Market Roundup
- Australia Q4 GDP +0.6% q/q, +3.0% y/y, +0.4% and +2.5% forecast, gross CAPEX -0.6% but final consumption expenditure +0.7%, chain price index -0.7%.
- Australia Jan HIA new home sales +3.1% m/m, Dec +6.0%.
- New Zealand Feb QV residential property price index +11.6% y/y.
- United States Feb total vehicle sales 17.54 mln AR, Jan 17.45 mln, light vehicle sales 1.34 mln units, +6.9% m/m, Japanese automakers set February sales records.
- United Kingdom Jan BRC shop rices -2.2% y/y, 34th straight fall, Jan -1.8%.
- Moody's changes outlook on China Aa3 government bond rating to negative from stable, reflects ongoing-prospective weakening of fiscal metrics, continuing fall in reserve buffers - Reuters.
- China RRR cut not signal of impending large-scale fiscal stimulus - Xinhua.
- Chinese overseas investment tops $1 trln over a decade - KF Wealth Report.
- BoJ Gov Kuroda - Price trend improving, crude oil holding prices back - RTRS.
- Japan MoF, FSA, BoJ met to exchange views on int'l capital markets - Reuters.
- Japan Feb monetary base trln, Jan trln, fresh record high.
- Toshiba mulls Australia battery plant as Japan seeks A$50 bln sub deal -RTRS.
- RBA diversifies FX reserves with KRW buy, 5% of reserves, allocation in line with JPY, CAD, GBP and CNY, will further diversify, USD 55%, EUR 20% - RTRS.
Economic Data Ahead
- (0330 ET/0830 GMT) Sweden Q4 current account balance; last SEK76.4 bln surplus.
- (0400 ET/0900 GMT) Norway Q4 current account balance; last NOK43.6 bln surplus.
- (0430 ET/0930 GMT) Great Britain Feb construction PMI, 55.5 forecast; last 55.0.
- (0500 ET/1000 GMT) Eurozone Jan producer prices, -0.7% m/m, -2.9% y/y forecast; last -0.8%, -3.0%.
- (0815 ET/1315 GMT) United States Feb ADP national employment, +190k forecast; last +205k.
- (0945 ET/1445 GMT) United States Feb ISM-New York index; last 718.9.
Key Events Ahead
- N/A Abu Dhabi Global Financial Markets Forum, various speakers (till tom).
- N/A Riksbank executive board meeting, Greece E875 mln 26-week bill auction.
- N/A ECB Coeure, Buba Dombret speak at Frankfurt SZ Finance event.
- (0330 ET/0830 GMT) ECB/BdF Villeroy parliamentary testimony.
- (0500 ET/1000 GMT) BoE DepGov Broadbent speech at LSE.
- (0530 ET/1030 GMT) Germany E4 bln 2021 Bobl auction.
- (0530 ET/1030 GMT) UK DMO GBP3.5 bln 1.5% 2021 Gilt auction.
- (0900 ET/1400 GMT) BoE Cunliffe UK parliamentary testimony/Greek FinMin at EZ parliament.
- (1100 ET/1600 GMT) SF Fed Williams speech in San Ramon.
- (1200 ET/1700 GMT) ECB Coeure, Knot EZ parliamentary testimony
- (1400 ET/1900 GMT) Fed Beige Book.
FX Beat
USD: The U.S. dollar rebounded against the yen and hit 1-month high against the euro in the previous session following upbeat U.S. economic data, further increasing the prospects for the Fed interest rate hike in 2016. Against a basket of currencies, the dollar index was 0.03 up at 98.357.
EUR/USD: The euro trades 0.07 percent down at 1.0858 levels, just above a 1-month low of 1.0834 hit on Tuesday. The major stays under pressure as investors expect the European Central Bank to step up monetary stimulus at its policy meeting next week. The greenback was boosted by better than expected U.S. manufacturing and construction spending data, which increased the prospects of the Fed rate hike in 2016. U.S. February Markit manufacturing PMI and ISM manufacturing PMI increased to 51.3 and 49.5, respectively, while January construction spending was at 1.5% m/m, against previous print of 0.6%. Looking ahead, markets now await Eurozne Producer Price Index report, ahead of U.S. ADP Employment change data. Traders are likely to remain bearish on the pair, as it is touching fresh session lows. Immediate support is located at 1.0834 (Previous Session Low), while resistance is seen at 1.0907 (5-DMA). The euro rebounded towards 124.00 yen, from a near three-year trough of 122.085, during the Asian session on Tuesday.
