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Asia Roundup: Aussie at multi-month lows as RBA raises concerns over labour market, dollar index gains as U.S. Treasury yields touch 7-year peak, Asian shares plunge - Friday, October 5th, 2018

Market Roundup

  • Pentagon sees China as 'growing risk' to U.S. defense industry
     
  • Republicans aim to confirm Kavanaugh this weekend; protesters arrested
     
  • Apple, Amazon deny Bloomberg report on Chinese hardware attack
     
  • Australian wage forecasts need more work - central bank
     
  • Italy dismisses concern the EU will reject its budget plan
     
  • Japan household spending posts biggest rise in 3 years, signals steady recovery
     
  • Unfazed by yield surge, BOJ keeps size of super-long bond purchases
     
  • UK starting salaries jump but demand for staff cools - REC
     
  • Seeking Brexit deal, EU eyes compromise on Irish border
     
  • Australia Aug Retail Sales MM, 0.3%, 0.2% f'cast, 0.0% prev
     
  • Investors pull most cash from U.S. Treasury funds since March 2016 -Lipper
     
  • Foreign CB US debt holdings -$2.432 bln to $3.436 tln Oct 3 week
     
  • Treasuries -$3.082 bln to $3.060 tln, agencies +$1.077 bln to $306.819 bln
     

Economic Data Ahead

  • (0245 ET/0645 GMT) France Aug Trade Balance, EUR, SA, -4.50 bln f’cast, -3.49 bln prev
     
  • (0330 ET/0730 GMT) Great Britain Sep Halifax House Prices MM, 0.2% f’cast, 0.1% prev
     
  • (0330 ET/0730 GMT) Great Britain Sep HalifaxHousePrice 3M/YY, 3.3% f’cast, 3.7% prev
     

Key Events Ahead

  • (0400 ET/0800 GMT) European Commission President Juncker holds lecture on Europe and global policy in VIENNA.
     
  • (0645 ET/1045 GMT) ECB Vice-President Luis de Guindos gives speech at the University Carlos III of Madrid.
     
  • (1230 ET/1630 GMT) Federal Dallas President Kaplan participates in moderated question-and-answer session in Waco Texas.
     
  • (1240 ET/1640 GMT) Fed Atlanta President Bostic speaks on "Financial Literacy and Economic Education" in Atlanta.
     

FX Beat

DXY: The dollar index rallied after benchmark U.S. Treasury yields surged to a fresh 7-year high.  The greenback against a basket of currencies trades 0.1 percent up at 95.86, having touched a high of 96.12 on Thursday, its highest since August 20. FxWirePro's Hourly Dollar Strength Index stood at 38.29 (Neutral) by 0500 GMT.

EUR/USD: The euro edged down as the Italian government dismissed concerns that the European Commission would reject its plan to raise deficit spending next year and signalled that it would not make further revisions to its 2.4 percent target deficit for next year. The European currency traded 0.05 percent down at 1.1508, having touched a low of 1.1463 on Thursday, its lowest since August 20. FxWirePro's Hourly Euro Strength Index stood at 4.69 (Neutral) by 0500 GMT. Investors’ attention will remain on series of data from the Eurozone economies, ahead of U.S. non-farm payroll, unemployment data and trade balance, and speech from FOMC member Bostic. Immediate resistance is located at 1.1536 (August 10 High), a break above targets 1.1601 (August 21 High). On the downside, support is seen at 1.1450, a break below could drag it till 1.1415.

USD/JPY: The dollar nudged up after easing from an 11-month peak in the previous session, as investors awaited the monthly U.S. employment data, which if stronger could boost the Federal Reserve's case for a tighter monetary policy. The major was trading 0.05 percent up at 113.91, having hit a high of 114.54, its highest since Nov. 6. FxWirePro's Hourly Yen Strength Index stood at 24.05 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. non-farm payroll, unemployment data and trade balance and speech from FOMC member Bostic Immediate resistance is located at 114.73 (Nov 6 High), a break above targets 115.00 (Mar 9 High). On the downside, support is seen at 113.39 (10-DMA), a break below could take it lower 112.50 (21-DMA).

