Market Roundup
- Brexit fears loom large for Federal Reserve’s next meeting – Financial Times.
- Negative rates push Japanese investors into US Tsys, mortgage bonds
- After record month, US high-grade keeps rolling – IFR.
- Foreign CB US debt holdings +$11.799 bln to $3.229 trln June 1 week, Treasury holdings +$11.556 bln to $2.915 trln, agencies -$587 mln to $265.117 bln.
- NY Fed – FX swaps with foreign CBs $801mln June 1 week, BoJ $1 mln, rest ECB.
- Lipper – US-based stock funds post fifth straight week of withdrawals.
- Japan May service PMI 50.4, back in expansion, April 49.3.
- Japan April real wages +0.6% y/y, total cash earnings +0.3%, March rev +1.6% and rev +1.5%, April overtime +1.0%.
- Credit Agricole launches Y130.1 bln 5-tranche samurais, via CA, Daiwa et al.
- China May Caixin services PMI 51.2, three-month low, hiring slow, April 51.8.
- Australia May AIG PSI +1.8 points to 51.5, services back in expansion mode.
- Australia May new vehicle sales +3.6% y/y, on track for another record year.
- New Zealand considers debt/income test to slow house-price boom – Reuters.
- New Zealand Q1 value of residential bldg work +5.5% q/q, non-residential +5%.
- New Zealand May ANZ commodity price index +1.0% m/m, -11.7% y/y, April +0.8%, -16.8%.
- In New Zealand, kiwi fruit comeback offsets dairy downturn – Reuters.
- OPEC resists output cap with oil near $50 – Financial Times.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Apr ind production, +0.3% m/m, +3.0% y/y eyed; last +1.4%, +5.5%.
- (0330 ET/0730 GMT) Sweden Apr mfg new orders; last +2.1% y/y.
- (0345 ET/0745 GMT) Italy May PMI services, 51.5 eyed; last 52.1.
- (0350 ET/0750 GMT) France May PMI services, 51.8 eyed; flash 51.8.
- (0350 ET/0750 GMT) France May PMI composite, 51.1 eyed; flash 51.1.
- (0355 ET/0755 GMT) Germany May PMI services, 55.2 eyed; flash 55.2.
- (0355 ET/0755 GMT) Germany May PMI composite, 54.7 eyed; flash 54.7.
- (0400 ET/0800 GMT) Eurozone May PMI services, 53.1 eyed; flash 53.1.
- (0400 ET/0800 GMT) Eurozone May PMI composite, 52.9 eyed; flash 52.9.
- (0400 ET/0800 GMT) Norway May unemployment, 2.9% nsa, 100.86k sa eyed; last 3.1%, 100.36k.
- (0430 ET/0830 GMT) Great Britain May PMI services, 52.5 eyed; last 52.3.
- (0600 ET/0900 GMT) Eurozone Apr retail sales, +0.3% m/m, +1.9% y/y eyed; last -0.5%, +2.1%.
- (0600 ET/0900 GMT) Norway May housing prices; last +5.8% y/y.
- (0830 ET/1230 GMT) United States May non-farm payrolls, +164k eyed; last +160k.
- (0830 ET/1230 GMT) United States May unemployment, 4.9% eyed; last 5.0%, participation 62.8%.
- (0830 ET/1230 GMT) United States May average earnings/workwk, +0.2% 34.5h m/m eyed; last +0.3%, 34.5h.
- (0830 ET/1230 GMT) United States Apr int’l trade bal, $41.3 bln deficit eyed; last $40.4 bln deficit.
- (1945 ET/1345 GMT) United States May Markit PMI services/composite – final; flash 51.2, 50.8.
- (1000 ET/1400 GMT) United States May ISM non-mfg PMI services, 55.5 eyed; last 55.7.
- (1000 ET/1400 GMT) United States Apr factory orders, +1.9% m/m eyed; last +1.5%.
Key Events Ahead
- N/A Riksbank conference on CB mandate, various speakers (till tomorrow).
- (0345 ET/0745 GMT) Chicago Fed Evans at London banking conference.
- (0515 ET/0915 GMT) Riksbank DepGov Jansson speech in Sandhamn, Sweden.
- (0600 ET/1000 GMT) UK DMO GBP0.5/1.0/2.5 bln 1/3/6-month treasury bill auctions.
- (1230 ET/1630 GMT) Fed Gov Brainard speech at Washington, DC Council on Foreign Relations.
- (1500 ET/1900 GMT) Fed Board of Governors open meeting on insurance.
FX Beat
USD: The dollar index, against a basket of currencies trades at 95.55, drifting away from a low of 95.15 touched in the previous session.
