Market Roundup
- USD/JPY resumes updraft: 113.41 to 114.28 seen.
- GBP/USD off a 1.4109 high but surprisingly resilient after data.
- UK Feb Nation Wide House Prices +4.8% y/y vs 4.4% previous, 5.0% expected.
- UK Feb Service PMI 52.7 vs 55.6 previous, 55.1 expected.
- Germany Feb Service PMI 55.3 vs 55.1 previous, 55.1 expected.
- Germany Final Feb Composite PMI 54.1 vs 53.8 previous.
- EZ Final Feb Service PMI 53.3 vs 53.0 previous, 53.0 expected.
- EZ Final Feb Comp PMI 53.0 vs 52.7 previous, 52.7 expected.
- EZ January Retail Sales 2.0% y/y vs 1.4% previous, 1.3% expected.
- BoJ Nakaso reiterates steps to each CPI target.
- BoJ Gov Kuroda - Will adjust policy without hesitation if needed.
- Kuroda-Will strengthen communication with market.
- Japan official - No talk about JPY at Shanghai G20.
- Japan Feb PMI services 51.2, slowest expansion in 7-mos, Jan 52.4.
- China Feb Caixin PMI services 51.2, Jan 52.4.
Economic Data Ahead
- (0700 ET/1200 GMT) Brazil's gross domestic product data for 2015 will likely confirm the country's largest contraction since 1990s. The data will also raise pressure on President Dilma Rousseff to rescue the economy even as she struggles with the lingering threat of removal. The GDP data will also point to another contraction this year as weakening investments keep corporate spending in check despite some moderate improvement in confidence levels.
- (0830 ET/1330 GMT) The new applications for U.S. jobless benefits likely dropped 1,000 to 271,000 last week, as the labor market continues to show no stress from the recent turmoil in the financial markets. The continuing jobless claims for the week ending Feb 19 likely dropped to 2.250M from 2.253M previous week.
- (0830 ET/1330 GMT) The U.S. Non-farm productivity for Q4 is expected to have fallen 3.2 pct after dropping 3.0 pct in the previous quarter. While the unit labor costs likely rose 4.7 pct in Q4 after rising 4.5 pct in Q3.
- (0945 ET/1445 GMT) The financial firm Markit releases its services PMI for February which is expected to stay unchanged at 49.8 from the previous reading.
- (1000 ET/1500 GMT) The ISM is expected to report that its non-manufacturing index edged lower to 53.2 in February from 53.5 in January.
- (1000 ET/1500 GMT) A report from the Commerce Department is expected to show factory orders rebounded 2.0 percent in January after slumping 2.9 percent in December.
- (1030 ET/1530 GMT) EIA reports its Natural Gas Storage Change for the week ending Feb 26.
Key Events Ahead
- (1045 ET/1545 GMT) Federal Reserve Bank of Dallas President Robert Kaplan will speak on economic conditions and monetary policy before the University of Texas Investment Management Company 20th Anniversary Event, in Austin, Texas.
- (1145 ET/1645 GMT) FedTrade 30-year F.Mae/Fr.Mac max $1.825bln.
- (1245 ET/ 1745 GMT) BoE MPC Member Haldane's Speech.
- (1400 ET/1900 GMT) The Federal Reserve Banks of Atlanta, Boston, Cleveland, New York, Philadelphia, Richmond and St. Louis will release findings from the Small Business Credit Survey, a joint regional survey on small business credit conditions.
FX Recap
USD: The dollar was back above 114.00 yen, up 0.5 percent at 114.05 and moving towards the previous day's two-week high of 114.56. Against a basket of currencies it has slightly retreated after making a high of 98.58, it was trading around 98.227.
EUR/USD: The euro was flat at $1.0860, hovering above the previous day's one-month trough of $1.0825. Investors remained wary of the euro after another European Central Bank policymaker hinted it would take action at next week's policy review. It was trading around 1.08698, on the higher side any break above 1.0880 will take the pair to next level till 1.0950/1.09850/1.100 in short term. The major weakness can be seen below 1.0820 and break below targets 1.0780/1.0720. The low-yielding euro rose 0.6 percent at 123.95 yen.
USD/JPY: The demand for Japanese yen was back in Europe on account of moderate risk-off in European stocks. The pair has recovered after making a low of 113.21 and was trading around 113.97. The short term trend is slightly weak as long as resistance115 holds. On the lower side major support is around 113.20 and break below targets 112.80/112. The major resistance is around 115 and break above targets 116/117.50.
USD/CHF: The pair has declined after making a high of 1.00088 and was trading around 0.99717. The short term trend is slightly bullish as long as support 0.99480 holds. On the higher side any break above 1.0040 will take it till 1.00725/1.01300. The major support is around 0.9950 and break below targets 0.9850/0.9780. The overall bullish invalidation is only below 0.9780.
