Market Roundup
- MSCI declines to add China A-shares, South Korea to global benchmark, other issues on China share inclusion may arise over time - Reuters.
- Brexit would force Japan Inc to adopt twin-track strategy in Europe - BTS.
- Japan ChiefCabSec Suga – Desirable for UK to stay in EU, financial markets volatile, eyeing moves closely, UK referendum impact – Reuters.
- Indonesia launches priv-placement samurais via SMBC Nikko et al - IFR.
- PBOC – Will fend off potential risks in managing FX reserves, current level appropriate – Reuters.
- Australia Jun Westpac/MI consumer confidence index -1.0% to 102.2, +7.2% y/y.
- New Zealand Q1 c/a in surplus, NZ$1.306 bln, year-to-date NZ$7.504 bln deficit, NZ$1.05 and NZ$7.48 bln eyed, year-to-March -3% of GDP
- New Zealand May REINZ median house prices +3.2% m/m, +10.3% y/y, sales -4.5% m/m.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain May claimant count, no change eyed; last -2.4k.
- (0430 ET/0830 GMT) Great Britain Apr ILO unemployment, 5.1% eyed; last 5.1%.
- (0430 ET/0830 GMT) Great Britain Apr avge weekly earnings – 3-mo avge, +1.7% y/y eyed; last +2.0%.
- (0430 ET/0830 GMT) Great Britain Apr - ex-bonus, +2.1% y/y eyed; last +2.1%.
- (0500 ET/0900 GMT) Eurozone Apr trade balance, E21.5 bln surplus eyed; last E28.6 bln surplus.
- (0830 ET/1230 GMT) United States May PPI - final demand, +0.3% m/m, -0.1% y/y eyed; last +0.2%, unch.
- (0830 ET/1230 GMT) United States May – ex-food/energy, +0.1% m/m, +1.0% y/y eyed; last +0.1%, +0.9%.
- (0830 ET/1230 GMT) United States Jun Empire State manufacturing index, -4.0 eyed; last -9.02.
- (0915 ET/1315 GMT) United States May industrial output, -0.2% m/m eyed; last +0.7%.
- (0915 ET/1315 GMT) United States May capacity utilization, 75.2% eyed; last 75.4.
Key Events Ahead
- N/A BoJ Policy Board begins two-day meeting.
- N/A 6th European Financial Congress in Sopot, Poland (final day).
- N/A European Committee of the Regions meeting in Brussels (till tomorrow).
- N/A Greece CB annual monetary report/German FinMin Schaeuble in Poland.
- (0430 ET/0830 GMT) Denmark CB press conference on new economic forecasts.
- (0510 ET/0910 GMT) Greece E1 bln 13-week treasury bill auction.
- (0530 ET/0930 GMT) Germany E4 bln 0.5%v 2026 Bund auction.
- (0540 ET/0940 GMT) Portugal E0.75-1.0 bln 3 and 12-month treasury bill auctions.
- (0600 ET/1000 GMT) Sweden SEK500 mln each 4.0%, 0.25% 2020, 2022 CPI-linked bond auctions.
- (1000 ET/1400 GMT) ECB/Buba Weidmann speaks at Frankfurt Buba symposium
- (1030 ET/1430 GMT) ECB VP Constancio speaks at Utrecht symposium.
- (1400 ET/1800 GMT) FOMC policy announcement, no policy change, 0.375% Fed funds target eyed.
- (1430 ET/1830 GMT) FOMC Chair Yellen press conference.
- (1600 ET/2000 GMT) United States Treasury int’l cap flows (TIC report), last $98.3 bln net outflow.
- (1940 ET/2340 GMT) BoC Gov Poloz speaks in Ottawa, press conference to follow.
FX Beat
USD: The dollar index, a basket of currencies was trading lower at 94.83, hovering away from a high of 95.04 struck earlier in the session.
EUR/USD: The euro trades 0.2 percent higher at 1.1227 after declining 0.8 percent overnight to an 11-day low of 1.1188 as the benchmark German government bond yield turned negative due to growing worries that Britain might vote to leave the European Union next week. On Tuesday, Germany's 10-year bund yield turned negative for the first time after a series of opinion polls showed the "leave" camp ahead in Britain's EU referendum. The major attempted a minor recovery, to trade above the 1.1200 level. Investors remain cautious ahead of a Federal Reserve's policy decision later in day; however, markets expect the central bank to stand pat. Immediate resistance is located at 1.1228 (20-DMA), break above will take the pair to 1.1252/1.1287. On t he lower side, support is seen at 1.1179.
