Market Roundup
- N. Korea bolsters defences after flight by U.S. bombers, rhetoric escalates
- Obamacare repeal on the ropes as pivotal Republican rebuffs Trump
- Fed policymakers clash on outlook for inflation
- Japan FinMin Aso – Need more time to hit budget-balancing goal
- BOJ wants to stick with current policy, faces growing doubts
- BOJ optimistic wages-prices to rise, one member concerned over ETF buys
- Japan Aug corporate service price index -0.2% m/m, +0.8% y/y
- Debt-burdened Australia households vulnerable to shocks -RBA
- ADB keeps 2017, 2018 China growth estimates at 6.7 pct and 6.4 pct
- ADB keeps 2017, 2018 growth forecast for developing Asia at 5.9 pct and 5.8 pct
- New Zealand opposition leader still confident of election victory after indecisive poll
- Merkel tries to build coalition after vote that puts far right in parliament
- Britain's Labour shifts on Brexit, proposes staying in customs union
- Greece must wrap up review rapidly to start talks on bailout exit- Dijsselbloem
Economic Data Ahead
- No major economic data releases
Key Events Ahead
- (0520 ET/0920 GMT) Italy E1.0-1.5/E1.0-1.5/E1.0-1.5 bln for 2/5/15 years auction
- (0535 ET/0935 GMT) Germany E4 bln for 2-year auction
- (0700 ET/1100 GMT) ECB's Jozef Makuch speaks in Bratislava
- (0800 ET/1200 GMT) ECB's Praet speaks in Frankfurt
- (1245 ET/1645 GMT) Fed's Yellen speaks in Cleveland
FX Beat
DXY: The dollar eased versus most of its major peers as investors await the Fed Chair Janet Yellen speech in Cleveland on "inflation, uncertainty, and monetary policy." The greenback against a basket of currencies traded flat at 92.63, having touched a high of 92.72 the day before, its highest since Sept. 1. FxWirePro's Hourly Dollar Strength Index stood at 86.04 (Slightly Bullish) by 0500 GMT.
EUR/USD: The euro steadied after tumbling more than 1 percent in the previous session as German Chancellor Angela Merkel won a fourth term but saw some support shifting to the far right. The European currency traded flat at 1.1847, having touched a low of 1.1832 the day before, its lowest since Aug. 31. FxWirePro's Hourly Euro Strength Index stood at -144.96 (Highly Bearish) by 0500 GMT. Investors’ attention will remain on series of data from the Eurozone economies and ECB Praet speech, ahead of series of Fed official speeches and new home sales data. Immediate resistance is located at 1.9000, a break above targets 1.1934 (21-DMA). On the downside, support is seen at 1.1832 (Previous Session Low), a break below could drag it near 1.1800.
USD/JPY: The dollar tumbled, extending losses for the third straight session, amid renewed tension between North Korea and the United States. The major was trading 0.1 percent down at 111.56, having hit a high of 112.71 last week, its highest since Jul. 17. FxWirePro's Hourly Yen Strength Index stood at 105.51 (Highly Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. new home sales data and series of Fed officials' speeches for further momentum. Immediate resistance is located at 111.99 (5-DMA), a break above targets 112.70. On the downside, support is seen at 111.32 (10- DMA), a break below could take it near 111.00.
GBP/USD: Sterling slightly edged up after falling to a 10-day low against the dollar in the previous session, as investors remained cautious amid persisting moderate risk-aversion and a lack of Brexit clarity. The major traded 0.1 percent up at 1.3475, having hit a low of 1.3431 on Monday, its lowest since Sept. 15. FxWirePro's Hourly Sterling Strength Index stood at 28.24 (Neutral) by 0500 GMT. Investors’ focus will remain on the UK BBA mortgage approvals, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3600, a break above could take it near 1.3650. On the downside, support is seen at 1.3431 (Previous Session Low), a break below targets 1.3400. Against the euro, the pound was trading 0.1 percent up at 87.89 pence, having hit a high of 87.74 pence earlier in the month, its highest since Jul. 17.
