Market Roundup
- Japan Sept domestic corp goods prices unch m/m, -3.2% y/y, Aug -0.3%, -3.6%.
- MoF flow data week-ended Oct 8 – Japanese buy net Y87.1 bln foreign stocks, sell Y737.7 bln bonds, Y33.9 bln bills; foreign investors buy net Y430.3 bln Japanese stocks, Y289.6 bln bonds, Y247.3 bln bills.
- Japan Sept money supply M2 +3.6% y/y, M3 +3.1%, broad liquidity +1.8%.
- Toyota Finance eyes bond issue with record low 0.0003% yield – Nikkei.
- China Sept CPI +0.7% m/m, +1.9% y/y, +0.3/+1.6% forecast, food CPI +3.2% y/y.
- China Sept PPI +0.5% m/m, +0.1% y/y, -0.3% y/y forecast, y/y growth positive for first time since January ’12.
- Minny Fed Kashkari (’17 voter, dove) – Sluggish growth likely for foreseeable future – Reuters.
- Foreign CB US debt holdings -$6.330 bln to $3.146 trln Oct 12 week, Treasury holdings -$7.098 bln to $2.824 trln, agencies +$490 mln to $261.247 bln.
- NY Fed– Swaps with foreign CBs $3.22 bln Oct 12 week, BoJ $420 mln, rest ECB.
- Lipper– US-based stock funds post second straight week of outflows, $3.4 bln.
- RBA warns banks of oversupply danger in apartment frenzy but banking system in good shape, China focus of risk, concerns over rising debt-defaults.
Economic Data Ahead
- (0300 ET/0700 GMT) Spain Sep CPI, +0.1% m/m, +0.3% y/y forecast; last +0.1%, -0.1%.
- (0300 ET/0700 GMT) Spain Sep HICP, +0.8% m/m, +0.1% y/y forecast; last unch, +0.1%.
- (0315 ET/0715 GMT) Switzerland Sep PPI/import prices, +0.1% m/m, -0.2% y/y forecast; last -0.3%, -0.4%.
- (0430 ET/0830 GMT) Great Britain Aug construction output, +0.2% m/m, +1.5% y/y forecast; last unch, -1.5%.
- (0500 ET/0900 GMT) Italy Sep CPI, -0.2% m/m, +0.1% y/y forecast; flash -0.2%, +0.1%.
- (0500 ET/0900 GMT) Italy Sep HICP, +1.9% m/m, +0.1% y/y forecast; flash +1.9%, +0.1%.
- (0500 ET/0900 GMT) Eurozone Aug trade balance, E15.3 bln surplus forecast; last E25.3 bln surplus.
- (0830 ET/1230 GMT) United States Sep retail sales/ex-autos, +0.6%, +0.4% m/m forecast; last -0.3%, -0.1%.
- (0830 ET/1230 GMT) United States Sep PPI, +0.2% m/m, +0.6% y/y forecast; last unch, unch.
- (0830 ET/1230 GMT) United States Sep – ex-food/energy, +0.1% m/m, +1.2% y/y forecast; last +0.1%, +1.0%.
- (1000 ET/1400 GMT) United States Aug business inventories, +0.2% m/m forecast; last unch.
- (1000 ET/1400 GMT) United States Oct U.Mich sentiment index – prelim, 91.9 forecast; last 91.2.
Key Events Ahead
- N/A BoE MPC Forbes panelist at Warsaw Polish CB conference.
- N/A Portugal government presents ’17 budget, Finland to pick new CB board.
- N/A BoE Gov Carney, DepGovs tour central England.
- (0600 ET/1000 GMT) UK DMO GBP0.5/1.0/3.0 bln 1/3/6-month treasury bill auctions.
- (0830 ET/1230 GMT) Boston Fed Rosengren opens conference/17:30 FOMC Chair Yellen speaks.
- (1200 ET/1600 GMT) Cleveland Fed Mester in Cleveland roundtable discussion.
- Saturday Italy cabinet to vote on ’17 draft budget.
FX Beat
DXY: The dollar strengthened across the board on rising expectations of U.S. interest rate hike by end of this year. The greenback against a basket of currencies traded 0.2 percent higher at 97.80, having hit a 7-month high of 98.13 in the previous session and was up 1 percent for the week.
EUR/USD: The euro declined in early Asian trade as a rise in the treasury yields kept the bid tone around the dollar intact. On Thursday, the major slumped to an 11-week low below the 1.1000 handle, however, it rebounded erasing earlier losses as the greenback retreated across the board. The dollar has largely benefited from growing expectations of Federal Reserve interest rate hike by end of this year, which has kept other major currencies back footed. The European currency trades 0.3 percent lower at 1.1026, hovering back towards the 1.1000 level and was down 1.4 percent for the week. Investors now await US data retail sales, which are expected to show consumer spending rose in September and Michigan Consumer Sentiment index which is also seen rising, ahead of Fed’s Chair Yellen speech. Immediate resistance is located at 1.1070, break above could take it till 1.1100. On the downside, support is seen at 1.1000, a break below could drag it till 1.0960.
