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Asia Roundup: Aussie advances as RBA stands pat, dollar steadies near 1-month high against yen, higher oil prices strengthen Kiwi - Tuesday, September 6th, 2016

Market Roundup

  • RBA leaves OCR as is at 1.5%, steady policy consistent with sustainable growth after August ease, rising AUD could complicate rebalancing, global economy growing at lower than average pace, bias still for ease.
     
  • Japan PM advisor Hamada – BoJ should wait for Fed - Bloomberg.
     
  • Japan govt FY ’17 budget requests tops Y100 trln for third year – Reuters.
     
  • UK Aug BRC like-for-like retail sales -0.9% y/y, all sales -0.3%, July +1.1%, +1.9%, August weakest since September ’14 excl Easter distortions.
     
  • Australia Q2 government consumption +1.9% to A$75.96 bln, investment +15.5% to A$20.45 bln.
     
  • Australia Q2 c/a deficit A$15.54 bln, A$19.75 bln forecast, Q1 A$20.8 bln, net exports impact on GDP -0.2%, zero effect forecast, terms of trade +2.3%, last -1.9%, foreign debt A$1.04 trln.
     
  • New Zealand Q2 wholesale sales +1.7% q/q, +4.0% y/y.
     
  • New Zealand Aug QV residential property price index +14.6% y/y, 47.8% above ’07 peak.
     

Economic Data Ahead

  • (0315 ET/0715 GMT) Switzerland Aug CPI, -0.1% m/m, -0.1% y/y forecast; last -0.4%, -0.2%.
     
  • (0500 ET/0900 GMT) Eurozone Q2  GDP – revised, +0.3% q/q, +1.6% y/y forecast; prelim +0.3%, +1.6%.
     
  • (1000 ET/1400 GMT) United States Aug ISM non-mfg PMI, 55.0 forecast; last 55.5.

Key Events Ahead

  • N/A   Slovenia Bled Strategic Forum in Ljubljana (final day).
     
  • (0500 ET/0900 GMT) Austria E1.32 bln total 1.75% and 0.75% 2023 and 2026 RAGB auctions.
     
  • (0530 ET/0930 GMT) Germany E500 mln 0.1% 2026 index-linked Bund auction.
     
  • (0530 ET/0930 GMT) UK DMO GBP2.5 bln 1.5% 2026 Gilt auction.
     
  • (0530 ET/0930 GMT) ECB sero% 7-day refi, E42.3 bln allotment forecast, E43.8 bln maturing.
     
  • (0630 ET/1030 GMT) ESM E1.5 bln 3-month bill auction.
     
  • (1215 ET/1615 GMT) SNB Chair Jordan speaks at Lucerne conference.

FX Beat

DXY: The dollar index, against a basket of currencies trades flat at 95.78, as investors split their bets on the U.S. Federal Reserve interest rate hike this year.

EUR/USD: The euro edged up, recovering some of previous session losses as investors wait on the sidelines ahead of European Central Bank rate decision due later in the week. Markets expect the central bank to keep interest rates on hold, however, extend the maturity of its QE program from March 2017 to September 2017. The European currency trades 0.1 percent up at 1.1153, attempting to post a modest recovery after slumping from a high of 1.1252 hit on Friday. The gains in the major are likely to remain capped amid rising political uncertainty across Eurozone. Investors will closely watch Eurozone's gross domestic product numbers, ahead of U.S. labor market conditions index and ISM Non-Manufacturing Index for fresh cues on the pair. Immediate resistance is located at 1.1187 (10-DMA), break above could take it over 1.1200. On the lower side, support is seen at 1.1120, break below could drag it till 1.1100.

USD/JPY: The greenback edged up, after declining from a 1-month peak following Bank of Japan Governor Haruhiko Kuroda comments. The Japanese central bank Governor statements did not provide any hints on the chances of further easing of policy at its next review on Sept. 20-21, however, it indicated his willingness to expand an already massive stimulus programme. The dollar trades 0.2 percent higher at 103.66, hovering back towards a high of 104.31, it’s strongest since July 29. The major will be drive by broad market sentiment, ahead of set of U.S. economic data. Immediate resistance is located at 104.00, break above targets 104.50/ 104.80. On the downside, support is seen at 103.05, break below could take it lower 103.00.

