Market Roundup
- BoJ Gov Kuroda – Sticks to script, economy expanding moderately, inflation lagging, slightly negative or @zero for now, financial system stable, BoJ to stick to current policy, will ease more if needed – Reuters.
- Japan end-June foreign reserves $1.265 trln, +$11.435 bln from end-May.
- MoF flow data week-ended July 2 – Japanese buy net Y210.2 bln foreign stocks, Y428.2 bln bonds, sell Y72.0 bln bills; foreign investors buy net Y113.9 bln Japanese stocks, Y244.3 bln bonds, sell Y2.0788 trln bills.
- S&P cuts Australia rating outlook to negative from stable, rating still AAA.
- Australia June PCI +6.5 points to 53.2, 10-month high, in expansion again.
- PBOC fixes yuan at 6.6820 vs USD, last close 6.6959.
- China output glut will be touchy topic at G20 talk – Nikkei.
- Oil industry losing the burn of Asian demand – Reuters.
Economic Data Ahead
- (0245 ET/0645 GMT) France May current account balance; last E2.8 bln deficit.
- (0245 ET/0645 GMT) France May trade balance, E4.9 bln deficit eyed; last E5.2 bln deficit.
- (0315 ET/0715 GMT) Switzerland Jun CPI, unch m/m, -0.5% y/y eyed; last +0.1%, -0.4%.
- (0330 ET/0730 GMT) Great Britain Jun Halifax HPI, +0.3% m/m eyed; last -0.7%.
- (0400 ET/0800 GMT) Norway May manufacturing output, +0.2% m/m eyed; last -0.7%.
- (0430 ET/0830 GMT) Great Britain May ind output, -1.0% m/m, +0.5% y/y eyed; last +2.0%, +1.6%.
- (0430 ET/0830 GMT) Great Britain May mfg output, -1.0% m/m, +0.7% y/y eyed; last +2.3%, +0.8%.
- (0730 ET/1130 GMT) United States Jun Challenger layoffs; last 30.16k.
- (0815 ET/1215 GMT) United States Jun ADP national employment, +159k eyed; last +173k.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 270k eyed; last 268k.
Key Events Ahead
- (0430 ET/0830 GMT) Spain E4-5 bln 0.75/4.65/1.95% 2021/25/30 Bono auctions.
- (0430 ET/0830 GMT) Spain E250-750 mln 1.8% 2024 index-linked Bono auction.
- (0450 ET/0850 GMT) France E9-10 bln 0.5/1.5/1.25/4.5% 2026/31/36/41 OAT auctions.
- (0530 ET/0930 GMT) UK DMO GBP2.25 bln 1.5% 2026 Gilt auction.
- (0600 ET/1000 GMT) ECB Lautenschlaeger speaks at Madrid bank roundtable.
- (0730 ET/1130 GMT) ECB June 2 policy meeting minutes.
- (1200 ET/1600 GMT) ECB VP Constancio lecture at Madrid Navarra University.
FX Beat
USD: The dollar index, against a basket of currencies declined to 96.02, pulling away from a peak of 96.50 touched in the previous session.
EUR/USD: The euro failed to sustain above 1.1100 level, amid subdued trading and persisting mixed market sentiment. Federal Reserve's June policy meeting minutes released on Wednesday showed that the central bank had decided to keep interest rate hikes on hold as they reviewed the Brexit impact. Markets speculate that the Fed is unlikely to hike rates again this year as uncertainty caused by Brexit has resulted in strengthening the U.S. dollar. Investors now await ECB minutes, ahead of the U.S. weekly employment reported due later in the day, which is expected to have significant impact on the major. The major trades around 1.1086, having touched an early low of 1.1074. Immediate resistance is located at 1.1130, break above targets 1.1154/1.1185. On the lower side, support is seen at 1.1049.
USD/JPY: The Japanese yen continues to gain, as investors wary on renewed market sentiments over Brexit. The greenback continues to trade lower as the FOMC minutes released overnight failed to provide clarity on the interest rate hikes. On Wednesday, the greenback recovered from a low of 100.19 to close above 101 level, supported by strong U.S. ISM non-manufacturing PMI. The pair will be driven by the overall market sentiment, ahead of U.S. weekly jobless claims report. The major trades 0.5 percent lower at 100.79, extending losses below the 101.00 level. Immediate support is located at 100.19 (Previous Session Low), break below will drag the pair till 98.80/98. On the higher side, resistance is seen at 101.79 (5-DMA), break above targets 102.00.
