Asia Roundup: Kiwi slumps to 7-week low on downbeat GDT figures, euro advances on report of ECB policy change, crude oil extend gains - Wednesday, October 5th, 2016

Market Roundup

• Chicago Fed Evans – Fine with December rate hike if data stays firm, could be November, less concerned with timing of next rate hike than with pace- criteria for subsequent hikes, favors shallow path, inflation progress should be barometer for further hikes, unemployment to “natural level” by ’17 year- end, growth to average 2% next three years – Reuters.
   
• BoJ Gov Kuroda – Rates likely to rise when 2% inflation target met – Reuters.
• BoJ faces less pressure to act after policy change – Q4 CB outlook – Nikkei.
   
• Japan Sept services PMI 48.2, worst since April ’14, Aug 49.6.
   
• Sompo Japan to buy Bermuda/US Endurance Holdings, $6.5 bln deal – Nikkei.
   
• Japan’s Asahi to bid on SABMiller's East Europe biz, Y500 bln+ deal – Nikkei.
   
• UK slips below France in global economy table, fall in GBP means Britain now sixth when measured at market exchange rates – Financial Times.
   
• Spokesman - ECB has not discussed reducing bond purchases – Reuters.
   
• Australia Aug retail sales +0.4% m/m, best in seven-months, +0.2% forecast, household wealth at record highs, unemployment edging lower.
   
• Australia AIG PSI +3.9 points to 48.9, still in contraction.
   
• Australia Sept VFACTS new vehicle sales +8.2% m/m, +1.3% y/y.
   
• New Zealand Sept ANZ commodity price index +5.1% m/m, +10.6% y/y, 17-month high.
   
• New Zealand Fonterra GDT price index -3% at latest auction, volumes off too - Reuters.
   
• World Bank ups ’16 developing East Asia growth forecast upped to 6.4% from 6.3%, ’16 and ’17 China growth forecasts unch at 6.7%, 6.5% - Reuters.
  ​

Economic Data Ahead

• (0315 ET/0715 GMT) Spain Sep PMI services,  55.0 forecast; last  56.0.
   
• (0330 ET/0730 GMT) Sweden Aug industrial output, +0.4% m/m, +0.5% y/y forecast; last +1.1%, +4.2%.
   
• (0330 ET/0730 GMT) Sweden Aug new mfg orders; last +5.2% y/y.
   
• (0345 ET/0745 GMT) Italy Sep PMI services,  51.9 forecast; last  52.3.
   
• (0350 ET/0750 GMT) France Sep PMI services,  54.1 forecast; flash 54.1.
   
• (0350 ET/0750 GMT) France Sep PMI composite, 53.3 forecast; flash 53.3.
   
• (0355 ET/0755 GMT) Germany Sep PMI services,  50.6 forecast; flash 50.6.
   
• (0355 ET/0755 GMT) Germany Sep PMI composite, 52.7 forecast; flash 52.7.
   
• (0400 ET/0800 GMT) Eurozone Sep PMI services,  52.1 forecast; flash 52.1.
   
• (0400 ET/0800 GMT) Eurozone Sep PMI composite, 52.6 forecast; flash 52.6.
   
• (0430 ET/0830 GMT) Great Britain Sep PMI services,  52.0 forecast; last  52.9.
   
• (0500 ET/0900 GMT) Norway Sep housing prices; last +9.1% y/y.
   
• (0500 ET/0900 GMT) Eurozone Aug retail sales, -0.3% m/m, +1.5% y/y forecast; last +1.1%, +2.9%.
   
• (0815 ET/1215 GMT) United States Sep ADP national employment, +166k forecast; last +177k.
   
• (0830 ET/1230 GMT) United States Aug int’l trade bal, $39.3 bln deficit forecast; last $39.5 bln deficit.
   
• (0830 ET/1230 GMT) Canada Aug trade balance, C$2.6 bln deficit forecast; last C$2.49 bln deficit.
   
• (0945 ET/1345 GMT) United States Sep Markit PMI services, composite – final; flash 51.9, 52.0.
   
