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Asia Roundup: Antipodeans ease despite upbeat Chinese inflation, yen rallies ahead of crucial U.S.-China trade talks, Asian shares at 6-week trough - Thursday, May 9th, 2019

Market Roundup

  • Trump says Beijing 'broke' trade talk deals, pledges to keep tariffs on Chinese goods
     
  • U.S. House panel accuses Barr of contempt as Trump invokes executive privilege
     
  • U.S. targets Iran's metals for sanctions, Tehran relaxes nuclear deal compliance
     
  • Blaming government 'failure', Britain's Labour launches European vote campaign
     
  • RBNZ governor says rate cut due to slowing global economic growth
     
  • China banks temper April lending as debt worries rise, but all eyes on trade threat
     
  • China Apr PPI YY, 0.9%, 0.6% f'cast, 0.4% prev
     
  • China Apr CPI YY, 2.5%, 2.5% f'cast, 2.3% prev
     
  • China Apr CPI MM, 0.1%, 0.1% f'cast, -0.4% prev
     
  • South Africa counts votes as Ramaphosa's ANC looks to retain power
     
  • Deputy of Venezuela's Guaido arrested and dragged away by tow truck
     

Economic Data Ahead

  • No major economic data releases

Key Events Ahead 

  • (0300 ET/0700 GMT) ECB supervisory board member Pentti Hakkarainen participates in a panel discussion in Basel, Switzerland
     
  • (0400 ET/0800 GMT) Norway Central Bank announces interest rate decision in Oslo
     
  • (0830 ET/1230 GMT) Fed Chairman Jerome Powell gives opening remarks before Federal Reserve System Community Development Research Conference in Washington, D.C.
     
  • (1045 ET/1445 GMT) Atlanta Fed President Raphael Bostic speaks on the economic outlook and monetary policy before the Louisiana Bankers Association Convention and Exposition in New Orleans
     
  • (1415 ET/1815 GMT) Chicago Fed President Charles Evans speaks at luncheon before the Federal Reserve System Community Development Research Conference in Washington, D.C.
     

FX Beat

DXY: The dollar index eased as investors nervously await the start of two-day trade talks in Washington later in the day to see if Chinese negotiators can convince the White House to back down on a threatened tariff hike on Friday. The greenback against a basket of currencies traded 0.05 percent down at 97.55, having touched a low of 97.38 on Tuesday, its lowest since May 1. FxWirePro's Hourly Dollar Strength Index stood at 20.67 (Neutral) by 0500 GMT.

EUR/USD: The euro consolidated within narrow ranges as German economy ministry warned the outlook remained subdued as Germany’s economy suffered from trade frictions and Brexit nerves. The European currency traded flat at 1.1195, having touched a low of 1.1135 on Friday, its lowest since Apr. 26. FxWirePro's Hourly Euro Strength Index stood at 78.80 (Slightly Bullish) by 0500 GMT. Investors’ attention will remain on data out of Eurozone economies, ahead of the U.S. producer price index, unemployment benefit claims, trade balance, wholesale inventories and speeches by Fed's Powell, Bostic and Evan. Immediate resistance is located at 1.1229 (April 30 high), a break above targets 1.1262 (April 22 High). On the downside, support is seen at 1.1140 (April 24 Low) a break below could drag it till 1.1096 (May. 2017 Low).

USD/JPY: The dollar plunged to a 6-1/2 week low after U.S. President Donald Trump stated that China broke the deal it had reached in trade talks with the United States and vowed imposing new tariffs on Chinese imports unless Beijing stops cheating U.S. workers. The major was trading 0.2 percent down at 109.92, having hit a low of 109.83 earlier, its lowest since Mar. 25. FxWirePro's Hourly Yen Strength Index stood at 104.61 (Highly Bullish) by 0500 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. producer price index, unemployment benefit claims, trade balance, wholesale inventories and speeches by Fed's Powell, Bostic and Evan. Immediate resistance is located at 110.54 (38.2% retracement of 111.68 and 109.83), a break above targets 111.07 (Feb. 27 High). On the downside, support is seen at 109.70 (Mar. 25 Low), a break below could take it lower at 109.13 (Jan. 29 Low).

