Market Roundup
- China Feb Trade balance USD 32.592bn vs 63.29bn previous, 50.15bn expected.
- Japan Q4 GDP revision is not bad but not that good, bank loans in steady rise.
- Japan Q4 GDP revised annualized -1.1%q/q vs -1.4% previous, -1.5% expected.
- Japan Q4 GDP revised -0.3%q/q vs -0.4% previous, -0.4% expected.
- Japan Q4 Cap ex revised 1.5%q/q vs 1.4% previous, 1.2% expected.
- Japan mulls second tax-hike delay as spending falls.
- Econ Min Ishihara: Impact of next sales tax hike not calculated.
- Nikkei closes near 1-week low as strong yen drags down exporters.
- MoF Feb flow data - Japan buy net tn foreign stocks, tn bonds, Y117.9bn bills- foreign investors sell net tn, Japan stocks, buy tn bonds, sell tn bills.
- Goldman Sachs - Structural bear market drivers for metals intact.
- Euro zone Q4 GDP revised 0.3%q/q vs 0.3 previous, 0.3 expected.
- Euro zone Q4 GDP revised 1.6%q/q vs 1.5 previous, 1.5 expected.
- German Jan Industrial output 3.3%m/m vs -1.2% previous, 0.5% expected.
- Schnabel, German Council of Economic Experts: Germany will resist ECB rate plans.
- Swiss Feb CPI -0.8% vs 1.3 previous, 1.1 expected.
- BoE's Carney: Leaving EU could weaken sterling, pushing up inflation.
- Carney: Leaving EU could lead to economic activity due to reduced confidence.
- BoE's Cunliffe: We are in "uncharted water" if UK leaves EU.
- German Fin Min Schaeuble: Brexit is a geopolitical risk.
Economic Data Ahead
- (0815 ET/1315 GMT) The Canadian Mortgage and Housing Corp release housing starts data. The seasonally adjusted annualized rate of housing starts is expected to have risen to 180,000 units in February from 165,861 units in January.
- (0830 ET/1330 GMT) The value of Canadian building permits is expected to have dropped 2.5 percent in January after rising 11.3 percent in December.
- (1000 ET/1500 GMT) The Investor's Business Daily (IBD) and Techno Metrica Institute of Policy and Politics (TIPP) are set to release the Economic Optimism Index.
- (1630 ET/2130 GMT) API reports its weekly crude oil stocks.
Key Events Ahead
- (0800 ET/1300 GMT) International Monetary Fund First Deputy Managing Director David Lipton speaks at the National Association for Business Economics Annual Economic Policy Conference in Washingtonon Tuesday.
- (0935 ET/1435 GMT) The U.S. Treasury Assistant Secretary for Economic Policy Karen Dynan is scheduled to speak on "a view from the Treasury Department" at the National Association for Business Economics Annual Economic Policy Conference in Washington.
- (1200 ET/1700 GMT) BoE MPC Member Weale's Speech.
- (1430 ET/1930 GMT) FedTrade 30-year Fannie Mae / Freddie Mac, max $1.825bn
FX Recap
USD: The dollar dropped 0.5 percent to 112.85 yen, after earlier hitting a 1-week low of 112.75 yen. Against the basket of currencies it was trading higher at 97.13.
EUR/USD: The low-yielding euro inched higher against the dollar on Tuesday as appetite for riskier assets and currencies faded following the weak Chinese data. It was also impacted by easing expectations from ECB. The single currency was up 0.2 percent at $1.1042, pulling away from a 1-month low of $1.0825 struck on March 2. Against the yen, it fell 0.2 percent to 124.65. The pair is currently hovering around $1.10 levels. It made intraday high at $1.1044 and low at $1.1003 levels. Short term bias remains bearish till the time pair holds key resistance level at $1.1050. On the down side, key support level is seen at $1.0825 marks. A daily close above key resistance will drag the parity towards $1.1160/$1.1376 marks thereafter. According to Eurostat, the euro zone's GDP remained at 0.3% in the fourth quarter and the yearly print ticked higher from 1.5% to 1.6%. German industrial production released with positive numbers at 3.3% m/m vs -0.3% previous release. There is no US economic data later in the day and therefore volatility might be lower.
USD/JPY: The safe-haven Japanese yen gained after the data showed China's February exports slumped 25.4 percent from a year earlier while imports dropped 13.8 percent. The pair fails to break key support level at 112.57 and currently trading around 112.91 levels. The pair is likely to consolidate below 114.87 marks. Intraday bias remains bearish for the moment. A daily close below key support level at 110.98 will drag the parity towards 108.75/107.51 marks thereafter. On the top side, key resistance levels are seen at 114.87/115.96 levels. Alternatively, a sustain close above 114.00 is required to turn the bias bullish again. Japanese GDP on an annualized basis dropped to -1.1% from 1.0%, whilst the quarterly change for the last quarter of 2015 declined to -0.3%. Meanwhile, the current account moderated to ¥520.8 billion from ¥960.7 billion while the trade balance posted a deficit of ¥411 billion from a surplus of ¥188.7 billion previously.
USD/CHF: The short term bias remains neutral for the parity. Pair is currently trading around 0.9943 levels. A daily close above 1.0073 is required to confirm the bullish bias. A current rebound from 0.9878 will take the parity towards key resistance area around 1.0073 and 1.0256 thereafter. Alternatively, a daily close below 0.9878 will turn the bias bearish and drag the parity towards major support at 0.9662 levels in near term.
