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Asia Roundup: Antipodeans consolidate, dollar near 5-month peak against yen as U.S. Treasury yields hit 7-year high, Asian shares surge amid U.S.-China trade negotiations - Friday, May 18th, 2018 

Market Roundup

  • China halts U.S. sorghum dumping probe amid signs of trade thaw
     
  • Trump seeks to placate North Korea's Kim over uncertain summit
     
  • Japan Apr CPI Core Nationwide YY, 0.7%, f'cast 0.8%, last 0.9%
     
  • Japan Apr CPI Overall Nationwide, 0.6%, last 1.1%
     
  • Bank of Japan inflation target recedes as consumers resist price rises
     
  • NAFTA nations 'nowhere near' a deal -USTR Lighthizer
     
  • U.S. fund investors hike stock exposure by most since March -Lipper
     
  • U.S. muni bond funds post $206.9 mln in inflows-Lipper
     
  • Foreign CB US debt holdings -$9,382 bln to $3.387 tln May 16 week
     
  • Treasuries -$9,039 bln to $3.035 tln, agencies -$80 mln to $275.520 bln

Economic Data Ahead

  • (0400 ET/0800 GMT) EZ Mar Current Account NSA,EUR, last 22.7 bln
     
  • (0400 ET/0800 GMT) EZ Mar Current Account SA, EUR, last 35.1 bln
     
  • (0500 ET/0900 GMT) EZ Mar Eurostat Trade NSA, Eur, last 18.9 bln
     

Key Events Ahead

  • (0915 ET/1315 GMT) Fed's Kaplan participates in moderated question-and-answer session at Dallas Project Management Symposium
     
  • (0915 ET/1315 GMT) Fed's Brainard speaks before the Association for Neighborhood and Housing Development 8th Annual Community Development Conference, NY
     
  • (0300 ET/0700 GMT) Fed's Mester speaks before the Third Annual European Central Bank Macroprudential Policy and Research Conference

FX Beat

DXY: The dollar index steadied near recent highs as rising yields reflect continued optimism about the U.S. economy, reinforcing expectations that the Federal Reserve would hike interest rates at least two more times this year. The greenback against a basket of currencies trades flat at 93.43, having touched a high of 93.63 on Wednesday, its highest since Dec. 19. FxWirePro's Hourly Dollar Strength Index stood at 160.33 (Highly Bullish) by 0500 GMT.

EUR/USD: The euro steadied after easing to a 5-month low earlier in the week on concerns about the demands of populist parties likely to form Italy's next government. On Thursday, the far-right League and 5-Star Movement agreed the basis for a governing accord that would cut down taxes and boost up welfare spending. The European currency traded 0.1 percent up at 1.1803, having touched a low of 1.1763 on Tuesday, its lowest since Dec. 18. FxWirePro's Hourly Euro Strength Index stood at -90.46 (Slightly Bearish) by 0400 GMT. Investors’ attention will remain on the Eurozone current account and trade balance, ahead of the Fed officials' speeches. Immediate resistance is located at 1.1860 (5-DMA), a break above targets 1.1978 (May 7 High). On the downside, support is seen at 1.1763 (May 16 Low), a break below could drag it till 1.1736 (Dec. 18 Low).

USD/JPY: The dollar rallied to a fresh near 5-month peak as a rise in U.S. Treasury yields indicated a more upbeat outlook for the world's largest economy. The U.S. benchmark 10-year yields touched a high of 3.128 percent in early Asian trade, recording its highest in nearly seven years. The pair was trading 0.2 percent up at 110.93, having hit a high of 111.03 earlier, its highest since Jan. 23. FxWirePro's Hourly Yen Strength Index stood at -73.93 (Slightly Bearish) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the Fed officials' speeches. Immediate resistance is located at 111.48 (Jan. 18 High), a break above targets 111.87 (Jan. 11 High). On the downside, support is seen at 110.09 (5-DMA), a break below could take it lower 109.69 (10-DMA).

