Market Roundup
- BoJ Gov Kuroda – Yield curve moving as per BoJ policy, no immediate need to change short/long-term target levels, 10s in line with target of around zero, no surprise if super-long yields rise more, flat yield curve undesirable, no plan to reduce BoJ JGB holdings now - Reuters.
- BoJ DepGov Iwata – Will continue to promote powerful easing with QE, interest rates, no change in emphasis, ready to deploy all available tools, inflation target achievement may be delayed – Reuters.
- MoF flow data week-ended Oct 22 – Japanese sell net Y5.6 bln foreign stocks, buy Y773.6 bln bonds, sell Y101.5 bln bills; foreign investors buy net Y85.3 bln Japanese stocks, sell Y752.5 bln bonds, Y3.1 bln bills.
- PBOC fixes CNY vs USD at 6.7736, offshore yuan to fresh six-year low, 6.7921.
- BoE seeks details of large UK lender exposure to Deutsche, Italy banks – FT.
- UK car exports offset domestic drop in September – Reuters.
- Staff reports – ECB
“groupthink” ups risk of missing next crisis – Reuters.
- Australia Q3 export prices +3.5% q/q, import prices -1.0%.
- Fonterra Australia to up average farmgate milk price for ‘16/17 – Reuters.
- New Zealand Sept trade deficit NZ$1.44 bln, NZ$1.265 bln forecast, imports NZ$4.90 bln, exports NZ$3.47 bln, annual trade balance NZ$3.4 bln deficit.
Economic Data Ahead
- (0300 ET/0700 GMT) Spain Q3 unemployment, 19.3% forecast; last 20.0%.
- (0300 ET/0700 GMT) Sweden Oct consumer confidence index, 98.6 forecast; last 100.4.
- (0300 ET/0700 GMT) Sweden Oct manufacturing confidence index; last 101.0.
- (0330 ET/0730 GMT) Sweden Sep household lending; last +7.5% y/y.
- (0400 ET/0800 GMT) Eurozone Sep money supply M3, +5.1% y/y forecast; last +5.1%.
- (0400 ET/0800 GMT) Eurozone Sep loans to non-financials; last +1.9%.
- (0400 ET/0800 GMT) Italy Oct consumer confidence index; last 108.7.
- (0400 ET/0800 GMT) Italy Oct business confidence index, 102.1 forecast; last 101.9.
- (0430 ET/0830 GMT) Great Britain Q3 GDP – prelim, +0.3% q/q, +2.1% y/y forecast; last +0.7%, +2.1%.
- (0500 ET/0900 GMT) Italy Sep wage inflation; last unch m/m, +0.6% y/y.
- (0730 ET/1130 GMT) United States Sep building permits – rev; prelim 1.23 mln AR, +6.3% m/m.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 255k forecast; last 260k.
- (0830 ET/1230 GMT) United States Sep durable goods orders, +0.1% m/m forecast; last +0.1%, ex-def -0.8%.
- (0830 ET/1230 GMT) United States Sep - ex-transport, +0.2% m/m forecast; last -0.2%.
- (0830 ET/1230 GMT) United States Sep – non-def cap goods ex-air, +0.3% m/m forecast; last +0.9%.
- (1000 ET/1400 GMT) United States Sep pending home sales, +1.2% m/m forecast; last -2.4%, index 108.5.
- (1100 ET/1500 GMT) United States Oct KC Fed manufacturing, composite indices; last 15.0, 6.0.
Key Events Ahead
- N/A China Communist Party Plenum (till today).
- N/A Globsec Tatra Summit in Bratislava, various speakers (till October 30).
- N/A ECB/Austria CB Nowotny speaks in Nicosia, Cyprus.
- (0330 ET/0730 GMT) Riksbank policy announcement, no change to -0.5% repo rate forecast.
- (0400 ET/0800 GMT) Norges Bank policy announcement, no change to 0.5% deposit rate forecast.
- (0500 ET/0900 GMT) Riksbank Gov Ingves press conference/Italy E6 bln 6-month BOT auction.
- (0730 ET/1130 GMT) Swiss FinMin Maurer, others hold press conference on tax reform package.
- (1130 ET/1530 GMT) BoS Gov Linde attends Florence, Italy event.
- (1300 ET/1700 GMT) ECB Mersch speaks at Hachenburg, Germany conference.
FX Beat
DXY: The dollar rose across the board as upbeat U.S. Markit services PMI report and trade deficit figures triggered speculation that the economy likely grew at a faster rate in Q3 than expected initially. The greenback against a basket of currencies trades flat at 98.62, within the sight of this week's near 9-month high.
EUR/USD: The euro nudged down below the 1.0900 handle, after rising to a 6-day high on Wednesday, as expectations of strong U.S. Q3 gross domestic product figures, strengthened the bid tone around the dollar. Moreover, upbeat U.S. trade deficit figures and strong Markit services PMI released in the previous session indicated that the economy could likely grow at a faster rate than expected in Q3. The major trades down at 1.0902, having touched an intra-day low of 1.0892. Investors’ attention will remain on Eurozone's M3 money supply report, ahead of US durable goods figures, unemployment claims and existing home sales data. Immediate resistance is located at 1. 0931 (10-DMA), a break above could take it till 1.0960. On the downside, support is seen at 1.0860, a break below could drag it till 1.0820.