GBP/USD: The Sterling erased some of its last week's gains on Tuesday but was trading at levels which showed a complete recovery from falls after the launch of the Brexit campaign two weeks ago. It was down 0.25 percent on the day against the dollar and euro on Tuesday at $1.4233 and 77.43 pence respectively. The pair fails to break key resistance at $1.4268 and remains well supported below $1.43 levels. Short term bias remains bearish till the time pair holds key resistance at $1.4268 level. On the down side key support falls at $1.3835 level. Alternatively, a daily close above $1.4270 will take the parity towards key resistance at $1.4357.
AUD/USD: The Aussie fell 0.5 percent to $0.7430 after touching a high not seen since July, of $0.7486 on Monday after investors booked profit following a three-cent rally in just a week. The resistance was found at $0.7495, the 50 percent retracement of the $0.8164-$0.6827 move with support at $0.7440. Much of recent strength came after commodity prices bounced and domestic data proved solid. A current rebound from $0.6826 is a corrective move. A sustained close above $0.7385 took the parity towards key resistance at $0.7427and $0.7482 thereafter. In addition, pair fails break $0.85 marks and currently trading around $0.7443 levels. On the downside, a break below $0.7108 support levels will turn bias back to the downside for retesting 0.6826 low. Today Australia's NAB business confidence data released with flat numbers at 3. Moreover, China's negative trade balance data took the Aussie lower. The trade surplus shrank from 406 billion to 210 billion. Exports tumbled 17.8% year-on-year in February, marking the eighth month in a row that exports have declined. Imports were down 13.8% over the same period, the sixteenth-consecutive decline.
NZD/USD: The New Zealand dollar was knocked by a lower dairy price outlook. It edged down to $0.6773, from a peak of $0.6814, after Fonterra cut its forecast dairy payout. The pair fails to sustain above $0.68 marks and currently trading around $0.6750 levels. Still overall trend remains bullish till the time pair holds key support at $0.6713 marks.
Equities Recap
The global stock markets dropped on Tuesday as the poor economic data from China intensified concerns about a likely slowdown in the global economy. China's exports plunged 25.4 percent in February compared with the same month last year, while its imports dropped 13.8 percent.
The pan-European FTSEurofirst 300 index fell 1 percent, Britain's FTSE 100 was down 0.8 pct, Germany's DAX slipped 1 pct, and France's CAC 40 lost 0.9 pct in early deals.
Tokyo's Nikkei closed down 0.76 pct at 16,783.15, China's CSI300 Index rose 0.1 pct at 3,107.67 points, Shanghai Composite Index ended up 0.1 pct at 2,901.39 points and HK's Hang Seng Index finished lower 0.7 pct at 20,011.58 points. The MSCI All-Country World index weakened 0.3 percent and the MSCI Emerging Market index fell 0.7 percent.
Commodities Recap
Oil prices dropped after Kuwait said it would only give consent to an output freeze if all major producers participate and Goldman Sachs noted commodity price rally is unsustainable. Brent crude futures slipped 12 cents at $40.72 a barrel at 0922 GMT. The contract rose by 5.5 percent in intra-day trading on Monday. U.S. West Texas Intermediate (WTI) futures were down 10 cents at $37.80 a barrel.
Gold was trading near a 13-month high on Tuesday, underpinned by a struggling dollar and hopes the U.S. Fed will not raise interest rates as soon as next week's meeting. Spot gold was up 0.5 percent at $1,274.33 an ounce by 1100 GMT, not far from Friday's peak of $1,279.60, its highest since Feb. 3, 2015. U.S. gold for April delivery gained 0.5 percent to $1,270.50 an ounce.
Treasuries Recap
The 10-year U.S. Treasury yield stood at 1.879 percent vs U.S. close of 1.904 percent on Monday.
JGB prices extended their earlier gains sharply, after the MoF published stronger-than-expected results of today's monthly JPY800bn 30-yr JGB auction. The accepted price came in at 100.80-100.83, far above median market expectations of around 100.25. The benchmark 10-year JGB yield was trading at a fresh record low of -0.09%, down 4.5bp from yesterday's afternoon close, after lead March JGB futures hit a new record high at 152.45. JGB futures were up 0.38 at 152.38. The 5s are down 2.5bp at -0.23%, while the 20s are down 8bp at 0.34%, their fresh record low, vs 0.445% earlier.
UK Gilts opened 40 ticks higher than the settlement of 120.48 as core fixed income markets drew support from soft China February Trade data. Early buyers extended gains as support on 10-year cash yields gave way around the 1.42% level. The next support level is next at 1.386%, which are lows from late last month.
Euro zone government bond yields dropped and short-term interest rates rose on Tuesday as stocks fell and weak Chinese data intensified concerns over global growth, but ECB meeting prevented a test of recent yield lows. The Germany's benchmark 10-year Bund yield was trading at 0.20 percent, about 10 bps above a 10-month low hit last week at 0.102 percent. The 2-year yield fell 1.3 bps to -0.56 percent, near last week's record low of about -0.58 percent.
Australian government bond futures were near multi-week lows, with the 3-year bond contract off 3 ticks at 98.020. The 10-year contract eased 1.5 ticks to 97.4000, while the 20-year contract was unchanged at 96.8700. The spread between the 10-year and 3-year government bond dropped to 62 bps, its lowest in nearly one year. New Zealand government bonds eased, sending yields 3.5 basis points higher at the long end of the curve.
