Market Roundup
- Japan FinMin Aso – Working closely with BoJ to support growth – Reuters.
- METI Seko – Eyeing stronger JPY and affect on CAPEX plans – Reuters.
- EconMin Ishihara – Closely following FX moves, not considering helicopter money – Reuters.
- Japan economic ministers plan all-out push for TPP - Nikkei.
- Japan automakers take beating from rising yen – Nikkei.
- Japan end-July foreign reserves off to $1.264750 trln, June $1.265402 trln.
- Japan June real wages +1.8% y/y, rise most in six years, total cash earnings +1.3%, overtime -0.1%.
- China Q2 c/a surpluse $59.4 bln, Q1 $48.1 bln – Xinhua.
- Foreign CB US debt holdings -$1.251 bln to $3.219 trln Aug 3 week, Treasury holdings -$2.074 bln to $2.896 trln, agencies +$474 mln to $264.865 bln.
- NY Fed – Swaps with foreign CBs $830 mln Aug 3 wk, ECB 800 mln, BoJ 130 mln.
- Lipper – US-based corp investment-grade bond funds post $2.5 bln inflows August 3 week, stock funds $3.6 bln outflows.
- RBA qrtly MPS – Reiterates policy easing to help foster growth, no forward guidance however, underlying inflation to remain low, economic prospects positive, AUD significant source of uncertainty – Reuters.
- Australia July PCI 51.6, -1.6 point from June, expansion if only barely.
Economic Data Ahead
- (0245 ET/0645 GMT) France Jun current account balance; last E300 mln deficit.
- (0245 ET/0645 GMT) France Jun trade balance; last E2.8 bln deficit.
- (0300 ET/0700 GMT) Spain Jun industrial output; last +1.0% y/y.
- (0400 ET/0800 GMT) Norway Jun manufacturing output, +0.4% m/m forecast; last +0.2%.
- (0400 ET/0800 GMT) Italy Jun industrial output, +0.3% m/m, +1.0% y/y forecast; last -0.6%, -0.6%.
- (0830 ET/1230 GMT) Unites States Jul non-farm payrolls, +180k forecast; last +287k.
- (0830 ET/1230 GMT) Unites States Jul unemployment, 4.8% forecast; last 4.9%, participation 62.7%.
- (0830 ET/1230 GMT) Unites States Jul average earnings, +0.2% m/m forecast; last +0.1%.
- (0830 ET/1230 GMT) Unites States Jul average workweek, 34.4 hrs; last 34.4.
- (0830 ET/1230 GMT) Unites States Jun int’l trade balance, $43.1 bln deficit forecast; last $41.1 bln def.
- (1300 ET/1700 GMT) Unites States Jun Dallas Fed PCE; last +1.9%.
- (1500 ET/1900 GMT) Unites States Jun consumer credit, $17.0 bln forecast; last $18.56 bln.
Key Events Ahead
- (0600 ET/1000 GMT) UK DMO GBP0.5/2.5/3.0 bln 1/3/6-month treasury bill auctions.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent lower at 95.67, pulling away from a high of 95.90, as markets remain cautious ahead of U.S. non-farm payroll data.
EUR/USD: The euro edged up, attempting to recover some ground after declining on Thursday. The major strengthened after U.S. unemployment claims for the week ending July 30 rose to 269,000; against the expectation of -1,000 to a seasonally adjusted 265,000. However, the upside was capped as U.S. factory orders came in better-than-expected for the month of June at -1.5 percent versus consensus of -1.8 percent. Markets attention now remains on the highly influential U.S. nonfarm payrolls report, which is expected to have increased 180,000 in July after surging 287,000 in June. The European currency trades 0.1 percent higher at 1.1135, pulling away from a low of 1.1113 hit in the previous session. Immediate resistance is located at 1.1159 (5-DMA), break above targets 1.1183/ 1.1200. On the lower side, support is seen at 1.1107 (10-DMA), break below could take it lower 1.1100.
USD/JPY: The greenback consolidates between a narrow, as investors remain cautious ahead of U.S. nonfarm payrolls report. Markets ignored stronger-than-expected Japan's wage earners' nominal cash earnings, which rose 1.3 percent y/y in June, after posting a decline of 0.1 percent in May. The rise in real wages was largely due to the effect of falling prices, which highlighted the government's struggle to pull the economy out of deflation. The dollar trades at 101.06, attempting to sustain gains above the 101.00 handle. Markets will continue to track the broader market sentiment ahead of the U.S. NFP data due later in the day. Immediate support is seen at 100.52, break below could take it near 100 handle. On the higher side, resistance is located at 101.76, break above targets 102.00/102.80.
