Market Roundup
• May confirmed as leadership winner, Britain's new PM – committee.
• S&P hits record high as the economy shows signs of strength.
• Brexit vote not binding, parliament must decide, lawyers tell PM.
• Article 50 does not require parliamentary approval-UK minister.
• Italy reform referendum to be held Oct. 30 or Nov. 6-PM Renzi.
• Deal to safeguard Italy's banks absolutely within reach-Renzi.
• No acute Italy crisis, stop asking for public money-Dijsselbloem.
• Fed hawk George says U.S. interest rates are currently too low.
• Aberdeen to keep property fund suspension in place two more days.
• Chile cuts 2016 growth forecast to 1.75 pct as copper exports slide.
• Fitch: Flat yield curve to pressure U.S. Bank margins in H2 2016.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Corp Goods Price MM Jun forecast -0.1%, 0.2%-previous
• 23:50 Japan Corp Goods Price YY Jun forecast -4.2%, -4.2%- previous
• 01:30 Australia NAB Business Confidence Jun 3- previous
• 22:45 New Zealand Food Price Index Jun -0.5%- previous
Looking Ahead - Events, Other Releases (GMT)
• 01:30 US Cleveland Fed President Mester speaks at Sydney Banking and Financial Stability Conference
Currency Summaries
EUR/USD is likely to find support at 1.1000 levels and currently trading at 1.1056 levels. The pair has made session high at 1.1074 and hit lows at 1.1035 levels. The dollar declined against euro on Monday, on broader the view that, the Federal Reserve may not raise interest rate in the near future and combined with the prospect of more fiscal stimulus from Bank of Japan. The euro also began to gain as a single candidate emerged to succeed David Cameron as British prime minister. The chairman of the ruling Conservative Party committee running the contest signaled that the process to replace Cameron would be completed much sooner than early September as previously envisaged. Once confirmed as party leader, May will automatically become prime minister. Yet investors are wary that she could call a general election and take advantage of a split in the opposition Labour party to strengthen her own leadership credentials. The dollar hit a four-month high of 96.793 against a basket of major currencies, having already received a lift from a U.S. jobs report that outpaced even the loftiest expectations on Friday.
GBP/USD is supported in the range of 1.2920 currently trading at 1.2993 levels. It reached session high at 1.3006 and hit low at 1.2938 levels. Sterling firmed against the U.S. dollar on Monday after Theresa May won the race to succeed David Cameron as Prime Minister, reducing political uncertainty in the UK. While Andrea Leadsom's exit removes the need for a drawn-out leadership contest, investors remain uncertain about May's approach to negotiating Britain's exit from the European Union and whether she will call a general election to cement her authority. Sterling rose to the day's high of $1.3020, having traded at $1.2865 before reports that Leadsom might withdraw earlier on Monday. It was last trading at $1.2993, 0.45 percent higher on the day, boosted by Prime Minister David Cameron's comments that he will resign on Wednesday, much earlier than planned, for May to take over the same day.
USD/CAD is supported at 1.3031 levels and is trading at 1.3116 levels. It has made session high at 1.3139 and lows at 1.3108 levels. The Canadian dollar declined against its U.S. counterpart on Monday, as Canada dollar was weighted down by decline in oil prices and Fridays upbeat US economic data continued to funnel investors into U.S. dollar. Oil prices fell to a two-month low on extended selling after the market's break below a key technical support level last week due to oversupply fears. Domestic monetary policy will be back in focus this week, with the Bank of Canada due to decide on interest rates and update its outlook on Wednesday, following last week's weak domestic jobs and trade data. On the data front, Canadian housing starts rose much more than expected in June from May. The report from the Canadian Mortgage and Housing Corp showed the seasonally adjusted annualized rate of housing starts rose to 218,333 in June from a revised 186,709 in May. Economists had forecast 190,000 starts in June.
USD/JPY is supported around 102.00 levels and currently trading at 102.77 levels. It peaked to hit session high at 102.88 and made session lows at 102.34 levels. The dollar rose against safe-haven yen on Monday, following Japanese Prime Minister Shinzo Abe's call for a fresh round of fiscal stimulus after a victory for his ruling coalition. Statements by ruling party sources indicated that the stimulus could reach 10 trillion yen helped the dollar soaring against the Japanese currency. The Bank of Japan is expected to provide additional easing to keep interest rates low and the yen weak to make sure stimulus spending can gain traction. The dollar rose as much as 2.3 percent to 102.87 yen its highest level since July 1. It was the dollar's biggest one-day percentage gain against the yen since Oct. 31, 2014. It was last up 2.25 percent at 102.78 yen.
Equities Recap
European shares rose on Monday to post its highest close since Britain voted to leave the European Union, after Theresa May won the race to succeed David Cameron as Prime Minister, reducing political uncertainty in the UK.
UK's benchmark FTSE 100 closed up by 1.4 percent, the pan-European FTSEurofirst 300 ended the day up by 1.54 percent, Germany's Dax ended up by 2.1 percent, France’s CAC finished the up by 1.8 percent.
The S&P 500 broke a record high on Monday it held for more than a year, as a string of upbeat economic data alongside low bond yields continued to funnel investors into U.S. equities.
Dow Jones closed up by 0.42 percent, S&P 500 ended up by 0.33 percent, Nasdaq finished the day up by 0.64 percent.
Treasuries Recap
U.S. Treasury yields rose on Monday after Japan prepared a new round of stimulus, boosting stocks and reducing demand for safe-haven U.S. bonds, and after the U.S. government sold new three-year notes to tepid demand.
Benchmark 10-year notes ended down 21/32 in price to yield 1.434 percent, up from 1.365 percent late on Friday.
Thirty-year bond yields fell to record lows of 2.089 percent in overnight trading, before rising back to 2.141 percent.
Commodities Recap
Gold fell on Monday as stock markets rallied on the back of Friday's stronger-than-expected U.S. jobs data and the prospect of more monetary stimulus from central banks, while the dollar rose against a basket of currencies.
Spot gold was down 0.8 percent at $1,355.50 per ounce by 2:31 p.m. EDT (1831 GMT), having touched its highest since March 2014 last week at $1,374.91 an ounce.
U.S. gold futures for August delivery settled down 0.1 percent at $1,356.6 per ounce.
Oil prices fell more than 1 percent on Monday, hitting two-month lows on extended selling after the market's break below a key technical support level last week due to oversupply fears.
Brent crude futures settled down 51 cents, or 1.1 percent, at $46.25 per barrel. The session low was $45.90, the lowest since May 11.
U.S. crude's West Texas Intermediate (WTI) futures slipped 65 cents, or 1.4 percent, to settle at $44.76 a barrel.
