Asia Roundup: Antipodeans hit multi-week highs on upbeat Chinese trade report, dollar eases as long-dated Treasury yields fall, investors cautious ahead of ECB policy meet - Thursday, December 8th, 2016

Market Roundup

• Japan Q3 GDP revised +0.3% q/q, +1.3% AR, +0.6% and +2.4% eyed, prelim +0.5%, +2.2%, CAPEX -0.4% q/q, private consumption +0.3%, net external demand +0.3%, CAPEX fall, forecast difficulties after base year change behind miss.
   
• MoF flow data week-ended Dec 3 – Japanese sell net Y72.1 bln foreign stocks, Y887.6 bln bonds, Y39.0 bln bills; foreign investors buy net Y400.1 bln Japanese stocks, Y658.2 bln bonds, sell Y510.6 bln bills.
   
• MoF November flows – Japanese buy net Y1.2793 trln foreign stocks, Y83.9 bln bonds, sell Y74.7 bln bills; foreign investors buy net Y1.2103 trln Japanese stocks, sell Y344.3 bln bonds, buy Y2.6207 trln bills.
   
• Japan Nov bank loans Y504.481 trln, +2.4% y/y, Oct +2.4%, Sept +2.2%.
   
• Japan Inc warns of global trade contraction under Pres Trump – Reuters poll.
   
• Japan to tell big companies to pay subcontractors in cash – Nikkei.
   
• Japan’s Mizuho develops its own virtual currency - Nikkei.
   
• Japan Nissin Food set to build first domestic plant in two decades – Nikkei.
   
• Lloyds prices Y61 bln 5/10-year samurais, via Daiwa, Mizuho, Nomura – IFR.
   
• China Nov trade surplus $44.61 bln, exports +0.1% y/y, imports +6.7%, $46.3 bln/-5%/-1.3% eyed, imports up most since Sept ’14, exports up first time since March.
   
• China Nov trade surplus CNY298.11 bln, exports +5.9% y/y, imports +13.0%.
   
• China Nov iron ore imports +13.8% m/m.
   
• China launches exchange for fast growing commercial paper market – Reuters.
   
• Australia Oct trade deficit A$1.541 bln, A$800 mln eyed, exports +1% m/m, imports +2%.
   
• RBNZ Gov Wheeler – OCR likely to remain at current level for some time, NZD- migration-house price inflation among factors eyed, changes could see change in policy path, overall risks stil to downside – Reuters.
   
• New Zealand ‘16/17 net debt 24.3% of GDP, OBEGAL surplus NZ$47 mln, surplus forecast cut on earthquake costs, net debt 18.8% of GDP by ‘20/21, growth to average 3% over next five years, ‘16/17 bond issuance NZ$8 bln, pre vest NZ$7 bln.
   
• New Zealand’s Bill English set to become PM after leadership rivals concede – Nikkei.
   
• UK Nov RICS house price index +30, seven month high, +26 eyed, Oct +23, number of prospective buyers low however.
   
• UK REC survey – Job vacancies, permanent vacancies-salaries, temp billings All up, placements and vacancies highest since February.
   
• Italy demands more time from ECB to rescue Monte dei Paschi -Financial Times.
  ​

Economic Data Ahead

• (0130 ET/0630 GMT) France Q3  non-farm payrolls – revision; prelim +0.3%.
   
• (0230 ET/0730 GMT) France Nov BdF business sentiment index, 100 eyed; last 99.
   
• (0330 ET/0830 GMT) Sweden Oct household consumption; last +1.5% y/y.
   
• (0830 ET/1330 GMT) United States w/e initial jobless claims, 258k eyed; last 268k.
   
• (1000 ET/1500 GMT) United States Q3  quarterly services survey.
   
• (1200 ET/1700 GMT) United States Q3  flow of funds data.
  ​

Key Events Ahead

• (0400 ET/0900 GMT) BoJ Gov Kuroda speaks at Tokyo Economist event.
   
• N/A   German FinMin Schaeuble speaks at Berlin conference.
   
• (0500 ET/1000 GMT) Sweden 3.5% and 2.5% 2022 and 2025 government bond auctions.
   
• (0745 ET/1245 GMT) ECB policy announcement, no changes in zero refi, -0.4% depo rates eyed.
   
• (0830 ET/1330 GMT) ECB Pres Draghi press conference, QE major issue, even-keel or cut.
   
• (0900 ET/1400 GMT) BoC Gov Poloz, Canada FinMin Morneau at Gatineau, Quebec event.
   

FX Beat

DXY: The dollar declined across the board as long dated Treasury bond yields eased, while investors adjusted their positions ahead of the European Central Bank policy meeting. The greenback against a basket of currencies trades 0.5 percent down at 100.04, hovering towards a 3-week low of 99.85 hit on Tuesday. FxWirePro's Hourly Dollar Strength Index stood at -44.00 (Neutral) by 0500 GMT.

EUR/USD: The euro rose, extending gains from the previous session on increasing expectations the European Central Bank will extend its bond-buying stimulus scheme at its policy meeting today. However, the upside remains capped as investors refrain from taking big positions.  The European currency trades 0.2 percent up at 1.0773, hovering towards a 3-week high of 1.0796 hit on Monday. Investors’ attention will remain on developments surrounding Italian political uncertainty and news flow related to the banking sector, ahead of the ECB's policy decision and the U.S. unemployment claims figures. FxWirePro's Hourly Euro Strength Index stood at 97.90 (Slightly Bullish) by 0400 GMT. Immediate resistance is located at 1.0800, a break above targets 1.0840. On the downside, support is seen at 1.0707 (7-EMA), a break below could drag it till 1.0650.

