Market Roundup
- Japan MoF flow data week ended Oct 1 – Japanese buy net Y362.2 bln foreign stocks, sell Y636.8 bln bonds, Y26.4 bln bills; foreign investors buy net Y251.7 bln Japanese stocks, Y1.1920 trln bonds, sell Y1.8965 trln bills.
- IMF – Global debt tops $152 trln, urges some to spend more – Reuters.
- FOMC ViceChair Fischer – Low neutral rate a sign of potential economic trouble, reliance on less CB conventional tools, fiscal steps needed.
- Richmond Fed Lacker – Strong US jobs report will bolster case for rate hikes, Fed governors less insulated from politics than in past – Reuters.
- Joseph Stiglitz – Italy, others to leave EZ in coming years – Die Welt.
- Australia Aug trade deficit A$2.01 bln, A$2.3 bln eyed, exports and imports unch m/m at A$26.86 bln, A$28.87 bln, July deficit A$2.1 bln (prev 2.4 bln).
Economic Data Ahead
- (0315 ET/0715 GMT) Switzerland Sep CPI, +0.2% m/m, unch y/y eyed; last -0.1%, -0.1%.
- (0730 ET/1130 GMT) United States Sep Challenger layoffs; last 32.19k.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 257k eyed; last 254k.
Key Events Ahead
- China markets closed all week.
- N/A ECB Angeloni speaks at Netherlands CB event in Amsterdam.
- (0315 ET/0715 GMT) ECB ChiefEcon Praet speaks at New York conference.
- (0430 ET/0830 GMT) Spain
E3.5-4.5 bln 0.75/1.3/4.2% 2021/26/37 Bono auctions.
- (0430 ET/0830 GMT) Spain E0.5-1.0 bln 0.3% 2021 index-linked Bono auction.
- (0450 ET/0850 GMT) France E6.5-7.5 0.25/1.5/1.75% 2026/31/66 OAT auctions.
- (0600 ET/1000 GMT) Irish central bank quarterly update of forecasts.
- (0700 ET/1130 GMT) ECB September 8 meeting minutes.
- N/A IMF/World Bank annual meetings (till Oct 9).
- (0830 ET/1230 GMT) United
States TsySec Lew speaks at Peterson Institute in Washington, DC.
- (1135 ET/1535 GMT) BoC DepGov Wilkins speaks in Trois-Rivieres, Quebec.
- (1730 ET/2130 GMT) EU Dombrovskis to speak at IIF annual meeting in Washington, DC.
FX Beat
DXY: The dollar rose to a 1-month high versus the yen, as strong U.S. macro-fundamentals boosted the prospects of Fed interest rate hike in near term. The greenback against a basket of currencies trades 0.1 percent up at 96.24, hovering towards a near 2-month high of 96.44 struck on Tuesday.
EUR/USD: The euro consolidated between a narrow range as upbeat U.S. fundamentals released on Wednesday strengthened the probability of Federal Reserve rate hike this year. The major rallied as high as 1.1233 in the previous session after a report suggested that the European Central Bank might taper the pace of bond-buying before its asset purchase programme ends. The European currency trades flat at 1.1201, attempting to sustain gains above the 1.1200 handle. Investors will closely watch ECB minutes and U.S. weekly jobless claims data due later in the day, ahead of US NFP report scheduled to release tomorrow. Immediate resistance is located at 1.1250 (Sept 30 High), break above could take it till 1.1280/ 1.1300. On the downside, support is seen at 1.1184 (Sept 22 Low), break below could drag it till 1.1150.
USD/JPY: The dollar edged up against the yen, having touched a more than 4-week high in the previous session as upbeat U.S. economic data underpinned the expectations of Federal Reserve interest rates hike by December. On Wednesday, the major rallied after better-than-expected U.S. services sector activity offset a downbeat report on private-sector job growth, ahead of Friday's non-farm payroll report. The Japanese yen traded lower at 103.50, having touched a low of 103.66 in the previous session, its weakest since Sept. 6. Investors’ attention will remain on U.S. unemployment claims, ahead of US payrolls data due tomorrow, which could influence the Fed's monetary policy outlook. Immediate resistance is located at 103.80, break above targets 104.00/104.30 On the downside, support is seen at 103.10, break below could take it near 102.80.
