Market Roundup
- BoJ Gov Kuroda – Government to take steps to up potential growth, natural rate of interest, QE to achieve price target, not underwrite government debt, definitely not tapering – Reuters.
- Japan Sept nationwide core CPI -0.5% y/y, Tokyo Oct core -0.4%, -0.5% forecast for both, nationwide Sept core-core unchanged y/y.
- Japan Sept household spending +2.8% m/m, -2.1% y/y, +0.6% and -3.0% forecast.
- Japan Sept unemployment 3.0%, lowest since ’95, 3.1% forecast, Aug 3.1%, jobs- applicants ratio 1.38, best since Aug ’91, 1.37 forecast, Aug 1.37.
- Japan fund managers up stock exposure in October, trim bonds – Reuters poll.
- CITIC VP – Chinese samurai bond offers to continue – Nikkei.
- US monetary policy works better, may unwind harder – Reuters
- Foreign US bond holdings at Fed rise from four-year lows, +$2.795 bln to $3.125 trln week-ended Oct 26, Treasuries +$4.913 bln to $2.806 trln, Agencies -$1.688 bln to $259.666 bln.
- NY Fed – Swaps with foreign CBs $3.541 bln Oct 26 week, BoJ $1 mln, rest ECB.
- Lipper – US-based stock funds post largest outflows since August ’15.
- UK Oct GfK consumer confidence index -3, as forecast, Sept -1.
- ECB/BoS Gov Linde – Reducing QE should be done slowly – Reuters.
- Australia Q3 final demand PPI +0.3% q/q, +0.5% y/y.
- Australia Sept HIA new home sales +2.7% m/m, Aug +6.1%
. - New Zealand Fonterra – September NZ milk collection off 2%, Australia off 9%.
Economic Data Ahead
- (0245 ET/0645 GMT) France Oct HICP – flash, +0.6% y/y forecast; last +0.5%.
- (0245 ET/0645 GMT) France Sep producer prices; last unch m/m.
- (0245 ET/0645 GMT) France Sep consumer spending, +0.4% m/m forecast; last +0.7%.
- (0300 ET/0700 GMT) Spain Q3 GDP, +0.7% q/q, +3.1% y/y forecast; last +0.8%, +3.2%.
- (0300 ET/0700 GMT) Spain Oct HICP – flash, +0.2% y/y forecast; last unch.
- (0300 ET/0700 GMT) Switzerland Oct KOF leading indicator, 101.8 forecast; last 101.3.
- (0330 ET/0730 GMT) Sweden Sep retail sales, +0.3% m/m, +2.9% y/y forecast; last +0.6%, +2.8%.
- (0400 ET/0800 GMT) Norway Oct unemployment, 2.8% nsa, 100.95k sa forecast; last 2.8%, 100.75k.
- (0500 ET/0900 GMT) Eurozone Oct business climate index, 0.44 forecast; last 0.45.
- (0500 ET/0900 GMT) Eurozone Oct economic sentiment index, 104.8 forecast; last 104.9.
- (0500 ET/0900 GMT) Eurozone Oct industrial sentiment index, -1.6 forecast; last -1.7.
- (0500 ET/0900 GMT) Eurozone Oct services sentiment index, 10.0 forecast; last 10.0.
- (0500 ET/0900 GMT) Eurozone Oct consumer confidence – final, -8.0 forecast; prelim -8.2.
- (0530 ET/0930 GMT) Belgium Oct CPI; last -0.21% m/m, +1.87% y/y.
- (0800 ET/1200 GMT) Germany Oct HICP – flash, +0.1% m/m, +0.6% y/y forecast; last unch, +0.5%.
- (0830 ET/1230 GMT) United States Q3 GDP – advance, +2.5% AR forecast; last +1.4%.
- (0830 ET/1230 GMT) United States Q3 PCE prices/core, +1.4% and +1.6% y/y forecast; last +2.0%, +1.8%.
- (0830 ET/1230 GMT) United States Q3 GDP deflator, +1.3% y/y forecast; last +2.3%.
