Market Roundup
• U.S. factory activity up for 3rd straight month (51.3 v 50.4 forecast); Apr construction spending drops (-1.8% v 1.5% previous)
• ISM prices paid beat 63.5 v 59.8 forecast; employment steady at 49.2 vs 49.7 forecasts.
• Atlanta Fed’s GDPNow: US economy on track to grow 2.5% in Q2 vs 2.9% May 30.
• Fed’s Beige Book report points to slight rise in inflation, tight job market.
• ECB unlikely to reinstate waiver on accepting Greek debt as collateral this week.
• New Zealand's Fonterra: Dairy prices rise 3.4%, volumes increase 32.8% at auction.
• Fed’s Yellen to testify before Senate Jun 21, house panel June 22.
Looking Ahead - Economic Data (GMT)
• 23:50 Japan Foreign Bond Investment w/e 684.0b-previous
• 23:50 Japan Foreign Invest JP Stock w/e 40.4b- previous
• 23:30 Australia AIG Manufacturing Index May 5340.00%- previous
• 01:30 Australia Retail Sales MM* Apr forecast 0.3%, 0.40%- previous
• 01:30 Australia Trade Balance G&S (A$) Apr forecast -2000m, -2163m-previous
• 01:30 Australia Goods/Services Imports Apr 1.00%- previous
• 01:30 Australia Goods/Services Exports Apr 4.00%- previous
• 05:00 Japan Consumer Confidence. Index May 40.8- previous
Looking Ahead - Events, Other Releases (GMT)
• --:-- Japan- BoJ board member Takehiro Sato speaks to business leaders in Kushiro.
• 03:00 Japan Former BoJ policy board member Sayuri Shirai shares her views on what the central bank should do to overcome deflation and boost the economy.
Currency Summaries
EUR/USD is likely to find support at 1.1111 levels and currently trading at 1.1187 levels. The pair has made session high at 1.1193 and hit lows at 1.1147 levels. The dollar initially rose against euro in the US session against euro, after data showed U.S. manufacturing activity expanded in May, but gave up ground on speculation that Federal Reserve may not raise interest rates later this month. U.S. manufacturing grew for a third straight month in May, but factories appeared to be taking in fewer deliveries from their suppliers, which could hamper production in the months ahead. The Institute for Supply Management (ISM) said its index of national factory activity rose half a percentage point to a reading of 51.3 last month, with a jump in prices paid by factories for raw materials also accounting for the increase. The euro was last up 0.49 percent against the dollar at $1.1184.
GBP/USD is supported in the range of 1.4330 levels and currently trading at 1.4408 levels. It reached session high at 1.4432 and hit low at 1.4385 levels. British pound slipped sharply lower against dollar on Wednesday as investors broadly sold off Pound on fears that Britain will vote to leave the European Union at this month's referendum. Sterling has been weighed down since late last year by worries that a June 23 referendum on EU membership will lead to a "Brexit". Meanwhile monthly purchasing managers' index (PMI) for the manufacturing sector did nothing to lift the currency. It showed UK manufacturing activity barely grew last month, though at 50.1 it came in slightly higher than forecasts for a contraction. Sterling fell to $1.4385, its lowest in two weeks, leaving it down 0.6 percent on the day.
USD/JPY is supported around 109.00 levels and currently trading at 109.51 levels. It peaked to hit session high at 109.69 and made session lows at 109.03 levels. The U.S. dollar slumped to hit two-week low against the Japanese yen on Wednesday as demand for yen increased sharply after Japan delayed a sales tax increase for longer than expected, raising concerns about the lack of Japanese monetary stimulus to halt the yen's rise. Japanese Prime Minister Shinzo Abe announced a two and a half-year delay in a sales tax increase, putting plans for fiscal reform on the back burner amid weakness in the economy. The dollar sank by as much as 1.5 percent against the yen to hit two-week low of 109.06 yen , continuing to ease from a one-month high of 111.43 yen touched on Monday.
USD/CAD is supported at 1.3030 levels and is trading at 1.3081 levels. It has made session high at 1.3121 and lows at 1.3059 levels. The Canadian dollar firmed against U.S. dollar on Wednesday, as investors tried to gauge if the Federal Reserve will raise interest rates as early as June, which weighed on the U.S. dollar. The loonie gained as soft figures on U.S. consumer confidence and regional manufacturing on Tuesday eclipsed other stronger-than-expected data and weighed on the greenback as investors rethought whether the Fed will increase rates this summer. With little major domestic economic data on the calendar, market attention will turn to US employment and Canadian trade data due on Friday.
Equities Recap
European shares fell on Wednesday, hit by a drop in commodity stocks and banks, while the travel sector came under pressure after the United States issued a travel alert over the possibility of attacks in Europe this summer.
UK's benchmark FTSE 100 closed down by 0.7 percent, the pan-European FTSEurofirst 300 ended the day down by 1.01 percent, Germany's Dax ended down 0.7 percent, France’s CAC finished the day down by 0. 8 percent.
U.S. stocks closed slightly higher on Wednesday as investors processed data on global manufacturing, U.S. auto sales and inflation for clues about the Federal Reserve's next interest rate hike.
Dow Jones closed flat, S&P 500 ended up by 0.10 percent, Nasdaq finished the day up by 0.07 percent.
Treasuries Recap
U.S. Treasury short-dated debt yields edged higher on Wednesday, helped by Wall Street's recovery following more upbeat U.S. manufacturing data and a Federal Reserve report that showed a rise in inflation and an improving labor market.
In late trading, benchmark 10-year Treasury notes were down 2/32 for a yield of 1.840 percent, from 1.849 percent late Tuesday. The 10-year yields earlier fell to 1.804 percent, their weakest level since mid-May.
Two-year notes were down 1/32, yielding 0.902 percent, compared with 0.883 percent late Tuesday. U.S. five-year notes were down 3/32, yielding 1.384 percent, up from Tuesday's 1.377 percent.
Commodities Recap
Gold turned negative on Wednesday, as the dollar briefly pared losses following U.S. manufacturing data and U.S. equities came off their lows, while the market tried to assess how close the Federal Reserve is to raising interest rates.
Spot gold was down 0.4 percent at $1,210.31 an ounce by 2:50 p.m. EDT (1850 GMT), falling for the tenth out of the last 11 sessions. Gold shed around 6 percent in May, its biggest decline in six months.
U.S. futures for August delivery settled down 0.2 percent at $1,214.70 an ounce.
Oil settled down on Wednesday on technical resistance at around the $50 a barrel mark, with the market retracing earlier declines after OPEC sources said the group will likely consider a production curb at its forthcoming meeting.
U.S. crude's West Texas Intermediate (WTI) futures settled down 9 cents at $49.01 a barrel, off a session low of $47.75.
Brent futures fell 17 cents to settle at $49.72, after plumbing $48.65 earlier. The session high was $50.