GBP/USD: Sterling steadied after slumping from a high of 1.3345 following Bank of England policy decision. The BoE cut interest rates to a record-low 0.25 percent from 0.5 percent and pledged 60 billion pounds in government bond purchases to revive the economy from possible recession. The larger than expected measures dragged the major 1.6 percent lower, recording its biggest fall in a month. Sterling trades 0.2 percent higher at 1.3133, retreating from previous session low of 1.3102. Markets will closely watch Britain's Halifax House Price Index for further cues on the pair. Immediate resistance is located at 1.3187 (20-DMA), break above targets 1.3218. On the lower side, support is seen at 1.3078, break below could take it till near 1.3000. Against the euro, the pound trades 0.1 percent higher at 84.79 pence.
AUD/USD: The Australian dollar advanced, hitting a fresh 3-week high following Reserve Bank of Australia's Monetary Policy Statement release. The RBA stated that core inflation was expected to remain below 2 percent for the next two years, which left the door open for more interest rates cuts. The Aussie trades 0.3 percent higher at 0.7650, hovering towards a high of 0.7676, a level last seen on July 15. However, the gains in the major were limited as AiG Performance of Construction Index for July declined to 51.6 from previous 53.2. The movement in the major will be driven broad market sentiment, ahead of U.S. NFP data due later in the N.Y session. Immediate resistance is located at 0.7700, break above targets 0.7765. On the lower side, support is seen at 0.7601 (5-DMA), break below could take it till 0.7568.
NZD/USD: The New Zealand dollar extended gains, re-attempting to regain the 0.7200 handle. Investors will remain cautious ahead of the Reserve Bank of New Zealand policy meeting next week, where it is widely expected to ease its monetary policy. The Kiwi trades 0.3 percent higher at 0.7194, hovering further away from a low of 0.7140 struck earlier in the week. The major will be driven by developments surrounding RBNZ rate cut talk, ahead of series of U.S. economic data. Immediate resistance is located at 0.7200, break above could take it till 0.7230. On the downside, support is seen at 0.7134 (10-DMA), break below targets 0.7100.
Equities Recap
Asian shares gained, as an overnight rally in crude oil prices boosted risk appetite, while the Bank of England's larger-than-expected stimulus package sent sterling tumbling.
MSCI's world stocks index edged up 0.1 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan extended gains to 0.9 percent and was on track for a 0.6 percent weekly gain.
Tokyo's Nikkei ended flat at 16,254.45, Australia's S&P/ASX 200 index rose 0.40 pct at 5,497.90 points and South Korea's KOSPI 200 added 0.8 percent at 2,016.60 points.
Shanghai composite index trades flat at 2,984.27 points, while CSI300 index trades 0.4 percent up at 3,215.29 points.
Hong Kong’s Hang Seng was trading 1.4 percent higher at 22,138.19 points. Taiwan shares edged up 0.8 pct at 9,092.12 points.
Commodities Recap
Crude oil prices declined, erasing some of the previous session gains, however, it remained well above a 4-month low touched this week as traders covered short positions. International Brent crude oil were trading 0.6 percent lower at $43.87 per barrel by 0351 GMT, but more than 6 percent up from Tuesday. U.S. West Texas Intermediate crude was trading at $41.54 per barrel, down 0.6 percent from its previous close.
Gold was little changed as investors eye U.S. employment data, scheduled later in the day. The precious metal trades within the sight of its 3-week high touched on earlier in the week and was on track for a second consecutive weekly gain. Spot gold was flat at $1,361.14 an ounce by 0358 GMT, having closed 0.2 percent up at $1,361.28 on Thursday and has gained 0.7 percent so far this week. U.S. gold was unchanged at $1,366.90 an ounce.
Treasuries
The 10-year U.S treasury yield stood at 1.4972 percent down by 0.007 bps, while 5-year was 0.002 bps lower at 1.0281 percent.
The Australian government bonds gained, following a dovish economic assessment from the Reserve Bank of Australia’s monetary policy statement. The benchmark 10-year Treasury note's yield fell 7-1/2 basis points to 1.890 percent and the yield on short-term 3-year note dipped 1 basis point to 1.437 percent.
The New Zealand government bonds closed higher as investors sought refuge in the safe-haven instruments ahead of the Reserve Bank of New Zealand (RBNZ) monetary policy decision. The yield on the benchmark 10-year bond fell 1-1/2 basis points to 2.200 percent, the yield on 7-year note also dipped 1-1/2 basis points to 1.925 percent and the yield on short-term 2-year note ended 1-1/2 basis points lower at 1.805 percent.
Canadian government bond prices were higher across the maturity curve. The 2-year price firmed 3.5 Canadian cents to yield 0.541 percent and the benchmark 10-year climbed 45 Canadian cents to yield 1.050 percent. The curve flattened as the spread between the 2-year and 10-year yields narrowed by 3.1 basis points to 50.9 basis points, indicating outperformance for longer-dated maturities.