- (0830 ET/1230 GMT) United States Q3 employment cost index, +0.6% forecast; last +0.6%.
- (1000 ET/1400 GMT) United States Oct U.Mich sentiment index – final, 88.1 forecast; prelim 87.9.
Key Events Ahead
- N/A Globsec Tatra Summit in Bratislava, various speakers (till October 30).
- (0330 ET/0730 GMT) ECB Coeure speaks at Frankfurt conference.
- (0400 ET/0800 GMT) ECB/Irish CB Lane speaks in London.
- (0500 ET/0900 GMT) Italy E2.25-2.75/E2-2.5 bln 0.35%/1.25% 2021/26 BTP auctions.
- (0500 ET/0900 GMT) Italy E2.75-3.25 bln 0.287% 2024 floating rate CCTeu auction.
- (0600 ET/1000 GMT) UK DMO GBP0.5/1.0/3.0 bln 1/3/6-month treasury bill auctions.
- (0800 ET/1200 GMT) Canada FinMin Morneau addresses Toronto Board of Trade, presser later.
FX Beat
DXY: The dollar eased across the board as investors remained cautious ahead of U.S. Q3 GDP report. The greenback against a basket of currencies trades flat at 98.90, within the range of a near 9-month high of 99.12 hit earlier in the week.
EUR/USD: The euro gained, reversing most of its previous session losses, as the greenback eased across the board after data released on Thursday showed U.S. durable goods orders edged down for the month of September. However, the dollar was supported by yields on U.S. Treasuries, which rose to near 5-month peaks tracking gains in German and British bond yields as markets expect the Bank of England and the European Central Bank to hold off on further easing measures. The European currency trades 0.1 percent higher at 1.0904, pulling further away from a near 8-month low of 1.0850 hit earlier in the week. The major is likely to track the US-German 2-yr bond yield differential, ahead of Eurozone's sentiment indicator, preliminary German CPI and Q3 US GDP. Immediate resistance is located at 1. 0923 (10-DMA), a break above could take it till 1.0955/ 1.1000. On the downside, support is seen at 1.0870, a break below could drag it till 1.0820.
USD/JPY: The dollar eased after rising to a 3-month high above the 105.00 handle as investors cautiously awaited for U.S. third quarter growth data due later in the day. The United States' Q3 GDP is widely expected to show the economy expanded at the fastest rate in the last two years, which could reinforce expectations that the U.S. Federal Reserve will hike interest rates by the end of this year. The downside in the major is likely to remain limited as data released earlier showed Japan's core consumer prices declined 0.5 percent in September from a year earlier, recording its seventh straight month of declines, which dampened the bid tone around the yen. The pair trades 0.1 percent down at 104.15, but within the sight of a high of 105.34, it’s highest since July 29 and was up 1.4 percent for the week. Immediate resistance is located at 105.60, a break above targets 106.00. On the downside, support is seen at 104.65, a break below could take it near 104.00.
GBP/USD: Sterling attempted a minor recovery after easing from a 1-week high hit against the dollar on Thursday. The British gilt yields rose 10 basis points to 1.27 percent, the highest since the Brexit vote in June after data showed the economy grew faster than expected in the third quarter, trimming the prospects of an interest rate cut in the near-term. Sterling trades 0.15 percent up at 1.2176, having hit a high of 1.2271 in the previous session, its highest since Oct. 20. In absence of macro-fundamental drivers from the UK docket, investors now eagerly await the US GDP data for further direction on the major. Immediate resistance is located at 1.2240, a break above could take it near 1.2300. On the downside, support is seen at 1.2100, break below targets 1.1900. Against the euro, the pound was trading lower at 89.55 pence.
