Market Roundup
- USD/JPY -0.45%, EUR/USD -0.15%, GBP/USD -0.6%
- DXY +0.08%, DAX +0.2%, Brent +0.7%, Iron -3.6%
- Germany Jul Ind. Output -1.5% m/m vs revised 1.1% previous, 0.2% expected
- UK Aug Halifax Hse Prices 3m/yy +6.9% vs 8.4% previous, 7.0% expected
- UK Aug Halifax Hse Prices m/m -0.2% vs revised -1.1% previous, -0.4% expected
- UK Jul Ind. Output 2.1% y/y vs revised 1.4% previous, 1.9% expected
- UK Jul Mfg Output 0.8% y/y vs revised 0.6% previous, 1.7% expected
- UK Ex- BoE Dep. Bean – No doubt EUR denominated clearing will return to EZ
- Germany 10-yr Bund yld lowest lvl on record in auction – Debt Agency
- Riksbank leaves rates/QE unchanged: Gov satisfied with developments in infl.
- Ex-BoJ Momma – BoJ won’t expand stimulus this month - Bbg
- Three-way split among BoJ board members over policy outlook – Sankei
- Japan to bulk up 40-year bond issuance – Nikkei
- Australia Q2 GDP +0.5% q/q, +3.3% y/y, +0.6% and +3.4% eyed
- New Zealand Fonterra GDT price index +7.7% but volumes off, previous auction +12.7%
Economic Data Ahead
- (1000 ET/1400 GMT) The U.S. Labor Department releases Job Openings and Labor Turnover Survey (JOLTS) for the month of July and the report is expected to show that job openings declined to their lowest in almost two years.
- (1000 ET/1400 GMT) The Bank of Canada is likely to leave interest rates unchanged at 0.5 percent and present its quarterly monetary policy report.
- (1000 ET/1400 GMT) The Richard Ivey School of Business releases Canada's seasonally adjusted Ivey Purchasing Managers Index for the month of August. The index stood at 49.4 in the prior month.
- (1400 ET/1800 GMT) The Fed issues its Beige Book, a compendium of anecdotes on the health of the economy.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
- (1901 ET/2301 GMT) The Royal Institution of Chartered Surveyors will report Britain's Housing Price Balance for the month August. The indicator is expected to have edged down to 2 percent from 5 percent in the previous month.
- (1950 ET/2350 GMT) Japan's Ministry of Finance will report foreign bond investment for the week ending September 2.
- (1950 ET/2350 GMT) Japan's Ministry of Finance reports foreign investment in domestic stocks for the week ending September 2.
Key Events Ahead
- (1145 ET/1345 GMT) FedTrade ops 30-year Fannie Mae/ Freddie Mac max $2.050 bln.
- (1000 ET/1400 GMT) Kansas City Fed President Esther George and Richmond Fed President Jeffrey Lacker testify before the House Financial Services Committee hearing, "Federal Reserve Districts: Governance, Monetary Policy, and Economic Performance," in Washington.
- (1855 ET/2255 GMT) Reserve Bank of Australia Deputy Governor Philip Lowe's Speech.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent higher at 94.97, pulling away from a near 2-week low of 94.71 touched earlier in the session.
EUR/USD: The euro traded between a narrow range as investors remained cautious ahead of European Central Bank monetary policy decision due tomorrow. The central bank is widely expected to keep rates on hold; however, markets expect an extension to the QE timeline. The major trades lower at 1.1245, having touched an early high of 1.1265, its highest since August 26. Markets appeared to have ignored poor German industrial figures keeping the pair near 2- week high, hit earlier in the session. The pair is facing strong resistance around 1.1263 and any further bullishness only above that level. Any break above 1.12630 will take the pair to next level till 1.1300/1.13660. On the lower side, any violation below 1.1200 will drag the pair till 1.11400/1.1120. The short-term weakness is only below 1.1045.
