Market Roundup
- BoJ Gov Kuroda - Economic view less optimistic, more in line with Policy Board Oct 6-7 minutes, admits EM slowdown affecting Japan exports-output, even maybe CAPEX-wages-prices too, still optimistic on achieving CPI target, BoJ ready to adjust policy if needed - Reuters.
- Japan PM Abe - Excessive JPY strength has been corrected, considering lower corporate tax rate next fiscal year than originally planned - Reuters.
- FinMin Aso - Wrong for TPP to tackle monetary-currency policies - Reuters.
- MoF flow data week-ended Oct 31 - Japanese buy net Y173.0 bln foreign stocks, Y882.8 bln bonds, sell Y115.1 bln bills; foreign investors buy net Y187.1 bln Japanese stocks, Y710.5 bln bonds, Y572.1 bln bills.
- Japan Sept leading indicator +2.1 pts to 101.4, coincident +0.3 pt to 111.9.
- St Louis Fed Bullard - Likely slowing of jobs natural at this point in recovery, 100-250k job growth adequate, should not be misread, guidance on December hike needed to reel back no-hike expectations, debate to continue post-liftoff, move away from zero-rate policy justified - Reuters.
- Fed Gov Tarullo - Fin'l stability should play rose in monetary policy - MNI.
- Atlanta Fed Lockhart - Forces will pressure prices towards target - Reuters.
- Foreign CB US debt holdings -$8.596 bln to $3.283 trln Nov 4 week, Treasuries -$7.906 bln to $2.962 trln, agencies -$778 mln to $275.313 bln.
- NY Fed - FX swaps with foreign CBs $143 mln Nov 4 week, all with ECB.
- US-based stock funds attract $5.7 bln new money in Nov 4 week - Lipper.
- China passes Canada as US's largest trading partner - GLOBML.
- RBA - Economic prospects have firmed, inflation forecasts tweaked down 0.5%, leaves room for further ease if needed.
Economic Data Ahead
- (0200 ET/0700 GMT) Germany Sep industrial output, +0.5% m/m eyed; last -1.2%.
- (0245 ET/0745 GMT) France Q4 industrial investment; +2.0% AR.
- (0245 ET/0745 GMT) France Sep trade balance; last E3.0 bln deficit.
- (0245 ET/0745 GMT) France Sep budget balance; last bln deficit.
- (0300 ET/0800 GMT) Spain Sep industrial output, +2.8% y/y eyed; last +2.7%.
- (0400 ET/0900 GMT) Norway Sep manufacturing output, +0.3% m/m eyed; last -0.4%.
- (0430 ET/0930 GMT) UK Sep ind production, -0.1% m/m, +1.3% y/y eyed; last +1.0%, +1.9%.
- (0430 ET/0930 GMT) UK Sep mfg production, +0.4% m/m, -0.9% y/y eyed; last +0.5%, -0.8%.
- (0430 ET/0930 GMT) UK Sep trade bal, GBP10.6 bln deficit eyed; last bln deficit.
- (0430 ET/0930 GMT) UK Sep - non-EU, GBP 3.3 bln deficit eyed; last GBP 3.77 bln deficit.
- (0830 ET/1330 GMT) US Oct non-farm payrolls, +180k eyed; last +142k.
- (0830 ET/1330 GMT) US Oct unemployment, 5.1% eyed; last 5.1%, participation 62.4%.
- (0830 ET/1330 GMT) US Oct average earnings, +0.2% m/m eyed; last unch.
- (1500 ET/ 2000 GMT) US Sep consumer credit, $17.5 bln eyed; last $16.02 bln.
Key Events Ahead
- N/A UK /2.5/1.5 bln 1/3/6-month treasury bill auctions.
- (0330 ET/ 0830 GMT) ECB ChiefEcon Praet speaks at SAFE Frankfurt conference.
- (0500 ET/1000 GMT) ECB Mersch speech in Ljubljana, Slovenia.
- (0915 ET/ 1415 GMT)St Louis Fed Bullard speech at St Louis forum.
- 15:00(1000 ET/ 1500 GMT) Buba Dombret in Frankfurt panel discussion.
- (1715 ET/ 2215 GMT) Fed Gov Brainard at Washington, DC IMF economic forum.
- Sat SF Fed Williams speech in Tempe, Arizona.