USD/JPY: The dollar rose against its Japanese counterpart, as markets anticipate Friday's US Q3 GDP release to show the economy expanded at the fastest rate in almost two years. The major initially declined to an intra-day low of 104.30 after BoJ's Kuroda stated that the central bank was unlikely to do more easing in the short-term, which strengthened the bid tone around Yen. The pair trades flat at 104.48, having touched a high of 104.69, just short of a near 3-month high of 104.87 hit earlier in the week. Markets focus is now on the US durable goods report, which is likely to surprise on the upside, as the bar of expectations has been already set very low. Immediate resistance is located at 104.87, a break above targets 105.00. On the downside, support is seen at 104.11, a break below could take it near 103.70/ 103.35.
GBP/USD: Sterling declined, reversing some of its previous session gains, as investors turned cautious ahead of Britain's third quarter GDP data release. On Wednesday, the major rose to a 3-day high after a government minister stated that both houses of parliament would have to scrutinize any new treaty emerging from Britain's renegotiation with the European Union. Sterling trades 0.2 percent down at 1.2213, having touched a high of 1.2249 on Wednesday, it’s strongest since Oct 21. The UK's preliminary GDP print is anticipated to be weaker, with traders expecting the GDP figures to come in at 0.3 percent in the third quarter after rising 0.7 percent previously. Immediate resistance is located at 1.2300, a break above could take it near 1.2330. On the downside, support is seen at 1.2100, break below targets 1.1900. Against the euro, the pound was trading 0.2 percent lower at 89.21 pence.
AUD/USD: The Australian dollar tumbled, halting its 3-days winning streak after the release of weaker-than-expected Chinese industrial profits data. On Wednesday, the major rose above the 0.7700 handle, following steady inflation figures release, which revived expectations that the Reserve Bank of Australia would not cut rates at its policy meeting next Tuesday. However, it trimmed gains to close out at 0.7649 as board based US dollar strength and declining oil prices triggered a fresh bout of selling in the pair. Data released earlier showed that Australia's exports prices rose 3.5 percent, while import prices fell 1 percent in the third quarter. The Aussie trades 0.3 percent down at 0.7630, having hit an intra-day low of 0.7621. Focus now remains on the upcoming U.S. economic data for fresh clues on the major. Immediate support is seen at 0.7610, a break below could drag it lower 0.7600. On the upside, resistance is located at 0.7670, a break above targets 0.7700.
NZD/USD: The New Zealand dollar rose, despite the economy posting weak trade report. The country's trade deficit widened to NZD -1436 mln in September versus estimates of -1145 mln and previous -1243 mln. However, the upside appears capped amid board based US dollar strength and monetary policy divergence between the Federal Reserve and RBNZ. The Kiwi trades 0.1 percent up at 0.7158, hovering away from a low of 0.7144 hit earlier in the session. The major will continue to track overall market sentiment, ahead of series of U.S. economic data. Immediate resistance is located at 0.7170, a break above targets 0.7200. On the downside, support is seen at 0.7130, a break below could drag it lower 0.7100.
Equities Recap
Asian shares nudged down after disappointing earnings from technology companies weighed on Wall Street, while investors cautiously awaited Britain’s Q3 gross domestic data.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent in early trade.
Tokyo's Nikkei fell 0.32 percent at 17,336.42 points, Australia's S&P/ASX 200 index declined 1.06 percent to 5,302.80 points and South Korea's KOSPI was trading 0.5 percent higher at 2,023.89 points.
Shanghai composite index lost 0.32 percent at 3,106.26 points, while CSI300 index was trading 0.4 percent lower at 3,340.78 points.
Hong Kong’s Hang Seng was trading 0.99 percent down at 23,100.35 points. Taiwan shares shed 0.7 percent to 9,299.55 points.
Commodities Recap
Crude oil prices steadied, supported by strong demand and concerns over Venezuela's stability, however, doubts over OPEC's ability to organize a coordinated production cut weighed on markets. International benchmark Brent crude was trading 0.18 percent higher at $50.02 per barrel at 0408 GMT, having touched near a 4-week low of $49.63 in the previous session. U.S. West Texas Intermediate crude traded flat at $49.20 a barrel, after declining to a 3-week low of $48.85 on Wednesday.
Gold prices edged down, extend previous session losses as the U.S. dollar steadied, however, underlying demand for bullion was seen strong ahead India's festival season. Spot gold was 0.1 percent down at $1,265.93 an ounce at 0413 GMT, after declining 0.6 percent on Wednesday. U.S. gold futures were nearly unchanged at $1,266.50 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.7985 percent higher by 0.008 bps, while 5-year was 0.008 bps up at 1.3099 percent.
The Australian government bonds plunged as stronger-than-expected third quarter consumer price index has lowered the possibilities of a rate cut by the Reserve Bank of Australia in the upcoming monetary policy meeting in November. The yield on the benchmark 10-year Treasury note rose nearly 7 basis points to 2.343 percent, the yield on 15-year note jumped 6-1/2 basis points to 2.699 percent and the yield on short-term 2-year climbed 1-1/2 basis point to 1.717 percent.
The New Zealand government bonds closed mixed after the country’s trade deficit widened unexpectedly in September. Also, rising speculations on the December Federal Reserve interest rate hike supported the Treasury yields. The yield on the benchmark 10-year bond fell 1 basis point to 2.670 percent, the yield on 7-year note ended 4 basis points higher at 2.353 percent and the yield on short-term 2-year note climbed 2-1/2 basis points to 1.995 percent.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The 2-year fell 3 Canadian cents to yield 0.558 percent and the benchmark 10-year declined 14 Canadian cents to yield 1.154 percent. The 10-year yield narrowed 1.8 basis points further below its U.S. equivalent to leave a spread of -63.7 basis points, its widest gap since March, indicating underperformance for U.S. Treasury debt.