• (1000 ET/1400 GMT) United States Sep ISM PMI non-mfg, 53.0 forecast; last 51.4.
   
• (1000 ET/1400 GMT) United States Aug factory orders, -0.1% m/m forecast; last +1.9%.
  ​

Key Events Ahead

• N/A   ECB Governing Council meeting, no policy announcements scheduled.
   
• N/A   UK Tory party conference in Birmingham (final day), UK PM May to speak.
   
• (0400 ET/0800 GMT) Iceland central bank policy announcement.
   
• (0430 ET/0830 GMT) BoE DepGov Broadbent speaks at London Wall St Journal office.
   
• (0500 ET/0900 GMT) Greece E875 mln 26-week treasury bill auction.
   
• (0530 ET/0930 GMT) Germany E4 bln zero% 2026 Bund auction.
   
• N/A   Sweden NDO SEK3.5 bln 1% 2026 government bond auction.
   
• N/A   IMF/World Bank annual meetings (till Oct 9).
   
• (0930 ET/1330 GMT) Minny Fed Kashkari speaks at Minneapolis conference.
   
• (1300 ET/1700 GMT) Richmond Fed Lacker lectures et al at Marshall University (till 21:00+).
   

FX Beat

DXY: The dollar extended gains against the yen following hawkish comments from a Federal Reserve official. The greenback against a basket of currencies trades 0.1 percent lower at 96.07, after rising to a near 2-month high of 96.44 in the previous session.

EUR/USD: The euro extended gain, having retreated from a near 2-week low in the previous session, following a report of a possible withdrawal of the European Central Bank's bond buying program. Bloomberg reported on Tuesday, quoting an unnamed ECB official that the ECB would likely wind down its $90-billion monthly bond purchases gradually before ending its quantitative easing programme. The major trades 0.2 percent higher at 1.1224, hovering towards a peak of 1.1250 touched last week. Investors now await series of Eurozone final services PMI reports, US ADP jobs report and ISM services PMI reading for further momentum on the major. Immediate resistance is located at 1.1250 (Sept 30 High), break above could take it till 1.1284/ 1.1300. On the downside, support is seen at 1.1181 (Sept 28 Low), break below could drag it till 1.1150.

USD/JPY: The dollar was little changed after rising to a near 3-week high in the previous session following hawkish comments from a Federal Reserve official. Richmond Federal Reserve President Jeffrey Lacker on Tuesday stated that there was a strong case for raising interest rates. The major declined to an intra-day low of 102.67, but recovered shortly as the yen came under renewed selling pressure after data showed Japan’s services sector activity contracted at the fastest pace in 2 years, declining to 48.2 in September against Augusts’ 49.6. The pair trades flat at 102.90, attempting to regain the 103.00 handle. Markets now await U.S. ADP jobs and ISM services report due later in the day, for further insights on the strength of US economy. Immediate resistance is located at 103.40, break above targets 103.80/104.00 On the downside, support is seen at 102.45, break below could take it near 102.00.

GBP/USD: Sterling steadied after tumbling to a 31-year low as concerns over Britain's exit from the European Union dampened investor sentiments. The British pound surrendered almost 2 percent over the past two days as growing worries of an economic slowdown overshadowed positive UK economic data. Sterling trades 0.1 percent up at 1.2736, attempting to recover from a low of 1.2719, its weakest since mid-1985. Markets will continue to track sentiment surrounding the Brexit uncertainty and developments around ECB QE taper, ahead of Britain's service PMI. Immediate resistance is located at 1.2800, break above could take it near 1.2847 (5-DMA). On the downside, support is seen at 1.2719 (Session Low), break below targets 1.2700. Against the euro, the pound trades 0.1 percent down at 88.08 pence, having touched fresh 3-year low of 88.18 earlier in the session.

