Market Roundup
- GBP/USD hits 1.2686 and EUR/GBP hits 0.8843
- USD/JPY +0.18%, EUR/USD +0.17%, GBP/USD -0.08%
- DXY -0.06%, DAX -0.8%, Brent +1.73%, Gold +0.5%
- Germany Sept Markit Service PMI 50.9 vs 50.6 previous, 50.6 expected
- EZ Sept Markit Service PMI 52.2 vs 52.1 previous, 52.1 expected
- EZ Aug Retail Sales y/y vs 2.9% previous, 1.5% expected
- UK Sept Markit/CIPS Service PMI 52.6 vs 52.9 previous, 52.0 expected
- U.K slips below France in global economy table-Financial Times
- BoJ Gov Kuroda – Rates likely to rise when 2% inflation target met
- BoJ faces less pressure to act after policy change – Q4 CB outlook – Nikkei
- Japan Sept services PMI 48.2, worst since April ’14, Aug 49.6
- Sompo Japan to buy Bermuda/US Endurance Holdings, $6.5 bln deal – Nikkei
- Japan’s Asahi to bid on SABMiller's East Europe biz, Y500 bln+ deal – Nikkei
- Spokesman - ECB has not discussed reducing bond purchases – Reuters
- Australia Aug retail sales +0.4% m/m, best in seven-months, +0.2% forecast
Economic Data Ahead
- (0815 ET/1215 GMT) Payrolls processor ADP releases U.S. employment report for the month of September. The report is expected to show that 166,000 jobs were added as compared with 177,000 jobs in August.
- (0830 ET/1230 GMT) The United States releases trade balance figures for the month of August. The report is likely to show that the trade deficit contracted to $39.30 billion from $39.47 billion in July.
- (0830 ET/1230 GMT) The Statistics Canada is likely to report that international trade deficit widened slightly to C$2.60 billion in August from C$2.49 billion in July.
- (0945 ET/1345 GMT) Markit Economics reports final U.S. service PMI for the month of September. The index posted a final reading of 51.9 in August.
- (0945 ET/1345 GMT) Financial firm Markit releases final U.S. composite PMI for the month of September. The index printed a final reading of 52 in the prior month.
- (1000 ET/1400 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. non-manufacturing Purchasing Managers' index rose to 53.0 in September from 51.4 in August.
- (1000 ET/1400 GMT) The United States is likely to report that factory orders declined 0.1 percent in the month of August, after slumping 1.9 percent in July.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Crude Oil Stocks for the week ending September 30.
- (1950 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending September 23.
- (1950 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending September 23.
Key Events Ahead
- (0930 ET/1330 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari gives opening remarks before the "Early Childhood Development in Indian Country" Conference hosted by the Federal Reserve Bank of Minneapolis.
- (1430 ET/1830 GMT) FedTrade operation 30-year Ginnie Mae max $1.725 bln
- (1700 ET/2100 GMT) Federal Reserve Bank of Richmond President Jeffrey Lacker, will give a lecture titled "Does Federal Reserve Governance Need Reform?" in Huntington, West Virginia.
FX Beat
DXY: The dollar hit a 3-week high versus the yen after hawkish Fed official's comments renewed expectations of U.S. interest rate hike this year. The greenback against a basket of currencies trades 0.1 percent lower at 96.04, after rising to a high of 96.44 on Tuesday, it’s strongest since August 9.
EUR/USD: The euro rose above the 1.1200 handle after a recent report suggested that the European Central Bank might taper its bond-purchase program before the scheduled conclusion in March 2017. Moreover, better-than-expected Eurozone's Markit service PMI and retail sales data, which came in at 52.6 and -0.1 percent, respectively, kept the bid tone around the major intact. The euro trades 0.2 percent higher at 1.1223, having touched an intra-day high of 1.1233. Markets now await U.S ADP report, trade balance figures, Markit’s services PMI, ISM non-manufacturing and factory orders for further insights on the strength of US economy. The pair is facing resistance around trend line at 1.12510 and any violation above will take it till 1.1280/1.13270/1.13660. On the lower side, 1.1220 (200 –4H MA) will be acting as immediate support and any break below will drag it down till 1.1180 (100- day MA)/1.1160 (200- day MA)/1.1120.