FX Beat
USD/JPY: USD hit a 2 1/2-month high of 122.01 against the yen on Thursday and currently trading at 121.68. A close above key resistance at 121.75, would signal a break above its trading range in the past few months. The major could thereafter test resistance around 123 levels. Data yesterday showed that U.S. applications for unemployment benefits last week recorded their largest increase in eight months, but remained at levels consistent with a fairly healthy labor market. Solid payroll gains in October could seal the case for a December interest rate increase from the Federal Reserve. Data due at 1330 GMT today will be closely watched. Daily RSI is at overbought and needs to unwind, bullish lean persists as pair continues to hold above the daily cloud & 200-DMA. The 100-DMA has been pierced to add to the bull view.
AUD/USD: The Antipodeans were hampered by broad U.S. dollar strength on Friday ahead of a key jobs report that is expected to reinforce the case for a Federal Reserve interest rate hike in December. The Australian dollar was steady at $0.7143, having wallowing in a narrow range in the past 24 hours. It was rejected at a peak of $0.7224 on Wednesday, and is on track to end the week largely unchanged. AUD/NZD: The Aussie was a star performer against the kiwi, up 2.7 percent this week. If sustained, it would be the largest such gain in 5 years. The kiwi was undermined by growing speculation of further easing by the RBNZ in Dec. Interest rate differentials and the divergences between RBA and RBNZ likely to push AUD/NZD higher. AUD/NZD is currently trading at 1.0808, momentum studies are positive, pair could test 1.0921 50% of Sep/Nov fall, close above 1.0762 (200 DMA) & sustained 1.0821 38.2% Fibo break is bullish.
EUR/USD: The euro, which has been under pressure since the ECB late last month signalled additional easing, slipped to as low as $1.0834, its lowest level since late July, on Thursday. The common currency last stood at $1.0881, hovering not far from a major support around $1.0810-20, a double bottom chart pattern hit earlier this year, a break of which could open the way for a test of its April low of $1.05205. MACD is posting higher highs and lows on the 4-hour chart, and price action is posting lower lows, which indicates spot has bottomed out for the time being. Some correction higher could be seen in the short term.
GBP/USD: The British pound fell 1.2 percent on Thursday, its biggest drop since late August, after the Bank of England's governor dismissed the view it would raise interest rates shortly after the Fed. BoE gave no sign on Thursday it was in a hurry to raise interest rates, predicting that inflation, now near zero, would pick up only slowly even if rates stay on hold all next year, and highlighting the increase in external risks to the UK economy over the past three months. The pound is trading at $1.5211 at the time of writing, slightly higher from a three-week low of $1.5205 touched on Thursday.
Equities Recap
Asian shares slipped on Friday as investors braced for U.S. employment data that is expected to bolster the case for a Federal Reserve interest rate increase as early as next month
MSCI's broadest index of Asia-Pacific shares outside Japan edged down about 0.36 percent at 0310 GMT, though it remained on track for a 0.7 percent weekly rise.
Tokyo's Nikkei average unofficially closes up 0.78 pct at 19,265, Seoul shares unofficially close down 0.34 pct, Taiwan stocks close down 1.8 pct at 8,693.57 points
The Shanghai Composite pared earlier gains to climb 0.36 percent, putting it on track for a jump of 4.5 percent for the week.
Commodities Recap
Crude oil prices edged up on Friday after falling over 2 percent the previous session, with analysts saying oversupply and a strong dollar would continue to weigh on fuel markets.
U.S. crude futures were trading at $45.37 a barrel at 0129 GMT, up 17 cents from their last settlement, while Brent crude rose 14 cents to $48.12 a barrel.
Gold steadies after seven days of losses, but still near 8-week low, eyes weekly dip. Spot gold had ticked up 0.4 percent to $1,107.60 an ounce by 0332 GMT, not far from $1,102.35 hit in the previous session, the lowest since Sept. 11. The metal has lost 3 percent for the week, the sharpest slide since the week ended July 24.
Other commodities also struggled, with London copper sliding to its lowest level in a month overnight. While it recovered 0.4 percent to $5,032.50 a tonne, it was still set to end the week 1.6 percent lower, its third consecutive weekly loss.
Treasuries Recap
Australian government bond futures extended losses to multi-week troughs, with the three-year bond contract off 2 ticks at 98.050. The 10-year contract shed 1.5 tick to 97.1650, while the 20-year contract eased 1 tick to 96.6100. New Zealand government bonds alos had a soft tone.
JGB futures are slowly edging higher, apparently due to some buying in the 2- to 5-year sector and due to continued swap receiving pressure.
Swap rates remain under downward pressure, with 10s and 30s down by 0.875bp and 1.625bp respectively.
In T-bills, the 6-month paper being auctioned was indicated at -0.06/-0.015%, suggesting that the paper is likely to draw strong bids from dealers looking to sell it to the BoJ to earn large profits.