AUD/USD: The Australian dollar recovered as investors sentiment strengthened on better-than-expected retail sales data and rebound in commodities’ prices. Australia's retail sales s.a. for the month of August rose 0.4 percent, surpassing estimate of 0.2 percent, after having stayed unchanged in the previous month. However, the recovery mode appears to be fragile as markets continued to digest hawkish comments from a Fed official. The Australian dollar trades 0.2 percent up at 0.7630, having touched a low of 0.7606 earlier in the session. Markets attention will remain on US jobs and factory report, ahead of Australia's trade balance data. Immediate support is seen at 0.7592 (20-DMA), break below could drag it till 0.7562. On the upside, resistance is located at 0.7670, break above targets 0.7700.

NZD/USD: The New Zealand dollar slumped below the 0.7200 handle, hitting near 7-week low, weighed down by a reversal in global dairy prices. On Tuesday, the major rose above the 0.7300 handle, however, it reversed gains to close lower at 0.7207 after the Global Dairy Trade price index declined 3 percent from previous 1.7 percent. The Kiwi trades 0.3 percent lower at 0.7187, hovering towards an early low of 0.7175, its lowest since August 18. Investors will continue to digest GDT price data, ahead of US ISM non-manufacturing report and ADP employment report. Immediate resistance is located at 0.7240 (5-DMA), break above targets 0.7287 (20-DMA)/ 0.7300. On the downside, support is seen at 0.7175 (Session Low), break below could drag it till 0.7150.

Equities Recap

Asian shares retreated as markets turned cautious by a media report indicating the possible withdrawal of the European Central Bank's bond buying program.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.3 percent in early deal.

Chinese banks are closed in observance of National Day.

Tokyo's Nikkei gained 0.50 percent at 16,819.24 points, Australia's S&P/ASX 200 index lost 0.46 percent at 5,458.80 points and South Korea's KOSPI shed 0.1 percent at 2,053.10 points.

Hong Kong’s Hang Seng was trading 0.4 percent up at 23,781.37 points. Taiwan shares declined 0.2 percent at 9,272.28 points.

Commodities Recap

Crude oil prices extended gains after an industry report showed that U.S. fuel inventories likely declined for a fifth consecutive week, however, it remained near the $50 a barrel mark as many traders now see fair value for crude.  International benchmark Brent crude was trading flat at $51.28 per barrel at 0359 GMT, having touched a 4-month high of $51.40 in the previous session. U.S. West Texas Intermediate crude edged down 0.1 percent at $49.12 a barrel, after rising to a high of 49.27 earlier in prior session, its highest since July 4.

Gold steadied after declining 3.3 percent in the previous session, hitting its lowest in more than three months as investors turned cautious following a report of a possible withdrawal of the European Central Bank's bond buying program. Spot gold was trading 0.5 percent higher at $1,274.48 an ounce by 0409 GMT, having touched fresh low of $1266.37, its lowest since June 24. U.S. gold futures rose 0.3 percent to $1,273.50 an ounce after falling over 3 percent in the previous session.

Treasuries Recap

The 10-year U.S treasury yield stood at 1.6795 percent lower by 0.003 bps, while 5-year was 0.004 bps up at 1.2206 percent.

The Australian government plunged as investors cheered higher than expected retail sales data in August. Also, traders poured into safe-haven instruments amid losses in riskier assets including equities and crude oil. The yield on the benchmark 10-year Treasury note rose 5 basis points to 2.144 percent, the yield on 15-year note jumped 7 basis points to 2.487 percent and the yield on short-term 2-year climbed 5 basis points to 1.659 percent.

The New Zealand government bonds closed narrowly mixed as recent data showed that dairy product prices decline for the first time since July at the Global Dairy Trade auction. On the contrary, investors sell off short-term debt following rally in energy prices. The yield on benchmark 10-year bond fell 1 basis point to 2.490 percent, yield on 7-year note also dipped 1 basis point to 2.215 percent and the yield on short-term 2-year note ended 1/2 basis point higher at 1.975 percent.

Canadian government bond prices were lower across the yield curve, with the 2-year down 2.5 Canadian cents to yield 0.552 percent and the benchmark 10-year falling 48 Canadian cents to yield 1.067 percent.