USD/JPY: The dollar rose above the 103.00 handle, extending gains for the seventh consecutive day as hawkish comments from a Federal Reserve official revived U.S. interest rate hike this year. The major trades 0.1 percent up at 103.07, having touched a 3-week high of 103.16 earlier in the session. Markets attention will remain on U.S. ADP report which is expected to come in at 166K for the month of September. The major resistance is around 103.80 (100- day EMA) and break above targets 102.80/ 103.40. On the lower side, major support is around 102.20 (daily Kijun-Sen) and any break below 102.20 will drag the pair till 101.60/101.
GBP/USD: Sterling tumbled below the 1.2700 handle for the first time since June 1985 and hit a 5-year low against the euro. The major continues its bearish run, as concerns over Britain's separation from the European Union would hurt the economy weighed on market sentiment. Investors ignored better-than-expected UK services PMI data, which came in at 52.6, against projections of 52.0 and previous 52.9. Sterling trades flat at 1.2726, having touched a low of 1.2685, its weakest in 31-years. The short term trend is weak as long as resistance 1.2818 (3- day EMA) holds and any break above will take the pair till 1.2860 / 1.2902 (7 - day EMA). On the lower side, any break below 1.2680 will drag it further down till 1.26400/ 1.2507 (161.8% retracement of 1.2865 and 1.3445). Against the euro, the pound trades 0.3 percent lower at 88.20, having touched an early 5-year low of 88.42 pence.
USD/CHF: The Swiss franc edged up, as growing concerns over ECB policy change hampered investor sentiment. The dollar trades 0.2 percent lower at 0.9771, retreating from a high of 0.9828, its highest since September 1st. On the higher side, any close above 0.9800 (200- MA) will take the pair till 0.9890. The short-term weakness can be seen only below 0.9630. The minor support is around 0.9740/0.9680 and any break below targets 0.9580/0.9530.
AUD/USD: The Australian dollar declined below the 0.7600 handle, erasing better-than-expected retail sales-led gains. The major rose to an early high of 0.7644, recovering from previous session losses, however, the recovery momentum stalled as investors turned cautious on talks of ECB reducing its bond-purchase program before the scheduled conclusion in March 2017. The Aussie trades 0.1 percent down at 0.7607, attempting to sustain gains above the 0.7600 handle. On the higher side, major resistance is around 0.7645 and any break above will take the pair till 0.7680/0.7730. The major support is around 0.7590 (21- day MA) and break below will drag it till 0.7530.
NZD/USD: The New Zealand dollar dropped, extending losses below the 0.7200 handle, as market sentiment weakened on a report that ECB might be considering gradually taper its asset purchases under its quantitative easing program. Meanwhile, growing prospects of further U.S. interest-rate hike by the end of this year dented the bid tone around the Kiwi. Also, comments from RBNZ Assistant Governor John McDermott that the central bank had clear inflation target underpinned market speculations of further easing by RBNZ. The major trades 0.4 percent lower at 0.7179, having touched an early low of 0.7168, it’s lowest since August 15. Immediate resistance is located at 0.7239 (5-DMA), break above targets 0.7286 (20-DMA)/ 0.7300. On the downside, support is seen at 0.7150, break below could drag it till 0.7120/ 0.7100.
Equities Recap
European shares declined as the prospects of the ECB eventually winding down its bond-buying stimulus programme weakened investors sentiment.
The pan-European STOXX 600 index decreased 0.98 percent at 342.71 points, while the FTSEurofirst 300 index fell 0.92 percent at 1,350.06 points.
Britain's FTSE 100 trades 0.53 percent down at 7,037.02 points, while mid-cap FTSE 250 declined 0.75 percent at 18,204.17 points.
Germany's DAX tumbled 0.8 percent at 10,534.20 points; France's CAC 40 trades 0.84 percent lower at 4,465.47 points.
