Market Roundup
- Trump declines to say whether he would accept the result of the election if he lost- Washington Post.
- NY Fed Dudley – Reasonably close to inflation-employment objectives, still some slack in labor market, goals not yet in conflict, sees rate hike this year if the economy stays on trajectory, 25 bp move not that big deal, no urgency to tighten aggressively, “not worried” about December timing.
- ECB seen firmly on hold, charting course to more ease in December – Reuters.
- Japan MoF flow data week ended Oct 15 – Japanese buy net Y145.4 bln foreign stocks, Y317.7 bln bonds, sell Y60.3 bln bills; foreign investors buy net Y72.0 bln Japanese stocks, Y365.4 bln bonds, Y827.6 bln bills.
- China CITIC prices Y100 bln 3-10-year samurais, via Daiwa/MUFJ, Mizuho et al.
- China war on underground banks uncovers $148 bln in illegal trades – Reuters.
- BoC Gov Poloz – Talked about contents of tool-kit, exports could disappoint, admits underestimated strength of headwinds – Reuters.
- Australia Sept employment -9.8k, unemployment 5.6%, participation 64.5%, +15k, 5.7% and 64.8% forecast, full-time employment -53k, Aug employment -8.6k against preliminary -3.9k.
- Australia Q3 NAB biz conditions index off 4 pts, +7, confidence +2 pts, +5.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Sep unemployment, 6.4% nsa forecast; last 6.6% nsa, 7.2% sa.
- (0400 ET/0800 GMT) Eurozone Aug current account balance; last E31.5 bln surplus nsa, E21 bln sa.
- (0400 ET/0800 GMT) Eurozone Aug net investment flow; last E72.1 bln inflow.
- (0430 ET/0830 GMT) Great Britain Sep retail sales, +0.4% m/m, +4.8% y/y forecast; last -0.2%, +6.2%.
- (0430 ET/0830 GMT) Great Britain Sep - ex-fuel, +0.4% m/m, +4.5% y/y forecast; last -0.3%, +5.9%.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 250k forecast; last 246k.
- (0830 ET/1230 GMT) United States Oct Philly Fed business sentiment index, 5.3 forecast; last 12.8.
- (1000 ET/1400 GMT) United States Sep leading indicators index, +0.2% m/m forecast; last -0.2%.
- (1000 ET/1400 GMT) United States Sep existing home sales, 5.35 mln AR forecast; last 5.33 mln, -0.9% m/m.
Key Events Ahead
- N/A European Council meeting, Italia 8-year linker BTP syndication.
- (0305 ET/0705 GMT) Riksbank Gov Ingves speaks in Oslo.
- (0430 ET/0830 GMT) Spain E3-4 bln 0.25/5.9/3.45% 2019/26/66 Bono auctions.
- (0450 ET/0850 GMT) France E5-6 bln zero% and 3% 2021 and 2022 OAT auctions.
- (0550 ET/0950 GMT) France E0.5-1.0 bln 0.25% and 1.85% 2024/27 index-linked OAT auctions.
- (0745 ET/1145 GMT) ECB policy announcement, no change to zero% refi, -0.4% depo rates forecast.
- (0830 ET/1230 GMT) ECB Pres Draghi press conference.
- (0830 ET/1230 GMT) NY Fed Dudley opens New York finance conference.
FX Beat
DXY: The dollar strengthened across the board as the third and final U.S. presidential debate concluded. The greenback against a basket of currencies rose 0.2 percent at 98.01, hovering towards a 7-month high of 98.17 hit earlier in the week.
EUR/USD: The euro edged down, extending losses for the third consecutive session as markets remained cautious ahead of European Central Bank monetary policy decision. Even though no changes on policy are expected, investors will look for clues from ECB President Mario Draghi speech on QE early taper. The European currency trades lower at 1.0969, hovering towards a near 3-month low of 1.0955 hit in the previous session. The trading activity in the major is likely to remain subdued as traders will remain reluctant to take positions ahead of ECB policy meet. Moreover, attention will also remain on U.S. jobless claims, Philly Fed manufacturing gauge and existing home sales data for further momentum. Immediate resistance is located at 1.1000, a break above could take it till 1.1040/ 1.1070. On the downside, support is seen at 1.0950, a break below could drag it till 1.0920.
USD/JPY: The dollar gained, halting its 3-days losing streak as buying interest renewed around the greenback after CNN/ORC poll cited that Democrat Hillary Clinton won the third and final US election debate against Republican Donald Trump. Moreover, a minor recovery seen in the shorter-duration U.S. treasury yields strengthened the upward momentum in the greenback. The major trades 0.2 percent higher at 103.60, retreating from over a week low of 103.16 struck in the previous session. Investors will continue to digest headlines from the U.S. presidential debate, ahead of the U.S. unemployment claims, Philly Fed Manufacturing index and existing home sales data due later in the NY session. Immediate resistance is located at 104.00, a break above targets 104.40/105.00. On the downside, support is seen at 103.20, a break below could take it lower 103.00.