USD/JPY: The Japanese yen lost a bit of ground against the dollar as a bounce in Tokyo stocks slightly improved investor risk appetite. The greenback edged up to 106.34 yen, pulling away from an overnight low of 105.62 on the back of upbeat May U.S. retail sales data. The major trades higher at 106.27, attempting to sustain gains above the 106 level. Markets now await Federal Reserve's policy decision due later in the day ahead of BoJ's policy decision scheduled tomorrow. Immediate resistance is located at 106.51 (5-DMA), break above targets 106.84/ 106.97. On the lower side, support is seen at 105.62 (Previous Session Low), a break below 105.55 would take the greenback to its lowest level since October 2014.
GBP/USD: Sterling steadied after recovering slightly from a 2-month low of $1.4090 touched on Tuesday over growing worries that Britain will leave European Union at next week's referendum. On Tuesday, the major declined over 1 percent against the dollar after another opinion poll showed that the "Leave" campaign clearly ahead of the "In" camp. Sterling trades 0.2 percent higher at 1.4137, recovering from previous session low of 1.4090. Markets will closely watch Britain's unemployment and average earning data, ahead of Federal Reserve’s policy decision for further cues. Immediate resistance is located at 1.4171 (Apr-6 High),break above could take the pair over 1.4200. On the lower side, support is seen at 1.4057, break below targets 1.4005. Against the euro, the pound trades 0.1 percent higher at 79.24.
AUD/USD: The Austrian dollar rose after declining to an early low of 0.7333, close to previous session low of 0.7330. The Aussie was weighed down by declining commodity prices and the possibility of Britain exiting from the European Union. However, it has recovered to trade 0.2 percent higher at 0.7378, hovering towards a peak of 0.7504 touched last week. Markets attention will remain on Federal Reserve's policy decision, ahead of Australia's employment report. Immediate resistance is located at 0.7404 (Previous Session High), break above targets 0.7437/0.7500. On the downside, support is seen at 0.7315, break below will drag the pair lower 0.7300 level.
NZD/USD: The New Zealand dollar gained on the back of upbeat current account report. The kiwi rose 0.5 percent to 0.7029 after the economy posted a current account surplus in the first quarter, in line with expectations. The major continues to rise above the 0.7000 level, pulling further away from a low of 0.6963 struck earlier in the session. Markets will closely watch data that could impact the pair including the Federal Reserve's decision and New Zealand GDP data and an auction determining global dairy prices. Immediate resistance is located at 0.7046 (5-DMA), break above will take the pair to 0.7081. On the lower side, support is seen at 0.6944 (June-8 Low), break below targets 0.6903.
Equities Recap
Asian shares were slightly weaker but recovered from near 3-week lows as markets absorb U.S. index provider MSCI's decision not to include domestic Chinese equities in its indexes.
MSCI's broadest index of Asia-Pacific shares outside Japan were down 0.1 percent.
Tokyo's Nikkei rose 0.38 pct to 15,919.58, Australia's S&P/ASX 200 index lost 0.93 pct to 5,154.90 points, and Seoul shares slipped 0.12 pct.
Shanghai composite index gained 1.4 pct at 2,882.617 points and CSI300 index rose 1.1 pct at 3,111.91 points.
Hong Kong’s Hang Seng was trading 0.3 percent higher at 20,443 points. Taiwan stocks added 0.4 pct at 8,606.37 points.
Commodities Recap
Crude futures declined as increasing concerns about Britain's possible exit from the European Union and an unexpected rise in U.S. inventories left investors ignoring an IEA declaration that oil markets are now in balance. Brent was lower at $49.15 a barrel, a fifth consecutive day to hit its lowest in around two weeks. U.S. crude fell to a 3-week low of $47.55 as the contract dropped for a fifth day.
Gold edged down after touching a near 6-week high in the previous session, as the market await the U.S. Federal Reserve's policy statement amid concerns over a potential British exit from the European Union. Spot gold was flat at $1,284.80 an ounce by 0640 GMT, having touched a session-peak of $1,289.80 on Tuesday, it’s highest since May 6. U.S. gold edged 0.2 percent lower to $1,286.20
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.621 percent versus previous close of 1.611 percent.
Australian government bond futures declined from highs, with the 3-year bond contract off 4 ticks at 98.410. The 10-year contract was steady at 97.9350, having come off an all time peak of 98.0025 struck earlier in the day. The 20-year bond was steady at 97.3550, the highest since the contract started in September of last year. The premium between 10-year and 3-year bonds shrank to 48 basis points, the thinnest in a year. A break under 45 basis points would make it the narrowest since 2013.
New Zealand government bonds gained, sending yields 3.5 basis points lower at the long end of the curve.
Canadian government bond prices were lower across the maturity curve, with the 2-year price down 2 Canadian cents to yield 0.499 percent and the benchmark 10-year off 7 Canadian cents to yield 1.119 percent. The 10-year yield touched 1.078 percent in the session, its lowest since Feb. 24.