Chinese banks will be closed in observance of National Day.
Tokyo's Nikkei gained 0.50 percent at 16,819.24 points and Australia's S&P/ASX 200 index lost 0.46 percent at 5,458.80 points.
Hong Kong’s Hang Seng rose 0.4 percent at 23,788.31 points and South Korea's KOSPI shed 0.1 percent at 2,053.00 points.
Commodities Recap
Crude oil prices rose for the consecutive sixth day, hovering towards $52 a barrel and hitting their highest level since June after an industry report showed that U.S. inventories declined 7.6 million barrels and OPEC's supply cut deal. International benchmark Brent crude was trading 0.8 percent up at $51.73 per barrel at 0947 GMT, having touched a 4-month high of $51.78 earlier in the session. U.S. West Texas Intermediate crude rose 0.6 percent at $49.47 a barrel, after rising to an early high of $49.54, its highest since July 4.
Gold edged up, retreating from its lowest levels in more than 3-months, as the dollar eased and global equities tumbled on a report of ECB policy change. Spot gold rose 0.5 percent at $1,273.83 an ounce by 0954 GMT, after declining to a low of $1266.28, its lowest since June 24. U.S. gold futures rose 0.4 percent to $1,274.60 an ounce, after falling more than 3 percent on Tuesday.
Treasuries Recap
The U.S. Treasuries saw further selling during a relatively data-light session as markets slowly march towards the September employment report on Friday. The yield on the benchmark 10-year Treasury note rose 1-1/2 basis points to 1.697 percent, the yield on 5-year bond jumped 1 basis point to 1.234 percent and the yield on short-term 2-year note climbed nearly 1 basis point to 0.830 percent.
The Eurozone periphery bonds traded lower after media reported that the European Central Bank might gradually taper its asset purchases under its quantitative easing program sparked broad selling. The French 10-year bond yields rose 7-1/2 basis points to 0.233 percent, Irish 10-year bonds yield jumped 3 basis points to 0.480 percent, Italian equivalent climbed 9 basis points to 1.347 percent, Netherlands 10-year bonds yield inched 7 basis points higher to 0.103 percent, Portuguese equivalents bounced 11 basis points to 3.444 percent and the Spanish 10-year bonds yield up 8 basis points to 1.013 percent.
The UK gilts plunged after recent data showed that country’s services sector grew more than expected in September. The yield on the benchmark 10-year gilts rose 3 basis points to 0.819 percent, the super-long 40-year bond yield also climbed 3 basis points to 1.547 percent and the yield on short-term 2-year bond bounced 1/2 basis point to 0.132 percent.
German bunds slumped as the market got rattled on the rumour that the European Central Bank (ECB) might be considering a taper after the bond buying program gets concluded in March. The yield on the benchmark 10-year bond rose 5 basis points to -0.042 percent, the yield on long-term 30-year note also jumped 6 basis points to 0.547 percent and the yield on short-term 2-year bond climbed nearly 1 basis point to -0.678 percent.
The Japanese government bonds traded mixed Wednesday, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. Moreover, super-long bonds fell on lack of BoJ debt buying. The yield on the benchmark 10-year bonds hovered around -0.063 percent mark, the yield on long-term 40-year note jumped 4 basis points to 0.572 percent and the yield on short-term 2-year bonds remained steady at -0.272 percent.
The New Zealand government bonds closed narrowly mixed as recent data showed that dairy product prices decline for the first time since July at the Global Dairy Trade auction. The yield on benchmark 10-year bond fell 1 basis point to 2.490 percent, yield on 7-year note also dipped 1 basis point to 2.215 percent and the yield on short-term 2-year note ended 1/2 basis point higher at 1.975 percent.
The Australian government plunged as investors cheered higher than expected retail sales data in August. The yield on the benchmark 10-year Treasury note rose 5 basis points to 2.144 percent, the yield on 15-year note jumped 7 basis points to 2.487 percent and the yield on short-term 2-year climbed 5 basis points to 1.659 percent.
