Market Roundup
- Japan MoF Asakawa – Market still volatile, eyeing impact of US NFP data tonight, ready to respond to any speculative moves – Reuters.
- Japan MoF June flow data – Japanese bought net Y507.8 bln foreign stocks, Y1.9452 trln bonds, sold Y280.9 bln bills; foreign investors sold net Y434.2 bln Japanese stocks, Y997.3 bln bonds, bought Y887.5 bln bills.
- Japan May c/a surplus Y1.81 trln, Y1.75 trln eyed, April Y1.88 trln.
- Japan May real wages +0.2% y/y, Apr rev +0.4% (+0.6%), total cash earnings -0.2% y/y, first fall since June ’15, Apri unch (+0.3%).
- Japan June bank loans +2.0% y/y to Y497.518 trln, May +2.2%, April +2.2%.
- Foreign CB US debt holdings +$4.508 bln to $3.229 trln July 6 week, Treasury holdings +$5.123 bln to $2.917 trln, agencies -$692 mln to $261.920 bln.
- NY Fed – Swaps with foreign CBs $2.994 bln July 6 week, $1.475 bln with BoJ, $1.519 bln with ECB.
- Lipper – US-based gold funds attract most money since February, stock mutual funds post $6.1 bln outflows.
- Leadsom and May face off in UK PM race – Financial Times.
- UK June GfK consumer confidence falls to -9 post-Brexit, -1 pre-vote, biggest drop since Jan ’11.
- UK June BMO like-for-like retail sales -3.6% y/y, biggest June decline in more than decade.
- UK June REC permanent staff hiring off, first time since Dec ’12.
- UK launches bilateral trade talks for post-Brexit deal with India, to hold meetings with US, China, Japan and South Korea in coming months – Reuters.
- New Zealand PM Key – Central bank should get on with housing measures – stuff.co.nz.
Economic Data Ahead
- (0245 ET/0645 GMT) France May industrial output, -0.5% m/m eyed; last +1.2%.
- (0245 ET/0645 GMT) France May budget balance; last E56.5 bln deficit.
- (0430 ET/0830 GMT) Great Britain May trade bal, GBP10.65 bln deficit eyed; last GBP10.53 bln deficit.
- (0430 ET/0830 GMT) Great Britain May - non-EU, GBP 2.9 bln deficit eyed; last GBP 2.6 bln deficit.
- (0830 ET/1230 GMT) United States Jun non-farm payrolls, +175k eyed; last +38k.
- (0830 ET/1230 GMT) United States Jun unemployment, 4.8% eyed; last 4.7%, participation 62.6%.
- (1500 ET/1900 GMT) United States May consumer credit, $16.0 bln eyed; last $13.42 bln.
Key Events Ahead
- (0400 ET/0800 GMT) ECB/Slovenia CB Jazbec parliamentary testimony.
- (0600 ET/1000 GMT) UK DMO GBP0.5/2.5/3.0 bln 1/3/6-month treasury bill auctions.
FX Beat
USD: The dollar index, which tracks the greenback against a basket of currencies was down 0.1 percent at 96.10, however, it was on track for a 2.1 percent gain in a week.
EUR/USD: The euro edged up, attempting a minor recovery to regain the 1.1100 handle amid broad based dollar weakness. It extended gains above 1.1050 after the greenback rose against its major peers on the back of upbeat U.S. ADP data in the previous session. On Thursday, the ADP private payroll report showed better-than-expected data, increasing expectations about a bounce back in June NFP report following a weak reading in May. Markets now await U.S. payrolls data, which will provide insights on the health of the labour market in the U.S economy. The European currency trades at 1.1082, hovering towards 1.1100 level. Immediate resistance is located at 1.1111, break above targets 1.1130/ 1.1154. On the lower side, support is seen at 1.1049, break below could take the pair near 1.1000 level.
USD/JPY: The Japanese yen gained, extending gains for the sixth consecutive session amid broad based dollar weakness and deteriorating risk sentiment. The yen bulls strengthened the bids for the safe-haven as risk conditions appear to weaken, sending the major lower towards the 100 handle. The major trades 0.3 percent lower at 100.34, pulling further away from the 101 level. The pair will be driven by broader market sentiment ahead of the U.S. employment report for further momentum. Immediate support is located at 100 level, break below targets 99.50/98. On the higher side, resistance is seen at 101.33 (5-DMA).