USD/JPY: The yen nursed broad losses in early trade on Wednesday, having suffered a big reversal overnight as traders took a brighter view on the global economy and sold the safe-haven Japanese currency. The U.S. economic outlook was strengthened by U.S. factory and construction spending report, which helped to turn market sentiments around. The greenback rose to its highest in nearly two weeks at 114.18 yen on the back of a 1.2 percent rally in the previous session. Markets now shift their attention towards U.S. ADP employment change data and EIA crude oil stocks change for further cues on the pair. The pair trades around 113.88 levels, having touched sessions high of 114.14. Immediate resistance is seen at 114.32 (Feb 18 High), while support is located at 113.49 (5-DMA).
AUD/USD: The Australian dollar rallied about half a U.S. cent to reach a high of 0.7241 following upbeat Australian GDP data on Wednesday. The Aussie extended gains on the Q4 GDP data, which showed the economy unexpectedly sped up to an annual pace of 3.0 percent in the December quarter, surpassing market consensus for a steady growth rate of 2.5 percent. Traders will now closely watch Australia's trade data ahead of U.S. employment report and non-farm payroll data scheduled later in the week. The pair continues to rise, hovering towards session high of 0.7241. Immediate resistance is located at 0.7256 (Feb 26 High), while support is seen at 0.7149 (20-DMA).
NZD/USD: The New Zealand dollar trades 0.20 percent higher at 0.6634 level, having touched session's high of 0.6661. However, it failed to sustain at higher levels and briefly eased back from a session high. The kiwi remains strengthened by positive GDT price index data, which was at 1.4% versus previous -2.8%. It had a less eventful session, however, traders will now adjust their positions in the run up to the March 10 policy review by the Reserve Bank of New Zealand. On the upside, resistance is located at 0.6673 (Feb 24 High), while on the down side, support is seen at 0.6605 (Feb 18 Low).
USD/CNY: The yuan edged up against the dollar on Wednesday, shrugging off the decision by rating agency Moody's to downgrade the outlook for Chinese sovereign debt.Chinese government debt outlook was changed by Moody to negative from stable, citing uncertainty over authorities' capacity to implement economic reforms, rising government debt and falling reserves. The central bank set the midpoint rate at 6.549 per dollar prior to market open, the softest in a month, and 0.16 percent weaker than the previous fix 6.5385. In the spot market, yuan opened at 6.5530 per dollar and was trading at 6.5517 at midday, 0.03 percent firmer than the previous close. The offshore yuan converged with its onshore counterpart by midday, with both trading at 6.5517 per dollar.
Equities Recap
Asian shares rallied to 2-month highs on Wednesday as overnight gains in oil prices and a series of positive economic data from Australia and the U.S. calmed fears of a global economic slowdown.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 2 percent to its highest levels since Jan. 7, and building on gains in the previous session. Taiwan stocks closed up 0.7 pct at 8,544.05 points.
Australia's S&P/ASX 200 index climbed 2.02 pct at 5,021.50 points, while Nikkei advanced 4.11 pct at 16,746.55, with Seoul shares edging up 1.71 pct.
Commodities Recap
Gold declined for a second straight session on Wednesday, as global equities and the dollar rose following strong U.S. manufacturing data that revived speculation of a Federal Reserve interest rate hike this year. Spot gold slipped 0.4 percent to $1,226.56 an ounce by 0247 GMT, after dropping 0.5 percent in the previous session.
Brent crude futures hit 8-week high of $37.25 per barrel, up more than $10, or 37.5 percent, from a 12-year low of $27.10 hit in January. U.S. crude futures also hit a one-month high of $34.76 per barrel although gains were cut in post-settlement trade on Tuesday after data suggesting a huge build in U.S. crude stockpiles already at record high levels. U.S. crude inventories rose by 9.9 million barrels last week, data from the American Petroleum Institute showed after Tuesday's settlement.
Treasuries Recap
U.S. 10-Year Treasuries Yield stood at 1.8302 percent.
New Zealand government bonds eased, sending yields 3.5 basis points higher at the short end and 8 basis points higher at the long end.
Canadian government bond prices were lower across the maturity curve, with the benchmark 10-year fell 43 Canadian cents to yield 1.237 percent, while the 2-year price was down 2.5 Canadian cents to yield 0.532 percent. The spread between the 2-year and 10-year yields widened by 3.6 basis points to 70.5 basis points, indicating underperformance for longer-dated maturities.
