Market Roundup
- BoJ leaves policy unchanged as forecast, short-rate target -0.1%, to continue to buy JGBs at current pace and at annual Y80 trln pace, plenty risks to economic scenario, growth estimates unchanged, inflation forecasts lowered.
- Japan FinMin Aso – Not considering third extra budget this FY – Reuters.
- Japan Oct mfg PMI – final 51.4, still best in 9-mos, flash 51.7, Sept 50.4.
- PBOC fixes CNY vs USD at 6.7734, yesterday 6.7641, -6.12% y/y.
- China Stats Bureau – Residential property prices showing signs of slowdown in October, initial effects of policy measures – Reuters.
- China Oct Caixin mfg PMI 51.2, est since July ’14, 50.2 forecast, Sept 50.1, output sub-index best since March ’11, new orders best since July ’14 too.
- China Oct official mfg PMI 51.2, 50.4 forecast, Sept 50.4, mfg still facing difficulties due to weak global recovery.
- China Oct official services PMI 54.0, Sept 53.7.
- RBA leaves OCR as is as forecast, global economy still soggy, policy consistent with growth-inflation targets, China steadier, commodity prices up some rising AUD could complicate.
- Australia Oct AIG PMI +1.1 point to 50.9, new orders-exports up.
- Australia Oct CoreLogic home prices +0.5% m/m, +7.5% y/y, Sept +1.0%, +7.1%.
- New Zealand Oct QV residential property price index +12.7% y/y, Sept +14.3%, slowing.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Oct PMI mfg, 54.8 forecast; last 54.9.
- (0400 ET/0800 GMT) Norway Oct PMI mfg, 52.5 forecast; last 52.6.
- (0415 ET/0815 GMT) Switzerland Sep retail sales, -2.2% y/y forecast; last -3.0%.
- (0430 ET/0830 GMT) Switzerland Oct PMI mfg, 53.8 forecast; last 53.2.
- (0530 ET/0930 GMT) Great Britain Oct PMI mfg, 54.5 forecast; last 55.4.
- (0945 ET/1345 GMT) United States Oct Markit PMI mfg – final; flash 53.2.
- (1000 ET/1400 GMT) United States Oct ISM PMI mfg, 51.7 forecast; last 51.5.
- (1000 ET/1400 GMT) United States Sep construction spending, +0.5% m/m forecast; last -0.7%.
- (1030 ET/1430 GMT) United States Oct Dallas Fed services revenues, outlook indices; last 13.0, 4.7.
- (1330 ET/1730 GMT) United States Oct total vehicle sales, 17.5 mln AR forecast; last 17.76 mln AR.
Key Events Ahead
- (0230 ET/0630 GMT) BoJ Gov Kuroda press conference.
- (0430 ET/0830 GMT) ESM Regling speaks at Nicosia, Cyprus conference.
- (0630 ET/1030 GMT) UK DMO GBP2.75 bln 0.5% 2022 Gilt auction.
- (0700 ET/1100 GMT) Norges Bank Gov Olsen speaks at London OMFIF.
- N/A FOMC begins two-day meeting.
- N/A Canada updated fiscal, economic, budget estimates.
- (1200 ET/1600 GMT) BoC Gov Poloz speaks in Vancouver, press conference to follow.
- (1230 ET/1630 GMT) SNB Chair Jordan speaks in Vevey, Switzerland.
FX Beat
DXY: The dollar nudged lower as U.S. political uncertainty news drove it away from highs hit on increasing expectations that the Federal Reserve will hike interest rates in December. The greenback against a basket of currencies trades 0.1 percent up at 98.42, pulling further away from an 8-day low of 98.24 hit on Friday.
EUR/USD: The euro declined, extending losses from the previous session, as investors await U.S. Federal Reserve monetary policy decision due on Wednesday. Investors’ price in a small chance that the central bank will increase rates before the election, however, traders will scrutinize its statement for clues on the timing of its next interest rate hike. According to the CME Group's FedWatch Tool, markets see a 78 percent chance the Fed will raise rates in December, but just a 6 percent probability of a hike this week. On the data front, PCE price index rose 0.2 percent in September and 1.2 percent from a year earlier, recording the fastest annual pace since November 2014. The major trades 0.1 percent down at 1.0965, hovering towards a low of 1.0935 hit on Monday. In absence of macro-fundamental drivers from the Eurozone docket, traders will eye developments surrounding U.S. presidential elections. Immediate resistance is located at 1.1001 (20-DMA), a break above could take it till 1.1040. On the downside, support is seen at 1.0946 (5-DMA), a break below could drag it near1.0900.
USD/JPY: The dollar initially rose to an intra-day high of 104.96, but weakened following the announcement of an unchanged Bank of Japan policy decision, which dragged the pair to a daily low of 104.67. The Japanese yen strengthened after the BoJ announced steady policy decision and unchanged growth forecasts at 1 percent for FY 2016/17, limiting the further bounce in the major. The dollar trades flat at 104.85, attempting to regain the 105.00 handle. On Monday, the major came under renewed selling, which knocked it off from session's high of 105.23 to close out at 104.81 as the concluding days of the U.S. presidential campaign overshadowed other major market events. Investors will continue to digest headlines from the BoJ, ahead of U.S. ISM and Markit manufacturing PMI data. Immediate resistance is located at 105.30, a break above targets 105.60/ 106.00. On the downside, support is seen at 104.37 (10-DMA), a break below could take it near 104.00.
