Market Roundup
- Chicago Fed Evans (in Sydney) – Benefits to overshooting inflation target, uncertainty over measures of full employment enormous, December rate hike would not surprise, recent jobs report pretty good number – Reuters.
- Global investment flows neutering national monetary policy.
- Japan Aug c/a surplus Y2 trln, Y1.539 trln forecast, trade surplus cited.
- MoF Sept flow data – Japanese buy net Y233.9 bln foreign stocks, Y445.7 bln bonds, Y112.1 bln bills, Sept usually repatriation month; foreign investors sell net Y1.344 trln Japanese stocks, Y723.9 bln JGBs, buy Y2.238 trln bills.
- UK Sept BRC like-for-like retail sales +0.4% y/y, total sales +1.3%, Aug +0.9%, -0.3%, average total sales over past 12-mos +0.9%, slowest since ‘95.
- Australia Sept NAB business conditions index +8, confidence +6, Aug +7, +6, sales and profits rebound, marked rise in forward orders.
- Australia Aug owner-occupied housing finance -3% m/m, -2.5% forecast, investment housing finance +0.1%.
- Australia debuts 30.5-year bond via ANZ, Citi, CBA et al, demand seen good.
- RBNZ AsstGov McDermott – Inflation up in Q4 but further policy easing required, will continue to be accommodative – Reuters.
- New Zealand Sept electronic card retail sales +1.9% m/m, +6.1% y/y.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Sep CPI, +0.5% m/m, +1.2% y/y forecast; last -0.1%, +1.1%.
- (0330 ET/0730 GMT) Sweden Sep CPIF, +0.6% m/m, +1.5% y/y forecast; last -0.1%, +1.4%.
- (0500 ET/0900 GMT) Germany Oct ZEW economic sentiment index, 4.3 forecast; last 0.5.
- (0500 ET/0900 GMT) Germany Oct ZEW current conditions index, 55.5 forecast; last 60.0.
- (0600 ET/1000 GMT) United States Sep NFIB business optimism index; last 94.4.
Key Events Ahead
- N/A EU EcoFin meeting in Luxembourg.
- (0440 ET/0840 GMT) Spain E4.5-5.5 bln 6 and 12-month treasury bill auctions.
- (0500 ET/0900 GMT) BoE MPC Saunders parliamentary testimony.
- (0500 ET/0900 GMT) Norges Bank Gov Olsen speaks in Oslo.
- (0500 ET/0900 GMT) Austria E1.32 bln total 0.75% and 1.5% 2026 and 2047 RAGB auctions.
- (0500 ET/0900 GMT) Netherlands E1.5-2.5 bln 0.5% 2026 DSL auction.
- (0530 ET/0930 GMT) Germany E500 mln 0.1% 2046 index-linked Bund auction.
- (0530 ET/0930 GMT) Belgium E1.7-2.1 bln 3 and 12-month treasury certificate auctions.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E34 bln allotment forecast, E34.368 bln maturing.
- (0600 ET/1000 GMT) BoE FPC Kashyap parliamentary testimony.
- (0800 ET/1200 GMT) Norges bank DepGov Nicolaisen speaks in Trondheim.
- (0900 ET/1300 GMT) Irish FinMin Noonan presents ’17 budget.
- (1100 ET/1500 GMT) Minny Fed Kashkari speaks at Arden Hill, MN town hall meeting.
- (1100 ET/1500 GMT) RBNZ AsstGov McDermott speaks at a private event in Rotorua.
FX Beat
DXY: The dollar strengthened across the broad on rising expectations of imminent U.S. interest rate hike and optimism over Hillary Clinton's widening lead in the U.S. presidential election campaign. The greenback against a basket of currencies trades 0.2 percent higher at 97.11, hovering towards a 2-month high of 97.19 hit on Friday.
EUR/USD; The euro declined, extending previous session losses, as the greenback strengthened on rising expectations that the Federal Reserve will hike interest rate by the end of this year. On Monday, the major rose above the 1.1200 handle, however, it failed to sustain gains and tumbled to close out at 1.1137. The European currency trades lower at 1.1134, having touched an intra-day low of 1.1119. The pair is likely to remain under pressure, as investors continue to take advantage of improving risk-tone across the financial markets, in wake of higher oil prices. Markets seem to have ignored dovish comments from Fed official Evans, as attention now turns towards the US LMCI data due later in the today. Immediate resistance is located at 1.1156, break above could take it till 1.1197 /1.1220. On the downside, support is seen at 1.1110, a break below could drag it till 1.1070.