GBP/USD: Sterling edged up after declining to a new 31-year low on Wednesday, on increasing fears over the Brexit effect on Britain's property market and the prospect of Bank of England interest rates cuts. Money markets now expect BoE cutting interest rates to zero within the next three months, possibly as early as next week. Sterling trades 0.4 percent higher at 1.2983, attempting to recover from a low 1.2791 suck in the previous session. Investors will closely watch Britain's May manufacturing production and industrial production data for further momentum. Immediate resistance is located at 1.3091 (5-DMA), break above targets 1.3200. On the lower side, support is seen at 1.2800. Against the euro, the pound was trades 0.4 percent up at 85.47 pence.
AUD/USD: The Australia dollar tumbled after Standard and Poor changed Australia's sovereign credit outlook to negative from stable, while the current rating remained AAA. However, the major regained to trade above 0.7500 level, supported by iron ore prices and upbeat AiG performance of construction index data. AiG performance of construction index for the month of June rose to 53.2 from previous 46.7. The Aussie trades flat at 0.7522, pulling away from a low of 0.7466 struck earlier in the session. The major will continue to digest S&P rating impact, ahead of U.S economic data. Immediate resistance is located at 0.7544, break above could take the major to 0.7560/0.7593. On the lower side, support is seen at 0.7461 (10-DMA).
NZD/USD: The New Zealand dollar gained, after declining for the previous two sessions. Reserve Bank of New Zealand Deputy Governor Grant Spencer comments on macro-prudential policy and housing market risk, strengthened the major. The governor stated that the central bank could introduce tighter loan to value ratios by year end and contemplate further macroprudential tools to curb housing market. The Kiwi trades 0.5 percent higher at 0.7166, extending gains above 0.7100 level. Immediate resistance is located at 0.7197, break above could take the pair over 0.7200. On the lower side, support is seen at 0.7105 (10-DMA), break below targets 0.7079.
Equities Recap
Asian share edged up as markets sentiment was boosted by upbeat U.S. economic data, further reducing economic growth concerns triggered by Brexit scare.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8 percent.
Tokyo's Nikkei declined 0.67 pct at 15,276.24, Australia's S&P/ASX 200 index rose 0.74 pct at 5,235.80 points and Seoul shares gained 1.06 pct.
Shanghai composite index edged down 0.1 percent at 3,014.77 points, while CSI300 index also dropped 0.2 percent at 3,209.03 points.
Hong Kong’s Hang Seng was trading 0.8 percent higher at 20,660.97 points. Taiwan shares gained 0.8 pct at 8,640.91 points.
Commodities Recap
Oil prices decline, as a glut of refined products and economic growth concerns continue to hurt market sentiments, despite a report showing a fall in U.S. crude inventories. International Brent crude oil was trading 0.7 percent lower at $48.87 per barrel at 0410 GMT, while U.S. West Texas Intermediate crude was down 0.6 percents at $47.54 a barrel.
Gold continues to rise, having touched its highest in more than two-years in the previous session, as investors wary over renewed market sentiments over Brexit. Spot gold was trading up 0.3 percent at $1,367.94 an ounce by 0413 GMT, after touching its highest since March 2014 at $1,375.02 on Wednesday. U.S. gold was up 0.3 percent at $1,370.80.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.3665 percent down by 0.018 bps, while 5-year was down by 0.013 bps at 0.9494 percent.
The Australian government bonds slumped as data indicating a strengthening US economy offered a respite to weeks of market turmoil. The yield on the benchmark 10-year Treasury note rose more than 3 basis points to 1.900 percent and the yield on short-term 2-year note also jumped 2-1/2 basis points to 1.578 percent.
New Zealand government bonds eased, sending yields around 2 basis points higher across the curve.
Canadian government bond prices were mostly higher across the maturity curve, with the 2-year price up 1.5 Canadian cents to yield 0.485 percent and the benchmark 10-year rising 16 Canadian cents to yield 0.979 percent. The 10-year yield fell as low as 0.938 percent during the session. The Canada-U.S. two-year bond spread was -9.6 basis points, while the 10-year spread was -40.0 basis points.