GBP/USD:  Sterling continues to rise against the dollar, having touched a 7-week high in the previous session largely on the back of better-than-expected service PMI. The major rose to a high of 1.3375 following the release of upbeat data, however, it trimmed gains to close out at 1.3301 as trading was thinned out by a U.S. public holiday. Sterling trades 0.15 percent higher at 1.3320, extending gains above the 1.3300 handle. Investors will track overall market sentiment, in absence of relevant data from the UK. Immediate resistance is located at 1.3375 (Previous Session High), break above could take it near 1.3400. On the downside, support is seen at 1.3263 (5-DMA), break below targets 1.3250. Against the euro, the pound trades 0.1 percent up at 83.68 pence, having touched a 1-month high of 83.52 pence, in the previous session.

AUD/USD: The Australian dollar rallied above the 0.7600 handle, after data showed Australia's current account deficit narrowing more-than-expected and following Reserve Bank of Australia's policy decision outcome. The economy's current account deficit came in at $15.5 billion in the second quarter against expectations of $19.75 billion, after a large downward revision to the previous quarter's shortfall. Meanwhile, the RBA held interest rates steady, at a record low of 1.50 percent at its monthly meeting on Tuesday, a widely expected outcome. The Aussie trades 0.5 percent higher at 0.7623, having touched a peak of 0.7636, its highest since Aug. 26.  Investors will continue to digest upbeat domestic data, ahead of U.S. macro fundamentals, including LMCI, Service PMI and ISM non-manufacturing PMI; and Australia's Q2 GDP data due on Wednesday. Immediate resistance is seen at 0.7650, break above could take it near 0.7700. On the downside, support is located at 0.7570 (10-DMA), break below targets 0.7550.

NZD/USD: The New Zealand dollar gained for the fifth consecutive session, as high oil prices strengthened investor sentiments. The Kiwi trades 0.3 percent higher at 0.7324, hovering towards a peak of 0.7360, it highest since August 26. Markets now await another strong dairy auction due later in the day, which is likely to have significant impact on the major. Investors doubt whether the U.S. Federal Reserve will raise interest rates this year, as they await U.S. non-manufacturing service data for further cues on hike timing.  Immediate resistance is located at 0.7360, break above targets 0.7400. On the downside, support is seen at 0.7288 (5-DMA), break below could drag it till 0.7260.

Equities Recap

Asian shares edged up largely on the back positive market sentiment, while the Reserve Bank of Australia kept its cash rate at a record low of 1.50 percent, widely in line with expectations.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 percent.

Tokyo's Nikkei climbed 0.26 pct at 17,081.98, Australia's S&P/ASX 200 index declined 0.37 pct at 5,409.60 points and South Korea's KOSPI added 0.2 percent at 2,064.00 points.

Shanghai composite index gained 0.56 percent at 3,089.30 points, while CSI300 index was trading 0.66 percent up at 3,341.88 points.

Hong Kong’s Hang Seng was trading 0.4 percent higher at 23,742.19 points. Taiwan shares edged up 1.0 percent to 9,181.85 points.

Commodities Recap

Crude prices rose, extending previous session gains, after Russia and Saudi Arabia agreed to cooperate on stabilizing the oil market. Global benchmark Brent crude oil was up 0.7 percent  at $47.72 a barrel by 0411 GMT, after hitting a near 1-week high of $49.36 on Monday. U.S. West Texas Intermediate crude oil was 0.4 percent up at $45.30 a barrel, after rising as far as $46.51 on Monday, the highest since Aug. 30.

Gold prices were firm after rising slightly in the previous session on speculation that the U.S. Federal Reserve will not hike rates in September. Spot gold was little changed at $1,327.33 per ounce by 0415 GMT, while U.S. gold futures were up marginally at $1,329.70.

Treasuries Recap

The U.S. 10-year treasuries yield stood at 1.611 percent versus previous close of 1.597 percent.

The Australian government bonds traded lower after the Reserve Bank of Australia in its September monetary policy meeting maintained its official cash rate at a record low of 1.50 percent, widely in line with expectations after having lowered it by 25 basis points in August. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 1.956 percent and the yield on short-term 2-year bounced 1-1/2 basis points to 1.518 percent.

The New Zealand government bonds slumped after data showed that the country’s housing prices rose at the fastest pace in 10- months. The yield on the benchmark 10-year bond, which moves inversely to its price, rose 2-1/2 basis points to 2.335 percent, the yield on 7-year note also jumped 2-1/2 basis points to 2.040 percent and the yield on 5-year note climbed 1 basis point to 1.905 percent.

Canadian government bond prices were lower across a steeper maturity curve, with the 2-year bond down 5.5 Canadian cents to yield 0.593 percent and the benchmark 10- year falling 55 Canadian cents to yield 1.063 percent. The Canada-U.S. two-year bond spread narrowed 2.6 basis to -20.1 basis points, while the 10-year spread was 2.7 basis points narrower at -53.8 basis points as Canadian government bonds underperformed.

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