GBP/USD: Sterling eased after rising in the prior session on reports that Britain would tell Brussels it was prepared to stay in the European Union's customs union beyond a Brexit transitional arrangement. The major traded 0.05 percent down at 1.3508, having hit a low of 1.3451 on Tuesday, it’s lowest since Dec. 29. FxWirePro's Hourly Sterling Strength Index stood at 40.91 (Neutral) by 0400 GMT.  Investors’ focus will remain on the U.S. fundamental drivers, amid a lack of economic data from the UK docket. Immediate resistance is located at 1.3608, a break above could take it near 1.3665. On the downside, support is seen at 1.3428, a break below targets 1.3405. Against the euro, the pound was trading 0.1 percent down at 87.38 pence, having hit a high of 87.13 pence the day before, it’s highest since Apr. 27.

AUD/USD: The Australian dollar consolidated within a narrow range after the Reserve Bank of Australia signalled a steady policy for a while yet as inflation remained subdued. The Aussie trades 0.05 percent up at 0.7514, having hit a high of 0.7566 last week; it’s highest since Apr. 30. FxWirePro's Hourly Aussie Strength Index stood at 29.64 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7433 (May 8 Low), a break below targets 0.7412 (May 9 Low). On the upside, resistance is located at 0.7565 (May 16 High), a break above could take it near 0.7606 (Apr. 25 High).

NZD/USD: The New Zealand dollar rose but was down by 1.1 percent for the week and on track for its fifth straight weekly loss on a subtle divergence in monetary policy stance between the Fed and RBNZ.  The Reserve Bank of New Zealand recently indicated that interest rates could go either way in near term. The Kiwi trades 0.2 percent up at 0.6890, having touched a low of 0.6851 on Wednesday, its lowest level since Dec. 11. FxWirePro's Hourly Kiwi Strength Index was at -95.49 (Slightly Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6974, a break above could take it near 0.7030. On the downside, support is seen at 0.6835, a break below could drag it below 0.6805.

Equities Recap

Asian shares gained as investors remained cautious amid developments in U.S.-China trade negotiations, with the dollar consolidated near a 5-month peak after the benchmark U.S. Treasury yield rose to its highest in seven years.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 percent.

Tokyo's Nikkei rose 0.3 percent to 22,914.00 points, Australia's S&P/ASX 200 index eased 0.1 percent to 6,088.00 points and South Korea's KOSPI surged 0.3 percent to 2,455.00 points.

Shanghai composite index rose 0.05 percent to 3,155.59 points, while CSI300 index was trading 0.2 percent up at 3,858.58 points.

Hong Kong’s Hang Seng was trading 0.2 percent higher at 31,004.98 points. Taiwan shares shed 0.05 percent to 10,830.84 points.

Commodities Recap

Crude oil prices steadied after rising to multi-year highs on the back of strong demand, ongoing supply cuts led by producer cartel OPEC and looming U.S. sanctions against Iran. International benchmark Brent crude was trading 0.05 percent up at $79.49 per barrel by 0440 GMT, having hit a high of $80.47 on Thursday, its highest since Nov. 2014. U.S. West Texas Intermediate was trading 0.05 percent up at $71.57 a barrel, after rising as high as $72.28 on Thursday, its highest since Nov. 2014.

Gold prices hovered towards their lowest levels this year, weighed down by a firm U.S. dollar amid surging U.S. Treasury yields. Spot gold was 0.2 percent down at $1,288.21 per ounce at 0444 GMT, having hit a low of $1,285.04 on Thursday, its lowest price level since Dec. 27. U.S. gold futures for June delivery were 0.1-percent lower at $1,288.30 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 3.113 percent higher by 0.004 bps, while 5-year yield was 0.006 bps up at 2.937 percent.

The Japanese government bonds remained tad lower during late Asian session as investors have largely shrugged-off the country’s lower-than-expected national core consumer price inflation (CPI) data, late yesterday. The yield on the benchmark 10-year JGB note, which moves inversely to its price, remained tad higher at 0.06 percent, the yield on the long-term 30-year note rose 1/2 basis point to 0.76 percent and the yield on short-term 1-year remained nearly steady at -0.12 percent.

The Australian government bonds slumped across the curve on last trading of the week tracking heaving sell-off in the U.S. Treasuries.  The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 2-1/2 basis points to 2.935 percent (14-month high), the yield on the long-term 30-year Note also jumped 2-1/2 basis points to 3.418 percent and the yield on short-term 2-year up 1-1/2 basis points to 2.072 percent.

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