USD/JPY: The Japanese yen gained, as investors to cut favorable bets in the greenback on rising expectations that the Federal Reserve would not hike interest rate this month. The major attempted a minor recovery above the 101.50 level, however, it came under renewed selling pressure after Abe advisor Hamada stated that the Bank of Japan should wait and watch the Fed moves, which reduced prospects of a BoJ stimulus this month. The dollar trades 0.3 percent lower at 101.69, having declined to its lowest in more than a week. The short term trend is slightly bearish as long as resistance 104.89 (90- day EMA) holds. The major resistance is around 102.51 and break above targets 103/103.80. On the lower side, major support is around 101.35 and any break below 101.35 will drag the pair till 100.55/100.
GBP/USD: Sterling declined below the 1.3400 handle, pulling away from recent highs against the dollar and the euro, after data showed British manufacturing output slumped at a faster pace following Brexit shock vote. UK's manufacturing output fell 0.9 percent in July, recording a bigger fall than the 0.4 drop estimated. The downside in the major was limited as overall industrial output surprisingly gained to an annual rate of 2.1 percent versus consensus of 1.9 percent. Sterling trades 0.4 percent lower at 1.3381, having hit a 7-week high of 1.3444 on Tuesday. Any break above 1.3375 confirms major trend reversal; a jump till 1.3480 is possible. On the lower side, major support is around 1.3290 (5- day MA) and break below targets 1.3240/1.3175 (10- day MA), while the minor support is at 1.3192 (10 day-MA). Against the euro, it weakened 0.4 percent to 84.06 pence, pulling away from a high of 83.33 pence touched in the previous session.
USD/CHF: The Swiss franc edged up as the greenback weakened on fading Federal Reserve interest rate hike expectations following downbeat U.S. economic data. The major trades lower at 0.9687, having touched a low of 0.9677, a level last seen on August 26. Data released earlier showed that Switzerland’s Forex Reserves rose to 626.62 bln sfr in August versus 615.55 bln sfr in July. On the higher side, any break above 0.9835 will drag the pair till 0.9880/0.9960. The short-term weakness can be seen only below 0.9630.
AUD/USD: The Australian dollar declined, but reversed most of daily losses as the economy posted a mixed Q2 GDP print. Australia's GDP for 2016 showed a growth of 0.5 percent in the second quarter, as against expectations of a 0.6 percent growth, however, it expanded at its fastest annual pace in four years, posting a rise of 3.3 percent. The Aussie trades lower at 0.7681, recovering from session's low of 0.7651. On the higher side, any break above 0.7660 will take the pair till 0.7700/0.7760. The major support is around 0.7580 and break below will drag it till 0.7515/0.7490.
NZD/USD: The New Zealand dollar extended gains above the 0.7400 handle, strengthened by upbeat NZ Global Dairy Trade auction results and rallying oil prices. The major rose for the sixth consecutive session, hitting its highest level since mid-May 2015. The Kiwi trades 0.8 percent higher at 0.7474, attempting to gain the 0.7500 handle. Immediate resistance is located at 0.7500, break above could take it till 0.7530/ 0.7560. On the downside, support is seen at 0.7397 (Session Low), break below targets 0.7350.
Equities Recap
World shares touched their highest in more than a year, while the European shares recovered after declining in early trade, as rise in engineering business stocks helped to counteract weak German data.
MSCI's all-country world index rose to its highest level since August 2015, while MSCI's main Asia-Pacific stock index outside Japan was up 0.2 percent, having earlier touched its highest since July 2015.
The pan-European STOXX 600 index added 0.03 percent at 349.55 points, while the FTSEurofirst 300 index edged up 0.05 percent at 1,375.55 points.
Britain's FTSE 100 trades 0.10 percent up at 6,832.50 points, while mid-cap FTSE 250 gained 0.05 percent at 18,010.47 points.
Germany's DAX rose 0.23 percent at 10,712.68 points; France's CAC 40 trades 0.08 percent higher at 4,533.98 points.