GBP/USD: Sterling declined, reversing most of previous session gains, as investors cheered on increased prospects of Fed rate hike following strong US ISM non-manufacturing PMI released yesterday. On Wednesday, the major slumped below the 1.2700 handle for the first time since 1985, however, recovered some ground after better-than-expected construction and manufacturing PMI's provided some relief to the markets. Sterling trades 0.2 percent down at 1.2718, hovering towards a low of 1.2685, its lowest in 31-years. Markets will continue track overall market sentiment, amid lack of relevant data from the UK docket. Immediate resistance is located at 1.2800, break above could take it near 1.2860. On the downside, support is seen at 1.2700, break below targets 1.2680. Against the euro, the pound trades 0.2 percent down at 88.05 pence, having touched 5-year low of 88.42 in the previous session.
AUD/USD: The Australian dollar declined against its U.S. counterpart, as the greenback strengthened across the broad on growing expectations of a Federal Reserve rate hike this year. However, slightly better-than-expected Australia's trade deficit for August limited the losses in the major. The Aussie trades 0.2 percent lower at 0.7603, attempting to sustain gains above the 0.7600 handle. The movements in the pair will be driven by broad-based market sentiment ahead of weekly U.S. initial jobless claims and continuing claims release. Immediate support is seen at 0.7580, break below could drag it till 0.7562/ 0.7535. On the upside, resistance is located at 0.7642 (10-DMA), break above targets 0.7680/0.7700.
NZD/USD: The New Zealand dollar tumbled, extending losses to a 7-week low hit in the previous session. The major is seen making attempts to stall its three straight days of losses, however, the recovery appears fragile as weaker oil prices and broad-based stronger dollar continues to weigh on the Kiwi. The pair trades 0.1 percent lower at 0.7164, hovering towards a low of 0.7148, its lowest since August 9. Investors will continue to track overall market sentiment, ahead of US unemployment claim data. Immediate resistance is located at 0.7200, break above targets 0.7220 (5-DMA)/ 0.7250. On the downside, support is seen at 0.7121, break below could drag it till 0.7100.
Equities Recap
Asian shares steadied after stronger U.S. economic data boosted growing expectations of a near-term U.S. rate hike, while possible tapering of stimulus in Europe dampened safe-haven assets status, lifting the dollar to 1-month highs versus the yen.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent.
Chinese banks are closed in observance of National Day.
Tokyo's Nikkei gained 0.47 percent at 16,899.10 points, Australia's S&P/ASX 200 index climbed 0.51 percent at 5,480.60 points and South Korea's KOSPI added 0.5 percent at 2,063.33 points.
Hong Kong’s Hang Seng was trading 0.5 percent up at 23,911.26 points. Taiwan shares rose 0.1 percent at 9,284.31 points.
Commodities Recap
Crude oil prices eased, pulling away from multi -months high, but remained near June highs touched on Wednesday after an industry report showed a decline in U.S. crude inventories. International benchmark Brent crude was trading 0.1 percent down at $51.50 per barrel at 0408 GMT, having touched a 4-month high of $52.07 in the previous session. U.S. West Texas Intermediate crude declined 0.4 percent at $49.46 a barrel, after rising as high as 49.94 in the prior session, its highest since June 29.
Gold edged lower, having hit fresh 3-month lows in the previous session, as markets remained cautious ahead of Friday's nonfarm payrolls report, which could strengthen the case of Fed rate hike this year. Spot gold was down 0.1 percent at $1,264.92 an ounce by 00423 GMT, having a fresh low of $1,262.04 on Thursday, its lowest since June 24. U.S. gold futures rose 0.2 percent to $1,270.90 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7109 percent lower by 0.005 bps, while 5-year was 0.004 bps up at 1.2516 percent.
The Australian government bonds slumped as investors cheered better than expected trade balance data for August. Also, firmer equities continued to pressurize Treasury prices. The yield on the benchmark 10-year Treasury note rose 1 basis points to 2.177 percent, the yield on 15-year note also jumped 1 basis points to 2.541 percent and the yield on short-term 2-year climbed 1/2 basis point to 1.664 percent.
The New Zealand government bonds closed narrowly mixed, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. The yield on benchmark 10-year bond fell 1 basis point to 2.505 percent, yield on 7-year note rose 2 basis points to 2.245 percent and the yield on short-term 2-year note ended 1-1/2 basis point higher at 1.990 percent.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as U.S. services industries grew at their fastest pace in 11 months in September. The 2-year fell 4 Canadian cents to yield 0.577 percent and the benchmark 10-year declined 22 Canadian cents to yield 1.091 percent. The 10-year yield touched its highest intraday in nearly two weeks at 1.141 percent.