EUR/USD: The euro trades flat after declining from a high of 1.12200 to 1.1145 as the European Central Bank held back from making material changes to its policy. The central bank made little change to its 2016 inflation forecast, raising it to 0.2 percent, from 0.1 percent, still far below its target of 2.0 percent. The major weakened as markets expected the ECB to make upward revision to their long-term inflation forecast. Markets continue to absorb ECB decision effects, ahead of U.S. non-farm payrolls data due later in the day, which will strengthen expectations for an imminent U.S. rates hike. Immediate resistance is seen at 1.1173 (May-31 High), break above will take the pair to 1.1193/1.1200. On the downside, support is located at 1.1128; break below could drag the pair to 1.1114.
USD/JPY: The Japanese yen rose in its fourth consecutive sessions against the dollar, as market players attribute dissatisfaction over a lack of a clear plan on stimulus from Japanese Prime Minister Shinzo Abe. The yen trades 0.2 percent higher at 108.66, having touched a 2-week high of 108.49 earlier in the session and was poised for a gain of 1.3 percent for the week. Markets remain cautious on the major and refrain from placing high bets ahead of U.S. non-farm payroll release. Immediate support is located at 108.36, break below targets 108.22/108.00. On the higher side, resistance is seen at 109.13 (Session High), break above could take the pair to 109.39/109.83.
GBP/USD: Sterling edged down against the euro after gaining robustly following European Central Bank's marginal upward adjustments to its inflation projections. The euro trades 0.1 percent higher against the pound at 77.40 pence, hovering towards a 2-week high of 77.75 pence struck in the previous session. Against the dollar, sterling declined to 1.4409, having fallen as low as 1.4386 on Wednesday, its lowest in two weeks. Markets attention will remain on Britain's service PMI, ahead of U.S. employment data for further cues. Immediate support is located at 1.4386; break below could drag the pair to 1.4374. On the higher side, resistance is seen at 1.4454, break above targets 1.4472/1.4507.
AUD/USD: The Australian dollar steadied, recovering from a low of 0.7210, struck in the previous session. The Aussie trades 0.2 percent higher at 0.7249, within reach of a peak of 73 cents touched on Wednesday. The major strengthened after AiG's performance of services index for the month of May rose to 51.5 from previous 49.7. It has risen 0.7 percent this week, following six weeks of losses. The Reserve Bank of Australia holds its policy review on June 7 and is widely expected to keep rates on hold at 1.75 percent. Markets focus now remains on the crucial U.S. payrolls data due later. Immediate resistance is located at 0.7269, break above targets 0.7300 level. On the lower side, support is seen at 0.7201, break below could drag the pair to 0.7176
NZD/USD: The New Zealand dollar gained on the back of oil prices rally, following the conclusion of the OPEC meeting combined with recovery in dairy prices, signs of a slight pick- up in inflation and continuing rise in property prices. The Reserve Bank of New Zealand holds its monthly policy review on June 9 and markets expect the central bank to cut interest rates by 25 basis points from their current record low 2.25 percent. The kiwi trades 0.3 percent higher at 0.6827, having strengthened 1.8 percent since Monday. Immediate resistance is seen at 0.6847, break above targets 0.6877. On the lower side, support is located at 0.6780 (5-DMA), break below could drag the pair to 0.6765.
Equities Recap
Asian shares advanced as investors await U.S. employment data that could give further cues on Federal Reserve interest rate hike in near term.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 percent, setting to end the week on the higher note.
Shanghai Composite declined 0.2 percent, while CSI 300 index was little changed, however, both on track for weekly gains of about 3.5 percent.
Hong Kong's Hang Seng index rose 0.3 percent, set for an advance of 1.7 percent for the week. Taiwan stocks rose 0.4 pct at 8,587.36 points
Tokyo's Nikkei rose 0.48 pct at 16,642.23, Australia's S&P/ASX 200 index gained 0.74 pct at 5,318.20 points and Seoul shares ended down 0.09 pct.
Commodities Recap
Brent oil prices held around $50 a barrel after OPEC meeting failed to agree on output targets as Iran insisted on increasing production to regain market share, however, the meeting was seen supportive as Saudi Arabia pledged not to flood the market with more fuel. International Bent crude oil futures were trading around $50.10 per barrel at 0720 GMT. U.S. West Texas Intermediate crude futures were trading at $49.08.
Gold edged up, but was headed for its fifth straight weekly decline, as the dollar and Asian stocks steadied. Spot gold rose 0.1 percent at $1,212.60 per ounce by 0721 GMT, while U.S. gold was down 0.2 percent at $1,210.40.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.806 percent versus previous close of 1.811 percent.
Australian government bond futures extended gains, with the 3-year bond contract up 2 ticks at 98.410. The 10-year contract added 3.5 ticks to 97.7700, while the 20-year contract was 3.5 ticks higher to 97.1850.
New Zealand government bonds were unchanged, sending yields 0.5 basis points lower at the short end of the curve and flat at the long tend of the curve.
Canadian government bond prices were higher across the maturity curve, the 2-year price rose 5 Canadian cents to yield 0.565 percent and the benchmark 10-year climbed 45 Canadian cents to yield 1.254 percent. The 10-year yield hit its lowest since April 18 at 1.252 percent.
