services PMI reports from across the Eurozone, with Germany boosting Eurozone's growth to the strongest level so far this year. Eurozone flash manufacturing PMI for October came in at 53.3 versus estimate of 52.6, while German Markit manufacturing flash PMI stood at 55.1 against projection of 54.4. The major trades 0.1 percent up at 1.0893, pulling away from a low of 1.0859, its lowest since March 10. Investors now await the US flash manufacturing PMI report and speeches from Fed officials due later in the day. The short-term trend is bearish as long as resistance 1.1030 holds and any break above will take the pair to next level till 1.10580/1.10750 in the short term. The minor resistance is around 1.0960. On the lower side, any break below 1.0900 will drag the pair down till 1.08350.
USD/JPY: The dollar gained, however, failed to break above the 104 handle, despite board based greenback strength. The yen took advantage of better-than-expected trade balance report and manufacturing PMI from the Japanese economy, which restricted the upward movement in the major. The pair trades 0.1 percent up at 103.92, attempting to regain the 104.00 level. Investors will closely scrutinize comments from Federal Reserve Bank of St. Louis President James Bullard and Federal Reserve Bank of New York President William Dudley in order to determine probability and timing of next Fed rate-hike action. The major resistance is around 104.65 (trend line joining 104.32 and 104.48) and a break above targets 105.08/106. On the lower side, major support is around 103.50 (cloud bottom) and any break below targets 103.02 (100- day MA) /102.80/102.20.
GBP/USD: Sterling steadied above the 1.2200 handle on the back of better risk sentiment across the financial markets, however, expectations that Britain's economy would suffer due to Brexit capped gains. The major continues to remain under pressure on rising concerns about "hard" Brexit by Britain and a hard-line stance by the EU in the negotiations. Sterling edged up 0.1 percent up at 1.2236, recovering from a low of 1.2171 hit on Friday. Markets focus now remains on the UK's third-quarter growth readings due on Thursday, which is expected to be sluggish and grow at 0.3 percent in the third quarter. The pair is facing major resistance at 1.23380 and any violation above confirms minor trend reversal, a jump till 1.2400/1.2480 is possible. On the lower side, any break below 1.2150 will drag it down till 1.2150/1.20896 in the short term. Against the euro, the pound was flat at 88.96 pence.
USD/CHF: The Swiss franc edged down, as buoyant tone around the greenback kept the bid tone around the strong. The dollar trades higher at 0.9939, hovering towards a 7-month of 0.9961 hit in the previous session. The temporary top around 0.9962 will be acting as major resistance and slight jump is possible only above that level. Any violation above 0.9962 will take the pair to next level till 1.000. On the lower side, any break below 0.9890 (10-day MA) will drag the pair down till 0.9845/0.9780.
AUD/USD: The Australian dollar extended its recovery momentum further beyond 0.7600 handle, as markets expect Australia's consumer price report due this week to show underlying inflation rose around 0.4 percent for the third quarter and 1.6 percent for the year. However, lower-than-expected CPI print would increase probabilities of further monetary easing by RBA, which would renew selling pressure in the major. The Aussie trades 0.33 percent higher at 0.7630, after rising to an early high of 0.7640. On the higher side, major resistance is around 0.7680 and any break above will take the pair till 0.7730/0.7760/0.7800. The major support is around 0.7580 (cloud bottom) and a break below will drag it till 0.7530/0.7480.
NZD/USD: The New Zealand dollar nudged higher, attempting to recover from a 2-day low amid holiday-thinned trading. However, the recovery appears to remain fragile as speculations of further monetary easing by RBNZ at its meeting in November and increasing prospects of an eventual Fed rate hike action continued to underpin the greenback. The Kiwi trades flat at 0.7161, pulling away from a low of 0.7144 hit earlier in the session. Immediate resistance is located at 0.7187 (5-DMA), break above targets 0.7200/ 0.7250. On the downside, support is seen at 0.7135 (10-DMA), a break below could drag it near 0.7100.
Equities Recap
European shares rose, led higher by a surge in IBEX index as Spain's conservative leader Mariano Rajoy was on course to secure a second term in power, a sign of an end to 10 months of political deadlock.