USD/JPY: The dollar gained, as markets cheered on improving risk sentiment amid higher oil prices. However, the upside was limited as dovish comments from Fed’s Evans tampered U.S. interest rate hike expectations. The dollar trades 0.3 percent up at 103.93, attempting to take out the 104.00 handle. Data released earlier in the day showed Japan's short-term economic trend outlook in September at 48.5, versus previous 47.4. Investors will continue to track broad based market sentiment, ahead of U.S labor market conditions index. Immediate resistance is located at 104.00, a break above targets 104.30. On the downside, support is seen at 103.20, a break below could take it near 102.80.
GBP/USD: Sterling slumped, extending losses below the 1.2400 handle, as investors speculate that Britain will undergo a "hard Brexit" following the split from EU. The major came under renewed selling pressure following news run in The Times how the United Kingdom could lose up to 66 billion pounds a year under a "hard Brexit". Sterling trades 0.3 percent lower at 1.2316, attempting to sustain gains above the 1.2300 handle. The pair is likely to remain on the downside, as Brexit-uncertainty continues to outweigh any positive news surrounding the British pound. Immediate resistance is located at 1.2400, break above could take it near 1.2493 (5-DMA). On the downside, support is seen at 1.2300, break below targets 1.2100. Against the euro, the pound trades 0.3 percent down at 90.35 pence, having touched a 7-year low of 92.25 on Friday.
AUD/USD: The Australian dollar declined to a 3-week low below the 0.7600 handle as the investors priced in a higher chance of a U.S. Federal Reserve rate hike in December. The major tumbled from a high of 0.7609 to 0.7543, despite rising oil and iron ore prices and upbeat domestic data. A report released by the National Australia Bank showed that business conditions in September edged up to 8 from previous 7, while business confidence stood unchanged at 6. The Aussie trades 0.6 percent down at 0.7562, hovering towards a low of 0.7534 hit on September 21. Markets will closely watch activity in the bond and commodities markets amid thin economic calendar in the US. Immediate support is seen at 0.7530, a break below could drag it till 0.7500. On the upside, resistance is located at 0.7623 (10-DMA), a break above targets 0.7650.
NZD/USD: The New Zealand dollar fell below the 0.7100 handle to hit a fresh 2-1/2 month low after Reserve Bank of New Zealand’s McDermott called for further monetary easing. The central bank’s Asst. Governor raised concerns regarding the inflation in the short term, suggesting more policy easing, which weakened the bid tone around the Kiwi. Traders appeared to ignore better-than-expected retails sales via electronic cards, which rose 1.9 percent in September from -1.2 percent in the previous month. The major trades 0.9 percent lower at 0.7065, drifting towards the 0.7050 level. Markets will continue to digest RBNZ McDermott's statement, ahead of U.S. LMCI data. 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 till 0.7000.
Equities Recap
Asian shares were trading mixed as oil prices surge to a 1-year high and rising expectations of U.S. interest rate hike by December strengthened investors risk sentiment.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1 percent.
Tokyo's Nikkei gained 0.98 percent at 17,024.76 points, Australia's S&P/ASX 200 index added 0.11 percent at 5,481.60 points and South Korea's KOSPI shed 1.1 percent at 2,034.24 points.
Shanghai composite index rose 0.3 percent at 3,057.77 points, while CSI300 index traded 0.13 percent higher at 3,298.72 points.
Hong Kong’s Hang Seng was trading 1.5 percent down at 23,504.08 points. Taiwan shares declined 0.5 percent to 9,219.82 points.
Commodities Recap
Crude oil prices edged up, nearing 1-year highs touched in the previous session on growing expectations of an output cut by OPEC producers, as Russia and Saudi Arabia both said a deal between OPEC and non-OPEC members in curbing crude output was possible. International benchmark Brent crude was trading 0.3 percent up at $53.04 per barrel at 0401 GMT, having touched a high of $53.71 on Monday, its highest since Oct 9, 2015. U.S. West Texas Intermediate crude rose 0.2 percent at $51.24 a barrel, after rising to a 4-month high of 51.57 in the prior session.
Gold prices edged down, after gaining in the previous two sessions, as the U.S. dollar strengthened on rising expectations of U.S. interest rate hike by the end of this year. Spot gold declined 0.1 percent to $1,258.35 an ounce by 0410 GMT, within the sight of a 4-month low of $1,241.30 hit on Friday. U.S. gold futures fell 0.2 percent to $1,258.40 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7673 percent higher by 0.031 bps, while 5-year was 0.034 bps up at 1.3042 percent.
The Australian government bond futures were weak, with the 3-year bond contract down 5 ticks at 98.33, while the 10-year contract fell 7 ticks to 97.775.
The New Zealand government bonds eased, sending yields 3 basis points higher at the long end of the curve.