GBP/USD: The Sterling dropped against the dollar and euro after a sharply worse than expected survey of service sector purchasing managers. The survey showed the headline sentiment index falling to its lowest in three years, pointing to overall economic growth in the first quarter of just 0.3 percent - the least since late 2012. Sterling fell a quarter of a percent to $1.4033 before recovering some ground. The Cable has broken minor resistance 1.4060 and jumped till 1.4106. On the lower side any break below 1.4030 confirms minor weakness, a decline till 1.4000/1.3980 is possible. The major resistance is around 1.4120 and break above targets 1.4160/1.4200. The minor resistance is around 1.4085. Against the euro it dipped 0.1 percent to 77.27 pence.
AUD/USD: The Australian dollar held near 2-month highs against the U.S. dollar and the euro, as a rally in commodities and supportive domestic data prompted markets to pare back the chance of a future interest rate cut. It was up 0.2 percent to $0.7303 after earlier reaching a 2016 high of $0.7325. The euro slid to A$1.4900, near its weakest this year. Data showed Australia's fourth-quarter economic growth unexpectedly picked up to an annual 3.0 percent. It met a wall of resistance around the 73 cents mark, a level tested three times this year. A sustained break would target the December high of $0.7386, then 75 cents, the 50 percent retracement of the May-January move. The short term trend is slightly bullish as long as support 0.7260 holds, a break below will drag it till 0.7200/0.7150.
NZD/USD: The New Zealand dollar fell 0.1 percent to US$0.6667, having been left behind by the rally in the Aussie.
Equities Recap
The European stocks and oil prices slid on Thursday but on track to record this week's gains, as worries about the global outlook for economic growth eased.
The European stock markets dropped at the open but remained close to 2-month highs, reflecting a more upbeat mood among investors. The pan-European FTSEurofirst 300 was down 0.46 percent, London's FTSE 100 turned positive after PMI data, up 0.1 percent, Germany's DAX rose 0.25 percent.
Tokyo's Nikkei closed up 1.28 pct at 16,960.16; MSCI's broadest index of Asia-Pacific shares outside Japan added another 1.1 percent to reach a two-month peak. China's CSI300 Index gained 0.2 pct at 3,058.42 points and Shanghai Composite Index ended up 0.4 pct at 2,859.76 points. HK's Hang Seng Index edged down 0.3 pct at 19,941.76 points.
Commodities Recap
Oil prices erased earlier gains as swelling U.S. crude inventories outweighed a growing belief that the market's 20-month-long rout is ending. Brent futures fell 27 cents to $36.66 a barrel at 0948 GMT, while U.S. crude futures eased 2 cents to $34.64.
The strong inflows into gold-backed funds increased optimism the yellow metal could extend this year's rally despite a revival in risk appetite that lifted Asian equities to a 2-month high. Spot gold rose 0.1 percent at $1,241.40 an ounce, after rising 0.7 percent on Wednesday.
Treasuries Recap
The U.S. Treasury yield was pulled away from lows hit in February as greater risk appetite lessens the appeal of safe-haven bonds. The benchmark 10-year yield stood at 1.8546, up 7 bps.
The German Bund yields rose on Thursday as easing concerns about global growth and higher commodity prices reduced the likelihood of another test of the zero level before next week's ECB meeting. The benchmark 10-year German yields were up 3 basis points on the day at 0.24 percent, having reached a 10-month low of about 0.10 percent on Monday. Most other euro zone yields were 2-4 bps higher on the day and some 10 bps up on the week as well.
Japanese government bonds mostly dropped on Thursday in line with buoyant risk sentiment as equities rallied, but yields in the super long zone hit fresh record lows. The 20-year yield dropped 1.5 bps to 0.465 percent, after earlier dropping as low as 0.435 percent. The 30-year yield was down 2 basis points at 0.760 percent, after earlier dropping as low as 0.735 percent. But the benchmark 10-year JGB yield added 2 basis points to minus 0.020 percent. March 10-year JGB futures fell 0.35 point to end at 151.67.
UK June Gilts opened at 120.39, 22 ticks lower than the previous settlement of 120.61, in line with other core European bonds. They rallied around 8 ticks on the services PMI data to 120.72 after having printed a low trade of 120.37 earlier today and this data. The 10-year cash was unchanged on the day at 1.465%.
Australian government bond futures fell, with the 3-year bond contract off 6 ticks at 98.120. The 10-year contract dropped 8.5 ticks to 97.4550 in a bearish steepening of the curve. The 20-year contract lost 6.5 ticks to 96.9250. New Zealand government bonds eased, sending yields 1.5 bps higher at the short tend and 3 basis points higher at the long end.