GBP/USD: Sterling declined after rebounding from an over 3-week low in the previous session on news that Britain and the European Union were moving closer to an agreed position on a deal for Brexit, to avoid extensive border checks in Ireland. The major traded 0.1 percent down at 1.3001, having hit a low of 1.2921 on Thursday; it’s lowest since September 10. FxWirePro's Hourly Sterling Strength Index stood at 95.69 (Slightly Bearish) 0500 GMT. Investors’ attention will remain on the UK Halifax house prices, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3062 (10-DMA), a break above could take it near 1.3115 (October 1 High). On the downside, support is seen at 1.2979 (September 12 Low), a break below targets 1.2921 (October 4 Low). Against the euro, the pound was trading flat at 88.44 pence, having hit a high of 88.34 on Thursday, it’s highest since July 16.

AUD/USD: The Australian dollar plunged to a fresh 30-month low, after the Reserve Bank of Australia's head of economic analysis, Alex Heath stated that the central bank was uncertain about how much spare capacity exists in the labour market, its effect on wages and inflation over time. The Aussie trades 0.1 percent down at 0.7064, having hit a low of 0.7062 earlier; it’s lowest since February 2016. FxWirePro's Hourly Aussie Strength Index stood at -35.16 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7058 (Feb 5 Low), a break below targets 0.7005. On the upside, resistance is located at 0.7131 (September 10 High), a break above could take it near 7182 (September 12 High).

NZD/USD: The New Zealand dollar slumped to multi-month lows, as the U.S. Treasury bond yields surged on hawkish comments by the Fed Chair Jerome Powell, stating that rates may well need to go beyond neutral. The Kiwi trades 0.2 percent down at 0.6464, having touched a low of 0.6462 earlier, its lowest level since February 2016. FxWirePro's Hourly Kiwi Strength Index was at -79.68 (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 0.6563 (5-DMA), a break above could take it near 0.6566. On the downside, support is seen at 0.6447 (Feb. 1 Low), a break below could drag it below 0.6381 (Jan. 15 Low).

Equities Recap

Asian shares tumbled as strong U.S. economic data stoked concerns about inflation and the risk of faster-than-expected interest rate rises.

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

Tokyo's Nikkei plunged 0.6 percent to 23,828.14 points, Australia's S&P/ASX 200 index rose 0.1 percent to 6,185.10 points and South Korea's KOSPI declined 0.3 percent to 2,267.03 points.

Hong Kong’s Hang Seng traded 0.2 percent lower at 26,566.73 points. Taiwan shares shed 1.8 percent to 10,517.12 points.

Commodities Recap

Crude oil prices surged as traders focused on U.S. sanctions against Iran's crude exports that are set to come into effect next month to tighten global markets. International benchmark Brent crude was trading 0.2 percent up at $84.97 per barrel by 0446 GMT, having hit a high of $86.71 on Wednesday, its highest since November 2014. U.S. West Texas Intermediate was trading 0.2 percent up at $74.82 a barrel, after rising as high as $76.88 on Wednesday, its highest since Nov 2014.

Gold prices declined as investors remained cautious after U.S. Treasury yields touched multi-year peaks and ahead of monthly employment data, which if stronger could boost the Federal Reserve's case for a tighter monetary policy. Spot gold eased 0.1 percent at $1,198.58 an ounce at 0448 GMT, having hit a high of $1208.17 on Wednesday, its highest since September 21 and was on track to gain 0.6 percent for the week. U.S. gold futures rose 0.1 percent to $1,202.90 an ounce.

Treasuries Recap

The Japanese government bonds gained on the last trading day of the week even as the United States Treasury yields hovered near multi-year highs following a global debt market rout that started yesterday, in line with a better-than-expected set of economic data released Wednesday. The yield on the benchmark 10-year JGB note, which moves inversely to its price, fell 1 basis point to 0.150 percent, the yield on the long-term 30-year note also slipped 1 basis point to 0.943 percent and the yield on short-term 2-year too traded 1 basis point lower at -0.117 percent.

The Australian government bonds traded narrowly mixed during subdued Friday session as investors remain sidelined in any major deal ahead of the U.S. September non-farm payroll data. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, traded flat at 2.720 percent, the yield on the long-term 30-year bond also remained steady at 3.209 percent and the yield on short-term 2-year down nearly 1 basis point to 1.999 percent.

The Canadian government bond prices were mixed across a steeper yield curve, with the two-year up 1.5 Canadian cents to yield 2.307 percent and the 10-year falling 1 Canadian cent to yield 2.553 percent. The 10-year yield touched its highest intraday since January 2014 at 2.584 percent.

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