Market Roundup
• Tumbling oil sends Wall St into a slide, Oil prices fall more than 2% on IEA, OPEC comments.
• No Article 50 before Brexit ministry fully staffed - UK minister.
• ECB’s Lautenschlaeger: ECB should not change policy stance: skeptical about further rate reductions.
• BOJ plans to position taking interest rates further into negative territory – Nikkei.
• Japan confirms it will increase 40-year JGB issuance by Y400mln this FY.
• Global bonds & stocks lashed by policy rethink, talk of turning point as central banks fail to stir growth & inflation.
• Atlanta Fed’s Lockhart to step down Feb 28, no timetable set for naming new president.
• Former US Treasury Sec Geithner: Financial system more stable now because capital cushions are 'thicker'
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand Current Account - Quarterly Q2 forecast -0.411b, 1.306b-previous
• 22:45 New Zealand Current Account- Annual Q2 forecast -6.74b, -7.50b- previous
• 22:45 New Zealand Current Account Balance To GDP Q2 forecast -2.7%, -3%- previous
• 00:30 Australia Consumer Sentiment Sep 2%- previous
• 04:30 Japan Industrial Output Jul 0%- previous
• 04:30 Japan Capacity Utilization Index Change MM Jul 1.5%- previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1165 levels and currently trading at 1.1216 levels. The pair has made session high at 1.1260 and hit lows at 1.1203 levels. Euro declined against the dollar on Tuesday as attention turned to the likelihood of a December Federal Reserve rate hike, while declines in riskier commodity currencies also strengthened the dollar. The focus on a December rate hike came after Fed Governor Lael Brainard struck a dovish stance in a speech on Monday and reduced expectations that the Fed would hike rates next week. The dollar index, which measures the greenback against a group of six major currencies, hit a one-week high of 95.672 as U.S. Treasury yields surged on what analysts said were growing expectations for a December Fed rate increase. U.S. retail sales data on Thursday and consumer inflation data on Friday will be watched for signs of when the Federal Reserve is likely to raise rates. The euro slightly declined against the dollar and was last down just 0.15 percent at $1.1215.
GBP/USD is supported in the range of 1.3123 currently trading at 1.3194 levels. It reached session high at 1.3267 and hit low at 1.3166 levels. Sterling edged lower against the U.S. dollar on Tuesday as the currency pair was weighted down as downbeat UK data. Data released on Tuesday showed Britain's annual consumer price inflation rate for August unchanged at 0.6 percent, just below forecasts for 0.7 percent, while core inflation, which strips out volatile items, was also a tad lower than expected. Sterling fell after the data and then continued to fall, hitting a low of $1.3166 in the early US session, 1.1 percent down on the day and its weakest since September 1. The Bank of England starts a two-day policy meeting on Wednesday. The BoE is not expected to announce new measures this week, having cut interest rates to record lows and reintroduced an asset-purchase programme last month. But traders expect it to stick to a dovish bias.
USD/CAD is supported at 1.3123 levels and is trading at 1.3166 levels. It has made session high at 1.3191 and lows at 1.3121 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as advancing dollar and falling oil prices weighted on the Canadian dollar. Oil fell 3 percent after the International Energy Agency (IEA) said a sharp slowdown in global oil demand growth, coupled with ballooning inventories and rising supply, means the crude market will be oversupplied at least through the first six months of 2017. U.S. dollar was broadly higher, recovering ground lost in the previous session following a speech by Federal Reserve policymaker Lael Brainard that solidified the view that U.S. interest rates are unlikely to rise this month. The Canadian dollar was last trading at C$1.3166 to the greenback, much weaker than the Bank of Canada's official close on Monday of C$1.3049.
AUD/USD is supported around 0.7409 levels and currently trading at 0.7464 levels. It hit session high at 0.7528 and made session lows at 0.7440 levels. The Australian dollar declined sharply against US dollar on Tuesday as falling oil prices and reduced demand for commodity-related currency overshadowed positive economic data from China, helping dollar gain strength against the Aussie. The Aussie slipped 0.25 percent to $0.7545, trading near a key chart support. A breach below that level could see it testing $0.7490, a level last seen on Aug.31. China's industrial output grew 6.3 percent in August from a year ago, compared with 6.0 percent expansion in July while retail sales for last month beat expectations. Fears of a sharp slowdown in China have dissipated in recent months but analysts say it would take a run of upbeat news to convince investors the economy was taking off again.
Equities Recap
European shares fell for a fourth day on Tuesday as initial support from dovish remarks by U.S. Federal Reserve official Lael Brainard eased and a drop in crude oil prices weighed.
UK's benchmark FTSE 100 closed down by 0.5 percent, the pan-European FTSEurofirst 300 ended the day down by 0.95 percent, Germany's Dax ended down by 0.5 percent, France’s CAC finished the day down by 1.2 percent.
U.S. stocks fell more than 1 percent on Tuesday, with energy stocks slammed by lower oil prices and financials dropping on diminished prospects of a near-term rate hike.
Dow Jones closed down by 1.40 percent, S&P 500 ended down by 1.47 percent, Nasdaq finished the day down by 1.06 percent.
Treasuries Recap
Long-dated Treasury yields rose to their highest levels in around three months on Tuesday on heavy Treasury and corporate debt supply and on concerns about global central bank policy.
Benchmark 10-year notes fell 18/32 in price to yield 1.73 percent, after rising as high as 1.752 percent, the highest since June 3. Thirty-year bonds dropped 1-16/32 in price to yield 2.468, after earlier climbing to 2.488 percent, the highest since June 23.
The gap between two-year note and 30-year bond yields widened to 168 basis points, the steepest since July 1, while the difference between five-year note yields and 30-year bond yields increased to 123 basis points.
Commodities Recap
Gold fell for the fifth straight day on Tuesday, weighed down by a firmer dollar and a jump in Treasury yields as well as uncertainty about whether the U.S. central bank will raise interest rates next week.
Spot gold was down 0.7 percent at $1,317.47 an ounce by 3:03 p.m. EDT (1903 GMT). U.S. gold futures settled down 0.14 percent at $1,323.70 per ounce.
Oil prices fell as much as 3 percent on Tuesday after both the world's energy watchdog and OPEC revised forecasts that signaled the global crude glut could persist for much longer than expected.
Brent crude settled down $1.22 or 2.5 percent, at $47.10 a barrel.
U.S. West Texas Intermediate crude fell $1.39, or 3 percent, to settle at $44.90.