AUD/USD: The Australian dollar gained, reversing some of its previous session losses as firmer oil, copper and gold prices coupled with reports of the Australian Treasury revising lower 2016/2017 cash deficit supported the upside in the major. The Aussie trades 0.1 percent up 0.7940, having hit a low of 0.7908 on Friday, it’s lowest since Aug. 31. FxWirePro's Hourly Aussie Strength Index stood at -43.20 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7908 (Sept. 22 Low), a break below targets 0.7871. On the upside, resistance is located at 0.7981 (21-DMA), a break above could take it near 0.8080.
NZD/USD: The New Zealand dollar slumped to a 1-1/2-week low after data showed the economy registered a larger than expected trade deficit in August. Moreover, political uncertainty continued to weigh on investor sentiment after no single party won enough seats to form a government at Saturday's general election. The Kiwi trades 0.4 percent down at 0.7234, having touched a low of 0.7233 earlier, its lowest level since Sept. 15. FxWirePro's Hourly Kiwi Strength Index was at -56.85 (Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7287 (10-DMA), a break above could take it near 0.7327 (Previous Session High). On the downside, support is seen at 0.7233 (Session Low), a break below could drag it till 0.7211.
Equities Recap
Asian shares tumbled, while the dollar fell against the yen amid rising tensions on the Korean Peninsula, and as investors awaited fresh clues about the U.S. monetary policy outlook.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.3 percent.
Tokyo's Nikkei fell 0.4 percent to 20,323.09 points, Australia's S&P/ASX 200 index lost 0.3 percent to 5,667.20 points and South Korea's KOSPI declined 0.3 percent to 2,372.76 points.
Shanghai composite index eased 0.2 percent to 3,336.77 points, while CSI300 index was trading 0.1 percent down at 3,811.94 points.
Hong Kong’s Hang Seng was trading 0.2 percent lower at 27,442.26 points. Taiwan shares shed 0.7 percent to 10,257.02 points.
Commodities Recap
Crude oil prices rose, extending previous session gains, with Brent crude hitting a 26-month high, supported by Turkey's threat to cut crude flows from Iraq's Kurdistan region to the outside world. International benchmark Brent crude was trading 0.3 percent up at $59.33 per barrel by 0436 GMT, having hit a high of $59.48 earlier, its strongest since Jul. 2015. U.S. West Texas Intermediate was trading 0.3 percent up at $52.25 a barrel, after rising as high as $52.41, its highest since April.
Gold prices edged higher, extending gains for the third straight session, as geopolitical tensions over the Korean peninsula continued to support safe-haven demand. Spot gold rose 0.2 percent to $1,312.42 per ounce at 0444 GMT, having gained over 1 percent in the previous session, its biggest intraday percentage gain since Sept. 7. U.S. gold futures for December delivery rose 0.1 percent to $1,312.60 per ounce.
Treasuries Recap
The 10-year U.S Treasury yield stood at 2.219 percent higher by 0.001 bps, while 5-year yield was 0.001 bps up at 1.836 percent.
The Australian bonds rallied after U.S. Treasury yields fell on Monday as concerns about tensions between North Korea and the United States and a surge in support for the far right in Sunday's German election stoked safe-haven demand for U.S. government bonds. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1-1/2 basis points to 2.78 percent, the yield on 15-year note slumped 2-1/2 basis points to 3.06 percent and the yield on short-term 2-year also traded 1 basis point lower at 1.96 percent.
The Japanese government bonds traded flat as investors remained sidelined in any major trading activity amid lack of significant economic data through the day. Japan’s Prime Minister Shinzo Abe said he’ll dissolve the lower house of parliament on September 28 for a general election as he announced a USD18 billion economic package. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 0.02 percent, the yield on long-term 30-year rose nearly 1 basis point to 0.83 percent and the yield on short-term 2-year hovered around -0.13 percent.
The New Zealand bonds jumped at the time of closing after the country posted a bigger-than-expected goods trade deficit in August as exports of milk powder, butter and cheese declined and imports of crude oil and petroleum products jumped higher. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 5 basis points to 3.07 percent, the yield on 7-year note plunged 4-1/2 basis points to 2.83 percent and the yield on short-term 2-year ended 3-1/2 basis points lower at 2.12 percent.
The Canadian government bond prices were higher across the yield curve, with the two-year up 2 Canadian cents to yield 1.595 percent and the 10-year up 17 Canadian cents to yield 2.092 percent. The gap between Canada's 10-year yield and its U.S. equivalent narrowed to a spread of -13.0 basis points.