GBP/USD: Sterling edged down after rising above the 1.2200 handle on Monday on news that Bank of England Governor Mark Carney would serve for an extra year, until the end of June 2019. However, the pair remains under mild bearish pressure as the greenback continues to stay strong against its major peers as traders cheer Clinton's lead over Trump in the election polls, with just a week remaining before the US presidential elections. Sterling trades 0.1 percent down at 1.2231, attempting to sustain gains above the 1.2200 level. Investors’ attention will remain on the UK manufacturing PMI and U.S. ISM manufacturing PMI report for further clues on the major. Markets are also focused on BoE policy decision and quarterly inflation report due on Thursday, followed by a news conference. Immediate resistance is located at 1.2280 (20-DMA), a break above could take it over 1.2300. On the downside, support is seen at 1.2100, break below targets 1.1900. Against the euro, the pound trades higher at 89.63 pence, pulling further away from s 11-day low of 90.24 pence hit on Monday.
AUD/USD: The Australian dollar rallied, extending the upside for the third straight day after the Reserve Bank of Australia kept its cash rate steady at 1.5 percent and offered no clear easing bias. The steady decision was widely expected, as the policy makers assessed the impact of previous rate cuts in August and May and were optimistic about the economic outlook amid surging export prices. Moreover, better-than-expected Chinese PMI report eased Chinese economic concerns and boosted the overall market sentiment. The Aussie trades 0.6 percent higher at 0.7651, having touched a 6-day high of 0.7658 earlier in the session. Markets will continue to digest the RBA policy decision, ahead of the U.S. ISM manufacturing report due later on the day. Immediate support is seen at 0.7598 (Session Low), a break below could drag it near 0.7560. On the upside, resistance is located at 0.7680, a break above targets 0.7770.
NZD/USD: The New Zealand dollar edged up slightly but consolidated within a narrow range as investors remained cautious ahead of Federal Reserve and Reserve Bank New Zealand monetary policy decision. The major is expected to break the range on Wednesday after the Kiwi government releases third-quarter figures on employment and wages. Moreover, the RBNZ has raised the likelihood of an interest rate cut at its policy meeting next week; however, any strength in employment would further diminish the risk of easing beyond that. The major was also supported by upbeat Chinese manufacturing PMI data, which kept the bid tone intact. The pair trades 0.2 percent up at 0.7165, having touched an intra-day high of 0.7174. Investors will continue to track board based market sentiment, ahead of U.S. fundamental drivers. Immediate resistance is located at 0.7180, a break above targets 0.7200. On the downside, support is seen at 0.7120, a break below could drag it lower 0.7100.
Equities Recap
Asian shares erased early losses following the release of stronger-than-expected Chinese manufacturing PMI report, however, investors remained cautious as the U.S. presidential election campaign entered its final week.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, after hitting its lowest level since Sept. 19 earlier.
Tokyo's Nikkei rose 0.10 percent at 17,442.40 points, Australia's S&P/ASX 200 index fell 0.6 percent to 5,286.00 points and South Korea's KOSPI was trading 0.2 percent lower at 2,004.36 points.
Shanghai composite index gained 0.44 percent at 3,114.93 points, while CSI300 index was trading 0.45 percent higher at 3,351.63 points.
Hong Kong’s Hang Seng was trading 0.17 percent up at 22,994.18 points. Taiwan shares edged down 0.2 percent at 9,272.70 points.
Commodities Recap
Crude oil prices steadied, pulling away from 1-month lows hit in the previous session after OPEC agreed on a long-term strategy, indicating that the cartel was reaching a consensus on controlling production. However, gains were capped as signs of record output from the group weighed down market sentiment. International benchmark Brent crude was trading 0.7 percent higher at $48.87 per barrel at 0404 GMT, having hit a 1-month low of $48.43 in the prior session. U.S. West Texas Intermediate crude rose 0.36 percent at $46.91 a barrel, after falling to a low of $46.61 on Monday, its lowest since Sept 29.
Gold was little changed amid a steady U.S. dollar and easing equities, with investors cautiously awaiting for the upcoming Federal Reserve meeting for fresh clues on a possible interest rate hike in near term. Spot gold was trading flat at $1,277.29 an ounce at 0408 GMT, while U.S. gold futures were up 0.43 percent at $1,278.60 per ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.8487 percent higher by 0.015 bps, while 5-year was 0.012 bps up at 1.3246 percent.
The Australian government bond plunged after the Reserve Bank of Australia kept its official cash rate unchanged at a record low of 1.50 percent, citing recovery in consumer inflation and stronger economic growth. The yield on the benchmark 10-year Treasury note rose 4 basis points to 2.395 percent (highest since May), the yield on 15-year note jumped 3 basis points to 2.754 percent and the yield on short-term 2-year also climbed 3 basis points to 1.686 percent.
The New Zealand government bonds closed modestly higher as investors await GlobalDairyTrade (GDT) dairy auction and RBNZ’s inflation expectations data. The yield on the benchmark 10-year bond fell 1/2 basis point to 2.730 percent, the yield on 5-year note ended 1 basis point lower at 2.203 percent and the yield on short-term 2-year note closed steady at 2.020 percent.
Canadian government bond prices were higher across the yield curve, with the 2-year up 3.5 Canadian cents to yield 0.55 percent and the benchmark 10-year rising 27 Canadian cents to yield 1.198 percent.
