Market Roundup
- Stocks up, GBP up, Yen weaker across board, commodities up
- USD/JPY +0.9%, GBP/USD +1.45%, EUR/USD +0.45%
- DXY -0.37%, DAX +1.65%, Brent +2.33%, Iron +6.0%
- FTSE 250 +0.6%, Nikkei closed +2.46%, 11-mth high FTSE100
- Germany Jun HICP final 0.2% y/y vs 0.2% previous, 0.2% exp
- Germany Jun CPI Final 0.3% y/y vs 0.3% previous, 0.3% exp
- Germany Jun W/Sale Price Idx -1.5% y/y vs -2.3% previous
- New UK PM May to make Brexit a success, to favor social order – FT
- UK Jun BRC LFL R. Sales -0.5% y/y, total sales +0.2%, May +0.5%, +1.4%
- BCC balance of mfg expecting improvement lowest since Q3 ’12
- Government Spokesman Sugu does not confirm size of stimulus
- Japan Foreign Min: Hague tribunal ruling on South China Sea final, legally binding
- Econ Min Ishihara: Will consider size of stimulus spending from now
- Ishihara: Extra budget to fund stimulus submitted in Autumn
- Japan to downgrade fiscal ’16 growth forecast, +1.7% to +0.9% - Nikkei
- Japan Inc – economy top priority, not constitution – Nikkei
- Tight family budgets crimping Japanese spending – Nikkei
- Abe eyes broader public pension coverage to bolster demand – Nikkei
- Australia Jun NAB biz conditions index +12, confidence +6, May +10, +3
Economic Data Ahead
- (0900 ET/1300 GMT) Mexico releases its latest industrial production data for the month of May.
- (1000 ET/1400 GMT) The U.S. wholesale inventories are likely to have risen 0.2 percent in May, from 0.6 percent on April.
- (1400 ET/1800 GMT) The U.S. Labor Department is expected to report that Job Openings and Labor Turnover for May have declined to 5.7 million from 5.788 million in April.
- N/A The U.S. government is likely to report a budget surplus of $24 billion for the month of June.
Key Events Ahead
- N/A A European Union-China summit starts-off in Beijing. Top EU officials, including European Council President Donald Tusk and European Commission President Jean-Claude Juncker, are expected to join this annual two-day summit.
- (0915 ET/1315 GMT) The U.S. Federal Reserve Board Governor Daniel Tarullo will give opening remarks before the Center for American Progress and Americans for Financial Reform Conference, "Exploring Shadow Banking: Can the Nation Avoid the Next Crisis?," in Washington.
- (0915 ET/1315 GMT) St. Louis Fed President James Bullard speaks to economists in St. Louis, giving his views on the health of the U.S economy and Fed's thinking about Brexit fallout.
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae max $1.325 bln.
- (1730 ET/2130 GMT) Minneapolis Fed President Neel Kashkari speaks on the economy and the role of the Federal Reserve before a town hall forum co-sponsored by 40 Below Marquette County Young Professionals.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent lower at 96.31, having touched a low of 96.07 earlier in the session.
EUR/USD: The euro rose, but failed to sustain gains above the 1.1100 level, trading at 1.1083, still 0.2 up for the day. The major advanced to early high of 1.1126 as risk-appetite returned in the market, largely due to easing political uncertainty in Britain and Japanese stimulus package. Investors focus will now remain on U.S. economic data and Fed official's speech for further cues on Federal Reserve’s interest rate hike. The short term bearish trend from 1.14278 till 1.09115 will come to an end only if the pair breaks above 1.11880 level. Any break above 1.1188 would take the pair to next immediate resistance 1.1235 (21 day MA and also 61.8% retracement of 1.14279 and 1.0911)/1.13000. The minor resistance is around 1.1120/1.1150. On the lower side, the break below 1.1050 targets 1.1000/1.0970.
USD/JPY: The greenback extended gains above the 103 handle and now targets 104 handle. The dollar bulls were provided some respite after Japanese PM Abe’s confirmed additional stimulus following Sunday’s upper house election victory for the ruling coalition. The major was also supported by prevailing global risk-on sentiment, which hurt the safe-haven appeal of the Japanese yen. The U.S. dollar trades 1.1 percent higher at 103.91, just short of 104 handle. The short term trend is slightly bullish as long as support 101.95 holds. The minor resistance is around 104 and any break above confirms minor trend reversal, a jump till 105/105.85 is possible. On the lower side minor support is around 101.95 and any break below 101.95 will drag the pair till 101.40/100.
GBP/USD: Sterling gained more than 1 percent after Theresa May was appointed as Britain's prime minister. It extended gains following BoE Governor Mark Carney comments on making credit available to households and firms. Sterling trades 1.4 percent higher at 1.3160, on track for its biggest daily gain since Britain's vote decision to leave the European Union. On the lower side major support is around 1.2970 (hourly Kijun-Sen) and any violation below targets 1.29225/1.2850 level. The minor support is around 1.3450/1.3000. Technically resistance is around 1.3200 and break above targets 1.3500/ 1.3980. Against the euro, the pound touched a 1- week high of 84.21 pence.