The pan-European STOXX 600 index increased 0.43 percent at 345.85 points, while the FTSEurofirst 300 index edged up 0.42 percent at 1,364.73 points.
Britain's FTSE 100 trades 0.11 percent higher at 7,028.46 points, while mid-cap FTSE 250 was flat at 17,935.05 points.
Germany's DAX rose 0.76 percent at 10,792.06 points; France's CAC 40 trades 0.71 percent up at 4,567.89 points.
MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.2 percent.
Tokyo's Nikkei rose 0.29 percent at 17,234.42 points, Australia's S&P/ASX 200 index declined 0.46 percent to 5,405.50 points and South Korea's KOSPI added 0.73 percent at 2,047.74 points.
Shanghai composite index gained 1.2 percent at 3,128.25 points, while CSI300 index also climbed 1.2 percent at 3,367.57 points. Hong Kong’s Hang Seng jumped 1.0 percent to 23,604.08 points.
Commodities Recap
Crude oil prices declined after Iraq stated that it wanted to be exempt from any production retraining deal by producer OPEC to prop up the market and as U.S. drillers stepped up work. Global benchmark Brent crude was trading 0.2 percent lower at $51.80 per barrel at 0928 GMT, drifting closer to a 1-week low of $51.11 hit on Friday. U.S. West Texas Intermediate crude dropped 0.3 percent at $50.81 a barrel.
Gold prices were little changed as markets awaited further clues on the timing of U.S. Federal Reserve interest hike. Spot gold was trading flat at $1,266.49 an ounce at 932 GMT, while U.S. gold futures were down 0.1 percent at $1,266.40 an ounce.
Treasuries Recap
The U.S. Treasuries traded narrowly mixed as investors await Federal Reserve policymakers’ speech in an attempt to estimate the Fed's most likely policy step during a relatively quiet session that saw no data of great significance. The yield on the benchmark 10-year Treasury note fell 1-1/2 basis points to 1.724 percent, the yield on long-term 30-year Treasury fell 2 basis points to 2.472 percent and the yield on short-term 2-year note climbed 1/2 basis point to 0.832 percent.
The UK gilts gained as investors speculate that the county’s upcoming third quarter gross domestic product (GDP) is likely to deteriorate in the wake of Britain’s most likely exit from the European Union. The yield on the benchmark 10-year gilts fell 4-1/2 basis points to 1.043 percent (more than a week low), the super-long 40-year bond yield also dipped 4-1/2 basis points to 1.530 percent and the yield on short-term 2-year bond slid 3-1/2 basis points to 0.214 percent.
The Portuguese government bonds rallied after rating agency DBRS reaffirmed the country’s investment grade rating on Friday, retaining bonds in ECB’s QE programme. The yield on the benchmark 10-year bond fell 9 basis points to 3.099 percent (near 1-1/2 month low), the yield on 20-year note also dipped 9 basis points to 3.809 percent and the yield on short-term 3-year bond slid 5-1/2 basis points to 0.762 percent.
The German bunds traded modestly firmer as investors speculate that the European Central Bank (ECB) will lower its key interest rate in December’s monetary policy meeting in the wake of persistent weak inflation. Also, markets largely shrugged off better-than-expected PMI figures for October. The yield on the benchmark 10-year bond fell 1 basis point to -0.006 percent, the yield on long-term 30-year note also dipped 1 basis point to 0.60 percent and the yield on short-term 3-year bond slid ½ basis point to -0.66 percent.
The short-term Japanese government bonds slumped after recent data showed that the country’s trade balance returned to positive territory in September as exports declined at a much slower-than-expected rate. The benchmark 10-year bond yield, which moves inversely to its price, rose 1 basis point to -0.048 percent, the yield on long-term 30-year Treasury fell nearly 1 basis point to 0.498 percent and the yield on short-term 2-year note rose 2 basis points to -0.236 percent.
The Australian government bonds gained as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil. The yield on the benchmark 10-year Treasury note fell nearly 3 basis points to 2.277 percent, the yield on 15-year note dipped 2-1/2 basis points to 2.643 percent and the yield on 5-year slid 1 basis point to 1.943 percent.