AUD/USD: The Australian dollar hit a 2-week low, as the U.S. dollar strengthened ahead of U.S. third-quarter GDP data release. Mixed Australian PPI and new home sales data released earlier failed to support the major, keeping the Aussie muted below 0.7600 handle. Moreover, yields on Treasuries rising to roughly 5-month peaks and persistent mixed sentiment across the financial markets also continued to weigh on the pair. The major trades flat at 0.7591, after declining to a low of 0.7579, its lowest since its lowest since Oct.14 and was on track for its second straight weekly loss. Investors will continue to track board based market sentiment, ahead of US Q3 GDP figures, which are expected to show the economy expanded an annual 2.5 percent pace during the third quarter. Immediate support is seen at 0.7560, a break below could drag it lower 0.7530. On the upside, resistance is located at 0.7614 (20-DMA), a break above targets 0.7640.
NZD/USD: The New Zealand dollar rose, recovering from a near 1-week low of 0.7108 hit in the previous session. The major is seen benefiting from the board based US dollar correction after the recent surge, however, the upside remains capped as investors would prefer to remain long on the U.S. dollar ahead of the highly influential US GDP report due later in the day. The Kiwi trades 0.2 percent up at 0.7138, having touched an intra-day low of 0.7117 and was on course to end the week down 0.4 percent after rising more than 1 percent last week. The major will be driven by overall market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7162 (10-DMA), a break above targets 0.7190. On the downside, support is seen at 0.7100, a break below could drag it near 0.7077.
Equities Recap
Asian shares were subdued, as the dollar stood firm near a 3-month high against the yen after increased prospects of a near-term U.S. interest rate hike strengthened Treasury yields.
MSCI's broadest index of Asia-Pacific shares outside Japan nudged down 0.l percent.
Tokyo's Nikkei rose 0.63 percent at 17,446.41 points, Australia's S&P/ASX 200 index declined 0.23 percent to 5,283.20 points and South Korea's KOSPI was trading 0.27 percent lower at 2,018.42 points.
Shanghai composite index lost 0.02 percent at 3,111.74 points, while CSI300 index was trading 0.12 percent higher at 3,349.69 points.
Hong Kong’s Hang Seng was trading 0.76 percent down at 22,955.90 points. Taiwan shares edged up 0.1 percent at 9,306.92 points.
Commodities Recap
Crude oil prices rose but were on course for a weekly loss of more than 2 percent on rising concerns over whether OPEC would be able to implement a production cut to restrain a global glut that has hampered markets for two years. International benchmark Brent crude was trading 0.5 percent higher at $50.50 per barrel at 0358 GMT, while U.S. West Texas Intermediate crude rose 0.3 percent at $49.73 a barrel, however, Both benchmarks were headed for their biggest weekly drop since September.
Gold prices rose, as the dollar eased across the board amid subdued Asian shares, with the safe-haven metal remained on track for its second straight weekly gain. Spot gold gained 0.5 percent at $1,271.48 per ounce at 0402 GMT and was up about 0.2 percent so far this week. U.S. gold futures were nearly flat at $1,269.10 per ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.8593 percent higher by 0.016 bps, while 5-year was 0.011 bps up at 1.3489 percent.
The Australian government bonds plunged as investors expect that the Reserve Bank of Australia in its next week monetary policy meeting will keep the official cash rate (OCR) on hold at a record low of 1.50 percent in the wake of stronger-than-expected third quarter consumer price index. The yield on the benchmark 10-year Treasury note rose nearly 5 basis points to 2.388 percent (6-months high), the yield on 15-year note jumped 6-basis points to 2.751 percent and the yield on short-term 2-year climbed 3 basis points to 1.73 percent.
The New Zealand government bonds traded lower following sell-off in the global debt market. Also, rising speculations on the December Federal Reserve interest rate hike supported the Treasury yields. The yield on the benchmark 10-year bond rose 7 basis point to 2.670 percent and the yield on 7-year note jumped 5-1/2 basis points at 2.425 percent.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The 2-year price fell 5 Canadian cents to yield 0.583 percent and the benchmark 10-year declined 70 Canadian cents to yield 1.236 percent. The curve steepened sharply as the spread between the two-year and 10-year yields widened by 5.1 basis points to its most since June at 65.3 basis points, indicating underperformance for longer-dated bonds.