USD/CHF: The Swiss franc gained after declining for the previous three sessions. The greenback trades 0.1 percent lower at 0.9814, pulling away from a peak of 0.9865 touched last week. The short term decline from 0.9960 till 0.9512 will come to end if the pair closes well above 0.9842 (200 day MA). On the higher side, major resistance is around 0.9885 and any indicative break above 0.9840 will take the pair till 0.9960/1.000 in the short term. The minor resistance is at 0.9842. Any short term weakness can be seen only below 0.9780 (7 day EMA) and any violation below targets 0.9740/0.9670. Overall bullish invalidation is only below 0.9500.
AUD/USD: The Australian dollar rose above 0.7600 handle on the back of global risk-on sentiment and increasing probability of additional stimulus by the PBoC. The major was also supported by upbeat National Australia Bank (NAB) business confidence and conditions data, which rose to 6 in June from 3 in May. The Aussie trades 1.3 percent higher at 0.7627, hovering towards 0.7650 level. On the higher side any break above major resistance 0.7635 will take the pair till 0.7680/0.7725. The major support is around 0.7580 and break below will drag it till 0.7530/0.7480.
NZD/USD: The New Zealand dollar rebounded from a low of 0.7210 to touch its 2016 high of 0.7315, resuming its ongoing bullish tone, amid persistent risk-on market profile and recovery in oil prices. The major was largely supported by rally in oil prices, which gained nearly 3 percent. Markets attention now remains on Fed officials and RBNZ Assistant Governor’s speech. Immediate resistance is located at 0.7345, break above targets 0.7395/0.7400. On the downside, support is seen at 0.7196 (10-DMA).
Equities Recap
European shares were on course for a fourth straight day of gains as easing political uncertainties in Britain and stimulus expectations strengthened risk appetite.
Europe's STOXX 600 rose 1 percent, while FTSEurofirst 300 Index gained 0.9 percent. Germany's DAX advanced 1.5 percent and France's CAC 40 climbed 1.6 percent.
Tokyo's Nikkei gains 2.46 pct at 16,095.65, Australia's S&P/ASX 200 index rose 0.47 pct at 5,362.10 points and South Korea's KOSPI 200 added 0.15 pct.
Shanghai composite index rose 1.8 pct at 3,049.38 points, while CSI300 index soared 2.2 pct at 3,273.18 points. Hang Kong’s Hang Seng index closes up 1.7 pct at 21,224.74 points
Commodities Recap
Crude oil gained nearly 3 percent, recovering from 2-month lows touched in the previous session, supported by a weaker dollar and risk-on market profile. Brent crude was at $47.37 per barrel at 1017GMT, up 2.9 percent. U.S. West Texas Intermediate crude was up 58 cents at $45.34 a barrel.
Gold edged down as global equities rose on easing political tensions in Britain and expectations for more economic stimulus measures. Spot gold was down 0.1 percent at $1,352.61 an ounce by 1024 GMT after declining nearly one percent on Monday, recording its biggest fall in almost two weeks. U.S. gold was down 0.1 percent at $1,355.30 an ounce.
Treasuries Recap
The US Treasuries saw selling across the curve during a relatively quiet US session light on data. The yield on the benchmark 10-year Treasury note rose nearly 5 basis points to 1.481 percent and the yield on short-term 2-year note jumped 1/2 basis points to 0.665 percent.
The UK gilts plunged as the country’s political pressures eased following the election of new Prime Minister Theresa May. The yield on the benchmark 10-year gilts rose 2-1/2 basis points to 0.783 percent, yield on super-long 30-year bonds jumped nearly 2 basis points to 1.627 percent and the yield on short-term 2-year bonds bounced 1-1/2 basis point to 0.174 percent.
The German bunds slumped as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. The yield on the benchmark 10-year bond rose nearly 5 basis points to -0.118 percent, yield on super-long 30-year bonds jumped 6-1/2 basis points to 0.443 percent and the yield on short-term 2-year note bounced 1 basis point to -0.680 percent.
The Japanese government bonds slumped as stocks continue to gain for a second straight day on Tuesday due to weaker yen and expectations for fiscal stimulus. The yield on the benchmark 10-year bonds rose nearly 2 basis points to -0.254, short-term 2-year JGB yield jumped 1/2 basis point to -0.343 percent, super-long 40-year bonds bounced more than 3 basis points to 0.156 percent and the yield on 20-year JGB also climbed more than 3 basis points to 0.091 percent.
The New Zealand government bonds ended lower after the benchmark stock index nudged further into record territory. The yield on benchmark 10-year bond, which moves inversely to its price rose 4 basis points to 2.310 percent in the end session, yield on 7-year note jumped 2-1/2 basis points to 2.060 percent and the yield on short-term 2-year note ended 3 basis points higher at 2.050 percent.
The Australian government bonds slumped after data showed that business confidence has rebounded back to the strong levels seen in April. The yield on the benchmark 10-year Treasury note rose nearly 5 basis points to 1.963 percent and the yield on short-term 2-year note also jumped nearly 4 basis points to 1.655 percent.