GBP/USD: Sterling steadied against the dollar, attempting to regain 1.3000 level amid slightly improving risk sentiment. Data released overnight by the National Institute of Economic and Social Research showed Britain's GDP estimate at 0.6 percent in June. On Thursday, the major rose above 1.3000 level, however, it major failed to sustain gains following upbeat U.S. ADP report and unemployment claims data. Markets will closely watch Britain's trade balance report, ahead of the U.S. NFP report for fresh cues. Sterling trades 0.3 percent higher at 1.2946, but within the sight of 1.2791 struck earlier in the week. Immediate resistance is located at 1.3016, while support is seen at 1.2800 level. Against the euro, the pound trades flat at 85.62 pence.
AUD/USD: The Australian dollar rose to an early high of 0.7516, however, it failed to sustain gains above the 0.7500 level, trading at 0.7492, still 0.2 percent up. The Aussie attempted a recovery after declining in the previous session as S&P’s revised Australia’s sovereign credit outlook negative. The major strengthened on the back of improving risk sentiments and rebounding oil prices, but gains were limited as copper prices and iron-ore futures fell back in the negative territory. Markets focus remains on U.S unemployment rate and Nonfarm Payrolls report for further direction. Immediate resistance is located at 0.7538, break above targets 0.7550/ 0.7657. On the lower side, support is seen at 0.7449 (20-DMA).
NZD/USD: The New Zealand dollar extended gains above the 0.7250 level, amid improving risk conditions. The Kiwi trades 0.4 percent higher at 0.7256, hovering towards 2016 peak of 0.7298. On Thursday, the major rose above the 0.7200 handle from a low of 0.7115 after RBNZ Deputy Governor Grant Spencer said that an interest rate cut could deteriorate the imbalances in the property market and cause financial stability risk. Immediate resistance is located at 0.7298, break above could touch new 2016 high. On the lower side, support is seen at 0.7198 (5-DMA).
Equities Recap
Asian shares slumped and were set to post their biggest weekly loss in three weeks as investors await U.S. employment report to see if the labor market is stronger than prior survey.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 percent and was it was set for a decline of 1 percent for the week, its biggest weekly drop since June.
Tokyo's Nikkei dropped 1.11 pct at 15,106.98, while Australia's S&P/ASX 200 index edged up 0.03 pct at 5,229.70 points.
Shanghai composite index slumped 0.7 percent at 2,993.66 points, while CSI300 index declined 0.3 percent at 3,201.07 points.
Hong Kong’s Hang Seng was trading 0.8 percent lower at 20,528.85 points. Seoul shares closed down 0.60 pct.
Commodities Recap
Oil prices edged up after declining to a 2-month low in the previous session on report that showed the U.S. weekly crude draw missing forecasts. Brent crude oil was trading at $46.94 per barrel at 0354 GMT, having dropped 5 percent in the previous session. U.S. crude also rose 0.8 percent to $45.54 a barrel.
Gold edged down as investors remain cautious ahead of U.S. economic data later in the day, however it was on course for a sixth consecutive weekly gain. Spot gold was trading down 0.1 percent at $1,358.77 an ounce by 0356 GMT and it is up about 1 percent so far for this week. U.S. gold dropped 0.3 percent to $1,358 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.3612 percent down by 0.026 bps, while 5-year was 0.013 bps lower at 0.9460 percent.
Australian government bond futures were a tad softer but within striking distance of record highs set earlier in the week. The 3-year contract was three ticks lower on the day at 98.530, not far from an all-time high of 98.600. The 10-year contract eased 1.5 ticks to 98.1100.
New Zealand government bond yields jumped, with the short-end rising as much as 5.5 basis points and flattening the yield curve.
Canadian government bond prices were mixed across the maturity curve, with the 2-year price up 4 Canadian cents to yield 0.466 percent and the benchmark 10-year declining 6 Canadian cents to yield 0.979 percent. The Canada-U.S. two-year bond spread was -12.7 basis points, while the 10-year spread was -40.6 basis points.
