Market Roundup
- BoJ Gov Kuroda – Will adjust policy as needed to achieve 2% inflation target, will remain aggressive, respond flexibly to economic conditions, risks still tilted to downside despite recovery view, JPY weaker, reflects US rate hike view, stocks up too, will continue to eye market, stable FX desirable
- Japan Q3 GDP +0.5% q/q, +2.2% AR, +0.2% and +0.9% forecast, private consumption +0.1% q/q, CAPEX unch, unch and +0.1% forecast, CAPEX not negative for first time in 3 quaters, external demand contribution to GDP +0.5%, largest since Q2 ’14, housing investment +2.3% q/q, GDP deflator -0.1% y/y.
- Japan firms face tighter audits, 56% reviewing working hours, overtime cuts in focus – Reuters poll.
- PBOC fixes CNY at 6.8291 vs USD, CNY highest since September ’10.
- China Stats Bureau – Economy showing upward momentum, details better, still uncertainties, foundation not stable.
- China Oct industrial output +0.5% m/m, +6.1% y/y, +6.2% y/y forecast.
- China Oct retail sales +0.71% m/m, +10.0% y/y, +10.7% y/y forecast.
- China Oct urban unemployment below 5%.
- China Oct fiscal revenues +5.9%y/y, expenditures -12.5%, Jan-Oct +5.9%, -10%.
- China Jan-Oct fixed asset investment +8.3% y/y, +8.2% forecast, private +5.9%.
- China Jan-Oct property investment +6.6% y/y.
- New Zealand Oct REINZ median house price index +4% m/m, +10.9% y/y, Auckland +16% y/y.
- Large earthquake hits New Zealand south island, aftershocks rattle.
Economic Data Ahead
- (0315 ET/0815 GMT) Switzerland Oct producer/import prices; last +0.3% m/m, -0.1% y/y.
- (0400 ET/0900 GMT) Italy Oct CPI, unch m/m, -0.1% y/y forecast; last unch, -0.1%.
- (0400 ET/0900 GMT) Italy Oct HICP, +0.2% m/m, -0.1% y/y forecast; last +0.2%, -0.1%.
- (0500 ET/1000 GMT) Eurozone Sep industrial production, -1.0% m/m, +1.0% y/y forecast; last +1.6%, +1.8%.
Key Events Ahead
- (0850 ET/1350 GMT) France E3.1-3.5/1.0-1.4/1.1-1.5 bln 3/6/12-month BTF note auctions.
- N/A Dallas Fed Kaplan speaks at Wichita Falls economic forum.
- (1700 ET/2200 GMT) Federal Reserve Bank of Richmond President Jeffrey Lacker speech
- (1830 ET/2330 GMT) Federal Reserve Bank of San Francisco President John Williams participates in a panel discussion.
FX Beat
DXY: The dollar gained across the board as the 10-year Treasury note yield rose to a 10-month high. The greenback against a basket of currencies trades 0.6 percent higher at 99.57, having touched a high of 99.68 earlier in the session, its highest since Jan. 29.
EUR/USD: The euro declined, extending losses for the sixth consecutive session, as the greenback strengthened on expectations that Trump's administration would boost spending and lift inflation. The 10-year Treasury note yield rose to a 10-month high of 2.18 percent in Asia, further bolstering the bid tone around the dollar. The major trades 0.5 percent down at 1.0796, having hit a low of 1.0772, its lowest since late January. Investors now await Eurozone's industrial production figures and speeches from ECB President Draghi and Federal Reserve officials' for further momentum on the major. Immediate resistance is located at 1.0954 (5-DMA) a break above could take it near 1.1000. On the downside, support is seen at 1.0750, a break below could drag it lower till 1.0710.
USD/JPY: The dollar rose above the 107 threshold for the first time since late July, as risk-on sentiment in financial markets triggered by Donald Trump's presidency remained firmly intact. The U.S. Treasury yields rose to 10-month highs on prospects of larger fiscal spending and higher inflation, which also strengthened the bid tone around the greenback. The major trades 0.7 percent higher at 107.38, having hit a high of 107.59, it’s highest since June 7. Investors now await Federal Reserve Bank of San Francisco President John Williams and Richmond Federal Reserve Bank President Jeffrey M. Lacker's speeches for further clues on the December rate hike. Immediate resistance is located at 107.60 (Session High), a break above targets 108.00. On the downside, support is seen at 106.73 (Session Low), a break below could take it near 106.31 (5-DMA).