GBP/USD: Sterling steadied above the 1.3000 handle, after falling to an 8-day low in the previous session on signs that Brexit talks between Britain's government and the main opposition party may soon collapse. The major traded at 0.1 percent up 1.3020, having hit a high of 1.3176 on Friday; it’s highest since Apr. 4. FxWirePro's Hourly Sterling Strength Index stood at -55.95 (Bearish) 0500 GMT. Investors’ attention will remain on the U.S. fundamental drivers, amid a lack of economic data from the UK docket. Immediate resistance is located at 1.3071 (5-DMA), a break above could take it near 1.3132 (Apr. 12 High). On the downside, support is seen at 1.2976 (Mar. 29 Low), a break below targets 1.2923 (Apr. 30 Low). Against the euro, the pound was trading 0.05 percent up at 85.98 pence, having hit a low of 86.22 on Wednesday, it’s lowest since Apr. 30.

AUD/USD: The Australian dollar eased to a 3-day low, as Trump threatened to impose additional tariffs on Chinese goods beginning on Friday, while Beijing announced it would retaliate if tariffs rise.  The Aussie trades 0.2 percent down at 0.6975, having hit a low of 0.6962 on Monday, it’s lowest since Jan. 3. FxWirePro's Hourly Aussie Strength Index stood at -79.72 (Slightly Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6950, a break below targets 0.6921. On the upside, resistance is located at 0.7069 (Apr. 30 High), a break above could take it near 0.7110 (Mar. 19 High).

NZD/USD: The New Zealand dollar slightly consolidated near a 6-month low hit in the prior session following Reserve Bank of New Zealand's decision to cut interest rates to record lows. On Wednesday, the RBNZ trimmed its cash rate a quarter point to 1.5 percent citing the need to bolster inflation and employment. The Kiwi trades flat at 0.6577, having touched a low of 0.6525 the day before, its lowest level Nov. 1. FxWirePro's Hourly Kiwi Strength Index was at -97.42 (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 0.6653 (May 3 High), a break above could take it near 0.6694 (Apr. 19 High). On the downside, support is seen at 0.6514 (Nov. 1 Low), a break below could drag it below 0.6474 (Oct. 4 Low).

Equities Recap

Asian shares plunged to 6-week lows in early trade as increased tensions ahead of U.S.-China trade negotiations stoked fresh concerns about the outlook for the global economy.

MSCI's broadest index of Asia-Pacific shares outside Japan slumped 0.3 percent.

Tokyo's Nikkei fell 0.9 percent to 21,402.13 points, Australia's S&P/ASX 200 index gained 0.4 percent to 6,295.30 points and South Korea's KOSPI tumbled 2.5 percent to 2,114.60 points.

Shanghai composite index declined 1.1 percent to 2,862.13 points, while CSI 300 index traded 1.4 percent down at 3,617.50 points.

Hong Kong’s Hang Seng traded 1.9 percent lower at 28,452.37 points. Taiwan shares shed 1.7 percent to 10,733.67 points

Commodities Recap

Crude oil prices declined amid concerns over the escalating trade battle between the United States and China, despite a surprise drop in U.S. crude stockpiles. International benchmark Brent crude was trading 0.6 percent lower at $69.82 per barrel by 0422 GMT, having hit a low of $68.82 on Monday, its lowest since Apr, 3. U.S. West Texas Intermediate was trading 0.5 percent down at $61.62 a barrel, after falling as low as $60.02 on Monday, its lowest since the Mar, 29.

Gold prices steadied after falling from a 3-1/2 week peak in the previous session as investors remained cautious ahead of U.S.-China trade negotiations. Spot gold was trading 0.1 percent up at $1,281.46 per ounce by 0426 GMT, having touched a high of $1,291.36 on Wednesday, its highest since Apr. 15. U.S. gold futures were also steady at $1,281.30.

Treasuries Recap

The Japanese government bond prices were little changed, with the 20-year JGB yield edging up half a basis point to 0.360 percent, while the 40-year yield shed 0.5 basis point to 0.560 percent. Benchmark 10-year JGB futures ticked up 0.02 point to 152.79.

The Australian three-year bond futures firmed 1 tick to 98.740, while the 10-year contract rose 1.5 ticks to 98.2700.

The yields on New Zealand's two-year government bond stood at 1.425 percent, having touched an all-time low of 1.338 percent on Wednesday.

The Canadian government bond prices were lower across a steeper yield curve. The two-year fell 4 Canadian cents to yield 1.600 percent and the 10-year declined 26 Canadian cents to yield 1.712 percent. Earlier in the day, the 10-year yield touched its lowest since April 2 at 1.654 percent.

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