GBP/USD: Sterling steadied below the 1.2300 handle, ahead of British Prime Minister Theresa May's first European Union summit in Brussels, where the PM will outline her Brexit plan to the other 27 leaders. On Wednesday, the pound rose to an 8-day high against the dollar, while it hit a near 2-week high versus the euro after government lawyers noted that the parliament would have to ratify any Brexit agreement. Sterling trades flat at 1.2277, having touched a high of 1.2332, its highest since Oct. 11. Markets will continue to track news surrounding Brexit developments, ahead of the UK's retail sales data. Immediate resistance is located at 1.2370, a break above could take it over 1.2400. On the downside, support is seen at 1.2100, break below targets 1.1900. Against the euro, the pound was little changed at 89.28 pence, after rising as high as 89.00, its strongest since Oct. 7.
AUD/USD: The Australian dollar tumbled from a 6-week high after weaker-than-expected employment report showed a decline in full-time jobs and participation rate, which added to the risk of a further cut in RBA interest rates. Moreover, the selling pressure intensified as the U.S. dollar strengthened across the board after the U.S. final presidential election debate concluded and seemed to point towards a Clinton win. The Aussie trades 0.7 percent lower at 0.7661, after rising to an early high of 0.7734, it’s highest since August 16. Investors will continue to digest Australia's employment data, with attention now shifting towards US economic releases for further cues on the pair. Immediate support is seen at 0.7658 (5-DMA), a break below could drag it till 0.7627 (20-DMA). On the upside, resistance is located at 0.7740, a break above targets 0.7770/ 0.7800.
NZD/USD: The New Zealand dollar climbed to a more than 2-week high, but trimmed gains as the greenback picked up strength across the board following the conclusion of U.S presidential election debate. The major has been appreciating since consumer price figures released earlier in the week suggested inflation may have finally bottomed, even though at very low levels. The Kiwi trades flat at 0.7226, having hit a peak of 0.7265, its strongest since Oct. 4. The Reserve Bank of New Zealand is still widely expected to cut rates at its Nov. 10 policy meeting, however, economists remain skeptical about rates cuts after consumer price data release. The major will continue to get influenced by the broader market sentiment amid volatile oil prices, ahead of U.S. data due later in the day. Immediate resistance is located at 0.7290, break above targets 0.7330/ 0.7350. On the downside, support is seen at 0.7190 (20-DMA), a break below could drag it lower 0.7150.
Equities Recap
Asian stocks advanced, boosted by strong U.S. earnings and oil prices near a 15-month high, as markets cautiously awaited European Central Bank policy meeting.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent.
Tokyo's Nikkei rose 1.39 percent at 17,235.50 points, Australia's S&P/ASX 200 index climbed 0.08 percent to 5,439.90 points and South Korea's KOSPI was trading 0.1 percent lower at 2,038.62 points.
Shanghai composite index was flat at 3,085.61 points, while CSI300 index edged up 0.1 percent at 3,321.05 points.
Hong Kong’s Hang Seng was trading 0.6 percent up at 23,444.56 points. Taiwan shares rose 0.4 percent to 9,317.24 points.
Commodities Recap
Crude oil prices edged up, after rising to an 8-day high in the previous session following a draw in U.S. stocks and an expectation of an OPEC-led cut in production. International benchmark Brent crude was trading flat at $52.52 per barrel at 0356 GMT, having touched a high of 53.11 in the previous session, its highest since Oct 11. U.S. West Texas Intermediate crude rose 0.1 percent at $51.60 a barrel, hovering towards a high of 51.91 hit on Wednesday, its strongest since July 16, 2015.
Gold prices rose, extending gains for the fourth consecutive session, as markets closely watched the final U.S. presidential debate between candidates Hillary Clinton and Donald Trump. Spot gold was trading 0.3 percent up at $1,272.29 an ounce by 0408 GMT, having touched a 2-wekk high of $1273.22 in the previous session. U.S. gold futures were little changed at $1,270.00 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7503 percent lower by 0.002 bps, while 5-year was 0.002 bps up at 1.2361 percent.
The Australian government bonds strengthened after latest economic data showed that the country registered its biggest monthly drop in full-time employment in five years in September. The yield on the benchmark 10-year Treasury note fell 1-1/2 basis points to 2.300 percent, the yield on 15-year note dipped 2 basis points to 2.667 percent and the yield on short-term 2-year slid 4-1/2 basis points to 1.677 percent.
The New Zealand government bonds closed marginally higher as investors speculate that the Reserve Bank of New Zealand (RBNZ) will lower its interest rate in November’s monetary policy meeting in the wake of persistent weak inflation. The yield on the benchmark 10-year bond fell 1/2 basis point to 2.615 percent (fell for the first time this week), the yield on 7-year note also ended 1/2 basis point lower at 2.288 percent and the yield on short-term 2-year note slid ½ basis point to 1.945 percent.
The Canadian government bond prices were mixed across the yield curve, with the 2-year up 5 Canadian cents to yield 0.565 percent and the benchmark 10-year rising 3 Canadian cents to yield 1.191 percent. The curve steepened as the spread between the 2-year and 10-year yields widened by 2.1 basis points to 62.6 basis points, indicating outperformance for shorter-dated bonds.