USD/JPY: The dollar slumped following a decline in the long-dated Treasury bond yields, while investors remained cautious ahead of central bank policy decisions triggering a fresh bout of risk- aversion. Data released overnight showed Japan's economy grew at a 1.3 percent annualized rate in July-September, a much slower than an initial estimate of 2.4 percent, however, upbeat trade figures somewhat buoyed the sentiment around the yen.  The major trades 0.3 percent down at 113.39, slightly recovering from an early low of 113.13. FxWirePro's Hourly Yen Strength Index stood at 81.03 (Slightly Bullish) by 0400 GMT. Investors will continue to track board based market sentiment, ahead of the much-awaited ECB policy decision, amid a lack of macroeconomic drivers from the U.S. data docket. Immediate resistance is located at 114.54, a break above targets 115.00/ 115.30. On the downside, support is seen at 112.55, a break below could take it lower 112.00.

GBP/USD: Sterling advanced, after touching a 1-week low against the dollar in the previous session on the back of downbeat Britain's industrial output data. On Wednesday, the selling pressure around the major intensified after the British Parliament backed Prime Minister Theresa May's Brexit timetable, which triggered another round of Brexit-related political turbulence. Sterling trades 0.2 percent higher at 1.2650, after falling to a low of 1.2569 the day before. FxWirePro's Hourly Sterling Strength Index stood at -138.05 (Highly Bearish) by 0400 GMT. Markets will closely watch ECB's policy decision, amid a lack of macro-fundamental drivers from the UK data docket. Immediate resistance is located at 1.2681 (5-DMA), a break above could take it over 1.2700. On the downside, support is seen at 1.2569 (Dec-2 Low), a break below targets 1.2500. Against the euro, the pound trades lower at 85.18 pence, having hit a low of 85.49 pence the prior session, it’s weakest since Nov. 30.

AUD/USD: The Australian dollar rallied to a 3-week high above the 0.7500 handle after Chinese trade data showed the imports and exports rose much higher than expected. China's imports grew 13.0 percent y/y in November, versus estimates of 1.3 percent decline, while, exports jumped 5.9 percent y/y, beating the forecasts of 5.0 percent drop. The Aussie trades 0.2 percent higher at 0.7495, having touched a high of 0.7507, its strongest since Nov. 16. FxWirePro's Hourly Aussie Strength Index stood at 61.71 (Bullish) by 0500 GMT. The major will continue to digest upbeat Chinese trade report, ahead of the ECB policy meeting outcome, which could influence the broader market sentiment. Immediate support is seen at 0.7457 (20-DMA), a break below could drag it near 0.7400. On the upside, resistance is located at 0.7530, a break above targets 0.7570.

NZD/USD: The New Zealand dollar rallied above the 0.7200 handle to hit a near 4-week high on news that Fonterra has boosted the forecast payout to farmers. Moreover, improving risk appetite and better-than-expected Chinese trade report strengthened the bid tone around the major. The Kiwi trades 0.6 percent higher at 0.7208, having touched an early high of 0.7222, its highest since Nov 11. FxWirePro's Hourly Kiwi Strength Index was at 73.62 (Bullish) by 0500 GMT. The pair will be driven by overall market sentiment, ahead of the ECB policy decision. Immediate resistance is located at 0.7230, a break above could take it near 0.7300. On the downside, support is seen at 0.7135 (7-EMA), a break below could drag it till 0.7100.

Equities Recap

Asian shares advanced after Wall Street rallied to new records on bets that the European Central Bank would extend its asset-buying programme at a policy meeting later in the day.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.8 percent to a 1-month peak.

Tokyo's Nikkei advanced 1.16 percent at 18,711.87 points, Australia's S&P/ASX 200 index gained 1.23 percent at 5,545.50 points and South Korea's KOSPI was trading 1.31 percent higher at 2,017.55 points.

Shanghai composite index edged down 0.06 percent to 3,220.17 points, while CSI300 index was trading 0.03 percent higher at 3,476.96 points.

Hong Kong’s Hang Seng was trading 0.57 percent up at 22,931.69 points. Taiwan shares added 1.21 percent at 9,375.86 points.

Commodities Recap

Crude oil prices steadied after steep falls in the previous session, as a drawdown in U.S. crude stocks and a weaker dollar supported prices. International benchmark Brent crude was 0.05 percent up at $53.01 per barrel by 0406 GMT, having hit a low of $52.90 hit on Wednesday. U.S. West Texas Intermediate crude rose 0.1 percent at $49.85 a barrel, after declining as low as $49.70 in the prior day, its lowest since Dec. 1.

Gold prices gained, supported by a drop in the dollar along with long-dated U.S. Treasury bond yields ahead of European Central Bank policy meeting outcome. Spot gold rose 0.3 percent to $1,177.17 an ounce by 0415 GMT, while U.S. gold futures were up 0.1 percent at $1,179 an ounce.

Treasuries Recap

The 10-year U.S treasury yield stood at 2.3437 percent down by 0.003, while 5-year yield was up by 0.001 bps at 1.7978 percent.

The Australian government bonds gained after recent data showed that the country’s trade deficit widened in October. Also, investors await the next week’s FOMC final monetary policy decision for 2016. The yield on the benchmark 10-year Treasury note fell 5 basis points to 2.75 percent, the yield on 15-year note dipped 6 basis points to 3.20 percent and the yield on short-term 2-year slid 1-1/2 basis points to 1.82 percent.

The Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The 2-year rose 4 Canadian cents to yield 0.702 percent and the benchmark 10-year climbed 30 Canadian cents to yield 1.599 percent. The 2-year yield fell 1 basis point further below its U.S. equivalent to a spread of -40.8 basis points.