USD/JPY: The dollar rose above the 104.00 handle as investors eye upcoming US retail trade and Federal Reserve Chair Janet Yellen’ speech that could cement expectations of a U.S. interest rate hike by the end of this year. The major rose to a high of 104.63 on Thursday, its strongest level since late July, but reversed gains to close lower at 103.68 as the greenback weakened against most of its major peers. The pair trades 0.4 percent higher at 104.07, attempting to extend gains above the 104.00 handle and was up 0.9 percent for the week. Markets now await series of U.S. macro fundamentals including retail sales, producer price index, Michigan Consumer Sentiment index and Business inventories. However, attention will remain on Fed’s Chair Yellen's speech that could provide further insights on the U.S. monetary policy. Immediate resistance is located at 104.30, a break above targets 104.70/105.00. On the downside, support is seen at 103.38 (10-DMA), a break below could take it near 103.00.
GBP/USD: Sterling declined, erasing gains from the previous session, as worries that Britain will undergo a "hard Brexit", which would cut ties with Europe's single market. Traders prefer a "soft" Brexit scenario in which the UK remains close to the European Union's single market and retains many trade and business benefits. The lawyers heading a bid to force the government to seek parliamentary consent before formally initiating the Brexit process told the High Court on Thursday that the June 23 referendum had no constitutional substance, and was merely advisory. Sterling trades 0.5 percent lower at 1.2195, and was set for a loss of 1.7 percent for the week. Investors will continue to track developments surrounding Brexit, ahead of BoE Governor Carney's speech. Immediate resistance is located at 1.2370, a break above could take it near 1.2400. On the downside, support is seen at 1.2100, break below targets 1.1900. Against the euro, the pound trades 0.2 percent lower at 90.38 pence.
AUD/USD: The Australian dollar rose, retreating from a near 1-month low hit on Thursday, largely supported by solid Chinese CPI report and higher commodity prices. The major jumped above the 0.7600 handle following the release of stronger Chinese inflation figures, which came in at 1.9 percent y/y in September versus 1.6 percent projections and previous 1.3 percent. However, it trimmed gains as the greenback continued to strengthen on growing expectations of a rate hike in U.S. by the year-end. The Aussie trades 0.1 percent higher at 0.7577, having touched an intra-day high of 0.7607. Moreover, the investors have ignored RBA's cautious tone on high household debt level and excessive borrowing risk. Markets will continue to digest the Chinese macro data ahead of the U.S. fundaments and Fed Yellen speech. Immediate support is seen at 0.7550, a break below could drag it till 0.7525. On the upside, resistance is located at 0.7609 (20-DMA), a break above targets 0.7650.
NZD/USD: The New Zealand dollar recovered from a 2-1/2 month trough following the release of better-than-expected China's CPI number, while Producer Price Index turned positive for the first time in 55 months. The major initially rose above the 0.7100 handle but lost some ground as the U.S. dollar stood strong on U.S. rate hike by December expectations. The Kiwi traded flat at 0.7096 and was heading for its second weekly decline as speculation for another rate cut by the Reserve Bank of New Zealand weighed on market sentiments. Investors will continue to track overall market sentiments, ahead of the U.S. economic data and Federal Reserve Chair Janet Yellen’s speech. Immediate resistance is located at 0.7150, break above targets 0.7180/ 0.7200. On the downside, support is seen at 0.7050, a break below could drag it lower 0.7030/ 0.7000.
Equities Recap
Asian shares gained, recovering some lost ground from the previous session, as better-than-expected Chinese inflation figures eased concerns about the health of world's second-largest economy.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 percent, having declined 1.1 percent on Thursday, but was set for a loss of 2.1 percent on the week.
Tokyo's Nikkei rose 0.49 percent at 16,856.37 points, Australia's S&P/ASX 200 index edged up 0.01 percent at 5,436.30 points and South Korea's KOSPI added 0.46 percent at 2,024.72 points.
Shanghai composite index declined 0.3 percent at 3,051.74 points, while CSI300 index traded 0.23 percent lower at 3,295.07 points.
Hong Kong’s Hang Seng was trading 0.62 percent up at 23,172.00 points. Taiwan shares declined 0.6 percent to 9,165.17 points.
Commodities Recap
Crude oil prices edged up, after declining to a 9-day low in the previous session, strengthened by a tighter U.S. fuel market as an industry reported showed a drop of 3.7 million barrels for distillates late on Thursday. International benchmark Brent crude was trading 0.1 percent up at $52.01 per barrel at 0401 GMT, retreating from a low of $50.95 hit in the previous session. U.S. West Texas Intermediate crude rose 0.15 percent at $52.01 a barrel, having touched a low of 49.39 on Thursday.
Gold prices eased as global equities firmed and the U.S. dollar strengthened on expectations the Federal Reserve would hike interest rates by year-end. Spot gold edged down 0.1 percent at $1,255.36 an ounce by 0413 GMT, while U.S. gold futures were up 0.1 percent at $1,258.50 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7659 percent higher by 0.028 bps, while 5-year was 0.027 bps up at 1.2817 percent.
Australian government bond futures eased, with the 3-year bond contract down 4 ticks at 98.29, while the 10-year contract fell 2.5 ticks to 97.755.
New Zealand government bonds slipped, sending yields 1 basis point higher across the curve.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The 2-year firmed 0.7 of a Canadian cent to yield 0.599 percent and the benchmark 10-year climbed 13 Canadian cents to yield 1.182 percent. The 10-year spread versus Treasuries narrowed 1.7 basis points to -56.4 basis points as Treasuries outperformed on the pick-up in risk aversion.