GBP/USD: Sterling declined, after rising to a 5-week high against the dollar on Friday as ongoing strength in the U.S. treasury yields supported the dollar. The major declined to an intra-day low of 1.2508, however, it recovered as the offer tone weakened. Sterling trades 0.3 percent lower at 1.2560, having hit a high of 1.2673 in the previous session, its highest since Oct. 6. Investors will continue track board based market sentiment, amid a lack of macro fundamental drivers from the UK docket. Immediate resistance is located at 1.2600, a break above could take it near 1.2700. On the downside, support is seen at 1.2498 (5-DMA), a break below targets 1.2440 (10-DMA). Against the euro, the pound trades 0.1 percent higher at 85.97 pence, having hit a high of 85.66 pence the prior session, its highest since Sept. 23.
AUD/USD: The Australian dollar hit a 1-month low in early Asian trade, as soaring U.S Treasury yields and mixed Chinese data weakened the bid tone around the major. However, it briefly recovered on the back of an extended rally in copper prices. The Chinese October Industrial Production came in at 6.1 percent y/y against expectations of 6.2 percent, while retail sales also missed estimates, declining to 10.0 percent y/y in the same period versus projections of 10.7 percent. Meanwhile, fixed asset investment edged up at 8.3 percent versus 8.2 percent expected. The Aussie trades 0.1 percent up at 0.7548, retreating from a low of 0.7523, it’s lowest since Oct. 13. Investors will closely watch the Reserve Bank of Australia's minutes of November policy meeting, followed by Governor Philip Lowe's speech on Tuesday for further clues on the pair. Immediate support is seen at 0.7523 (Session Low), a break below could drag it near 0.7500. On the upside, resistance is located at 0.7580, a break above targets 0.7620.
NZD/USD: The New Zealand dollars fell to near 1-month lows below the 0.7100 handle, extending losses for a fourth straight session after several strong earthquakes hit the nation's regions. Moreover, the selling pressure in the major intensified following mixed Chinese economic data, which triggered a fresh bout of risk aversion. The Kiwi trades 0.3 percent lower at 0.7086, hovering towards an early low of 0.7074, its lowest since Oct.13. Markets anticipate the pair to rebound on expectations that the payouts from insurers overseas and rebuilding work would likely aid an already strong economy, trimming down the need for further interest rate cuts. Immediate resistance is located at 0.7150, a break above targets 0.7200. On the downside, support is seen at 0.7047, a break below could drag it near 0.7000.
Equities Recap
Asian shares slumped, while the greenback touched a 9-month peak as the risk of faster domestic inflation and wider budget deficits lifted Treasury yields higher.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.1 percent, having dropped to its lowest close since mid-July on Friday.
Tokyo's Nikkei added 1.81 percent at 17,689.11 points, Australia's S&P/ASX 200 index declined 0.61 percent to 5,337.90 points and South Korea's KOSPI was trading 0.34 percent lower at 1,977.56 points.
Shanghai composite index rose 0.4 percent to 3,208.24 points, while CSI300 index was trading 0.41 percent higher at 3,431.45 points.
Hong Kong’s Hang Seng was trading 1.24 percent down at 22,251.09 points. Taiwan shares shed 0.2 percent at 8,940.40 points.
Commodities Recap
Crude oil prices steadied near multi-month lows, weighed down by growing concerns about an oversupply as the U.S. rig count rose and OPEC's output rose to a record 33.64 million barrels per day (bpd) in October, up 240,000 bpd from the previous month. Global benchmark Brent crude was trading 0.5 percent higher at $44.78 per barrel by 0356 GMT, pulling away from a 3-month low of $44.18 hit on Friday. U.S. West Texas Intermediate crude rose 0.56 percent at $43.32 a barrel, having hit a low of $43.03 in the previous session, its lowest since Sept. 16.
Gold prices declined, having hit its lowest in over five months, dragged down by a stronger U.S. dollar and expectations that the Federal Reserve would hike interest rates in December. Spot gold was down 0.7 percent at $1,216.90 an ounce by 0405 GMT, having shed as much as 1 percent to $1,213.63 an ounce earlier in the session, its lowest since June 3. U.S. gold futures slipped 0.5 percent to $1,218.50 per ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.2135 percent higher by 0.095 bps, while 5-year yield was 0.011 bps up at 1.6386 percent.
The Australian 10-year Treasury yields hit highest since April on as investors moved away from safe-haven buying as the probability of a December rate hike by the Federal Reserve jumped to 84 percent. The yield on the benchmark 10-year Treasury note rose 7 basis points to 2.660 percent (highest since April), the yield on 15-year note jumped more than 8 basis points to 3.097 percent and the yield on short-term 2-year climbed 2-1/2 basis points to 1.757 percent.
The New Zealand 10-year bond yields closed highest since February on following heavy sell-off in global Treasury market. The yield on the benchmark 10-year bond rose 1/2 basis point to 3.135 percent (highest since February), the yield on 5-year note also ended 1/2 basis point higher at 2.523 percent and the yield on short-term 2-year note bounced 1/2 basis point to 2.135 percent.