Tokyo's Nikkei lost 0.41 pct at 17,012.44, Australia's S&P/ASX 200 index added 0.15 pct at 5,421.70 points and South Korea's KOSPI shed 0.23 percent at 2,061.88 points.
Shanghai composite index ended flat at 3,091.93 points, CSI300 index edged down 0.1 pct at 3,340.82 points and Hong Kong's Hang Seng index declined 0.2 pct at 23,741.81 points.
Commodities Recap
Crude oil rose, reversing most of previous session losses, as the U.S dollar weakened, however, the gains were limited as investors were uncertain on the prospects of a near-term agreement among the world's exporters to freeze production. Global benchmark Brent crude oil was 0.8 percent up at $47.70 a barrel by 1016 GMT, pulling away from a low of $46.27 hit the previous session. U.S. West Texas Intermediate crude oil was at $45.25, higher by 0.9 percent.
Gold edged down after rising to a fresh 2-1/2 week high, as downbeat U.S. economic data underpinned expectations the U.S. Federal Reserve will leave rates unchanged in September. Spot gold nudged down 0.1 percent at $1,347.96 per ounce by 1021 GMT, having touched a high of $1,352.49, its highest since Aug. 19. U.S. gold futures rose 0.2 percent to $1,356.
Treasuries Recap
The US Treasuries traded narrowly mixed as investors await the Federal Reserve policymaker’s speech during a relatively quiet trading session. The yield on the benchmark 10-year Treasury note fell ½ basis point to 1.537 percent, the yield on 5-year note remained steady at 1.122 percent and the yield on short-term 2-year note rose ½ basis point to 0.738 percent.
The UK gilts traded nearly flat after data showed that the country’s factory output data came mixed in July. The yield on the benchmark 10-year gilts hovered around 0.660 percent mark, the super-long 40-year bond yield remained steady at 1.186 percent and the yield on short-term 2-year bond rose 1/2 basis point to 0.101 percent.
The Eurozone periphery bonds strengthened as investors poured into safe-haven assets after reading weaker than expected United States economic data, which pressurized the European Central Bank for further monetary easing. The French 10-year bond yields fell nearly 1 basis point to 0.111 percent, Irish 10-year bonds yield dipped 1 basis point to 0.369 percent, Italian equivalent ticked lower 1 basis point to 1.090 percent, Netherlands 10-year bonds yield slid 1 basis point to -0.008 percent, Portuguese equivalents inched 1/2 basis point lower to 3.000 percent, Spanish 10-year bonds yield remained steady tumbled 2 basis points to 0.943 percent.
The German bunds traded modestly firmer as investors remained cautious ahead of the 10-year auction. The yield on the benchmark 10-year bond fell nearly 1 basis point to -0.109 percent, the yield on long-term 30-year note also tumbled 2-1/2 basis points to 0.428 percent and the yield on short-term 2-year bond remained steady at -0.666 percent.
The Japanese government bond strengthened as the United States Federal Reserve September rate hike faded after weaker than expected ISM non-manufacturing reading. The benchmark 10-year bond yield fell more than 2 basis points to -0.039 percent, the super-long 30-year JGB yield dipped 4 basis points to 0.463 percent and the short-term 2-year JGB yield slid 1 basis point to -0.192 percent.
The New Zealand government bonds closed higher as investors shrugged off the gains in dairy prices at Fonterra's Global Dairy Trade auction, highlighting that the worldwide glut is easing gradually. The yield on the benchmark 10-year bond fell 7-1/2 basis points to 2.260 percent, the yield on 7-year note ended 6 basis points lower at 1.980 percent and the yield on short-term 2-year note tumbled 1-1/2 basis points to 1.845 percent.
The Australian government bonds rallied as investors are pricing in a rate cut by November after examining third-quarter inflation numbers. The yield on the benchmark 10-year Treasury note fell 5-1/2 basis points to 1.903 percent and the yield on short-term 2-year dipped 2-1/2 basis points to 1.495 percent.
