Market Roundup
• Philly Fed: US core PCE inflation seen at 1.7% in Q4 v 1.6% Previous; q4 GDP growth seen at 2.2% v 2.3% Previous.
• Fed’s Kaplan: Fed will raise rates in 'near future,' Higher LT rates gives Fed more room to maneuver.
• Fed’s Kaplan: Infrastructure spending makes sense, US needs intelligent fiscal policy.
• USD soars as US yields spike on inflation forecast; U.S. bank stocks rise, supply risks; Crude falls on oversupply fears.
• ECB's Constancio warns of political, economic risk from Trump's win.
• ECB’s Praet: ECB policy "unambiguously positive" for EZ, vital that fiscal authorities rebalance toward more growth-friendly policies.
• Italy bears brunt of year's biggest bond rout, IT 10-yr yield hits highest since Sep 2015; US inflation bets buffet global bond markets.
• Brazil real weakens for 4th day; Mexico peso up; Gold hits 5-1/2 month low, Silver also hits lowest since June.
Looking Ahead - Economic Data (GMT)
21:45 New Zealand Retail Sales Volumes QQ* Q3 2.3%-previous
21:45 New Zealand Retail Qrtly Vs Yr Ago* Q3 6%-previous
Looking Ahead - Events, Other Releases (GMT)
00:30 Australia RBA to publish the minutes of its November policy meeting
--:-- Australia RBA Gov Philip Lowe speaks at the Cmte for Econonomic Development of Australia's (CEDA) annual dinner
Currency Summaries
EUR/USD is supported at 1.0700 levels and currently trading at 1.0736 levels. The pair has made session high at 1.0782 and hit lows at 1.0707 levels. Euro declined against the dollar on Monday as dollar resumed its rally as traders bet fiscal and trade policies under a Donald Trump administration would stoke inflation. Trump's stunning U.S. presidential win last week also sparked expectations that Federal Reserve will raise interest rate in December. The benchmark 10-year Treasury note yield rose as high as 2.30 percent, its highest since early January, while a bond market gauge on investors' 10-year inflation expectations hit its highest level in over two years. The euro shed 1.1 percent at $1.073 after hitting its lowest level against the greenback since Dec. 3, 2015, while the dollar was up 1.8 percent at 108.43 yen after reaching its strongest level since June 23.
GBP/USD is supported in the range of 1.2434 levels and currently trading at 1.2489 levels. It reached session high at 1.2513 and dropped to session low at 1.2443 levels. Sterling declined against the U.S. dollar on Monday as dollar was boosted by higher U.S. bond yields which jump on expectations that President-elect Donald Trump will boost U.S. spending. A slew of perceived risk events in Europe are weighing on the euro, with Trump's victory seen boosting a global wave of populism and radical political parties. Italy has a referendum on constitutional reform next month, while French, Dutch and German national elections are all due next year. The dollar rose for the sixth straight session, reaching an 11-month high against a basket of major currencies, while U.S. 10-year Treasury yields soared to their highest since December 2015 at 2.3 percent. Sterling fell to as low as $1.2445 on Monday, down 1.2 percent on the day, but still around 2.5 percent up from two weeks ago.
USD/CAD is likely to find support at 1.3500 levels and is trading at 1.3553 levels. It has made intraday high at 1.3589 band lows at 1.3535 levels. The Canadian dollar weakened to hit fresh eight-month low against its firmer U.S. counterpart on Monday, as investor’s expected that U.S. President-elect Donald Trump will pursue policies that trigger higher inflation. The U.S. dollar posted an 11-month peak against a basket of major currencies as the risk of faster inflation and wider budget deficits, if Trump should go on a U.S. spending spree, sent U.S. Treasury and other benchmark global bond yields shooting higher. Lower oil prices added to pressure on the Canadian dollar. U.S. crude prices were down 1.11 percent to $42.93 a barrel as the prospect of another year of oversupply and weak prices overshadowed chances that OPEC will reach a deal to cut output. The Canadian dollar was last trading at C$1.3549 to the greenback, or 73.81 U.S. cents, slightly weaker than Friday's close of C$1.3545, or 73.83 U.S. cents.
AUD/USD is supported around 0.7500 levels and currently trading at 0.7554 levels. It hit session high at 0.7564 and made session lows at 0.7524 levels. The Australian dollar declined against US dollar on Monday as soaring U.S Treasury yields led broader greenback strength. The Australian dollar slipped as far as $0.7525, its lowest since Oct.13. It was last trading at $0.7553.The Aussie has lost about 1.5 percent of its value since Donald Trump won the U.S. presidential election last week, on speculation his policies could reignite inflation and with it drive up interest rates. Trump's victory also sent U.S. Treasury futures to 10-month lows as investors expect him to adopt protectionist trade policies that may increase commodity prices and the cost of goods. Investors will watch out for the Reserve Bank of Australia's minutes of November policy meeting on Tuesday, followed by governor Philip Lowe's speech in the evening.
Equities Recap
European shares surrendered most of their early gains and ended slightly higher on Monday, with a slump in bond-proxy sectors following a rally in bond yields capping gains recorded by financials and miners.
UK's benchmark FTSE 100 closed up by 0.4 percent, the pan-European FTSEurofirst 300 provisionally closes up the day down by 0.29 percent, Germany's Dax ended up by 0.4 percent, France’s CAC finished the day up by 0.6 percent.
U.S. stocks closed little changed on Monday after rising dramatically the week before and a decline in the technology sector offset a steep rise in financial stocks as investors bet on higher interest rates.
Dow Jones closed up by 0.89 percent, S&P 500 ended down by 0.00 percent, Nasdaq finished the day down by 0.36 percent.
Treasuries Recap
The bond market sell-off resumed on Monday on the heels of the worst week for U.S. Treasuries in more than seven years on growing worries that inflation will become a resurgent force under the policies of President-elect Donald Trump.
The yield on the 30-year Treasury bond , the security most sensitive to inflation expectations, shot above 3 percent for the first time since January. The gap between the yields on 10-year and 2-year notes rose from 1.21 percent at the end of last week to 1.26 percent, its widest since December
Yields on 30-year bonds rose to a high of 3.067 percent, a peak not touched since December. Benchmark 10-year notes saw their yields rise to 2.302, also the highest mark since December.
Commodities Recap
Gold fell for the third straight session on Monday, reaching a 5-1/2-month low as the dollar and Treasury yields strengthened on expectations that President-elect Donald Trump will boost U.S. spending.
Spot gold hit its lowest since June 3 at $1,211.08 an ounce and was down 0.6 percent at $1,218.92 an ounce by 2:32 p.m. EST (1932 GMT). It was on track for its biggest three-day drop since July 2015.
U.S. gold futures settled down 0.2 percent at $1,221.70.
Oil prices were largely steady on Monday, rebounding from three-month lows, on a report saying that OPEC members were seeking to resolve their differences on a deal to cut production ahead of a meeting later this month.
Brent crude futures settled at $44.43 per barrel, down 0.72 percent, after falling to as low as $43.57. U.S. crude ended the session down 0.2 percent at $43.32, after hitting a low of $42.20. Both benchmarks' session lows were the weakest since Aug. 11.
