Market Roundup
- Japan PM Abe to announce details of stimulus package today, to amount to Y27 trln – Fuji TV.
- Japan considering issuing 50-year bonds as part of stimulus package, MoF denies report – Wall St Journal, Nikkei, Reuters.
- Japan to up minimum wage by 3% to ignite consumer spending – Reuters.
- BoJ wary of easing but yen, politics may sway it to act - Reuters.
- Japanese megabanks' profit likely sank 30% on negative rates – Nikkei.
- Australia Q2 RBA trimmed mean CPI +0.5% q/q, +1.7% y/y, +0.4% and +1.5% forecast, weighted median CPI +0.4%, +1.3%, +0.4% and +1.3% forecast, CPI +0.4%, +1.0%, +0.4% and +1.3% forecast, report mixed but inflation at 17-year low, RBA cut?
Economic Data Ahead
- (0245 ET/0645 GMT) France Jul consumer confidence index, 96 forecast; last 97.
- (0245 ET/0645 GMT) France Jun producer prices; last +0.3% m/m.
- (0300 ET/0700 GMT) Sweden Jul consumer confidence index, 98.0 forecast; last 98.7.
- (0300 ET/0700 GMT) Sweden Jul manufacturing confidence index, 104.4 forecast; last 104.8.
- (0300 ET/0700 GMT) Spain Jun retail sales, +3.3% y/y forecast; last +2.3%.
- (0330 ET/0730 GMT) Sweden Jun trade balance; last SEK2.1 bln deficit.
- (0330 ET/0730 GMT) Sweden Jun household lending; last +7.8% y/y.
- (0400 ET/0800 GMT) Eurozone Jun money supply M3, +5.0% AR, last +4.9%.
- (0400 ET/0800 GMT) Eurozone Jun loans to non-financials, households; last +1.4%, +1.6%.
- (0400 ET/0800 GMT) Italy Jul consumer confidence index, 109.2 forecast; last 110.2.
- (0400 ET/0800 GMT) Italy Jul business confidence index, 101.8 forecast; last 102.8.
- (0430 ET/0830 GMT) Great Britain Q2 GDP – prelim, +0.4% q/q, +2.0% y/y forecast; last +0.4%, +2.0%.
- (0730 ET/1130 GMT) United States Jun bldg permits – revised; prelim 1.15 mln AR, +1.5% m/m.
- (0830 ET/1230 GMT) United States Jun durable goods orders, -1.1% m/m forecast; last -2.3%, ex-def -0.9%.
- (0830 ET/1230 GMT) United States Jun – non-defense cap goods ex-air, +0.3% m/m forecast; last -0.4%.
- (0830 ET/1230 GMT) United States Jun - ex-transport, +0.3% m/m forecast; last -0.3%.
- (1000 ET/1400 GMT) United StatesJun pending home sales, +1.4% m/m forecast; last -3.7%, index 110.8.
Key Events Ahead
- (0500 ET/0900 GMT) Italy E6.25 bln 6-month BOT auction.
- (0530 ET/0930 GMT) Germany E1 bln 2.5% 2046 Bund auction.
- (0530 ET/0930 GMT) ECB 3-month LTRO, E9 bln allotment forecast, E9.388 bln maturing.
- N/A US Democratic Party national convention in Philadelphia (till July 28).
- (1400 ET/1800 GMT) FOMC policy announcement, no change in 0.375% Fed funds rate target forecast.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent higher at 97.23, hovering away from previous session's low of 96.85, as markets await Federal Reserve monetary policy outcome.
EUR/USD: The euro edged up, but struggles to extend gains above the 1.1000 handle. The major rose as high as 1.1029 on Tuesday, however, it failed to sustains gains, closing down at 1.0956. It retreated from its highs after better-than-expected U.S housing and confidence data, strengthened the prospects of imminent Federal Reserve interest rate hike this year. Traders now await Federal Reserve's policy decision due later in the day, although the central bank is expected to stand pat, investors will scrutinize Fed statement for further clues on the timing of next rate hike. The European currency hovers around 1.0998, attempting to regain 1.1000 level. Immediate resistance is located at 1.1023 (10-DMA), break above targets 1.1050/1.1080. On the lower side, support is seen at 1.0950, break below could take it till 1.0900.
USD/JPY: The greenback advanced more than 1 pct on the back of Japanese headlines surrounding stimulus package. The dollar rose as high as 106.53 following reports that PM Abe will announce stimulus detail today and the package size would be 27 trillion yen. However, the major reversed gains after the Japanese Ministry of Finance denied reports that it was considering issuing 50 year bonds as a part of the stimulus. The Japanese yen trades 0.7 percent lower at 105.36, hovering away from a high of 103.99 touched in the previous session. Investors will continue to track developments surrounding BoJ stimulus package, ahead of Federal Reserve monetary policy outcome. Immediate resistance is located at 106.72 (Jul-25 High), break above targets 107.00/107.90. On the downside, support is seen at 104.05 (20-DMA), break below could drag it lower 104 handle.
GBP/USD: Sterling consolidates between a narrow range above 1.3100, having touched a 2-week low on Tuesday after Bank of England policymaker Weale stated that recent downbeat Britain data would be very material for the BoE's monetary policy committee at next week's meeting, which pointed towards an interest rate cut. Sterling trades flat at 1.3133, attempting to sustain gains above the 1.3100 handle. Markets attention now remains on UK's GDP report for the second quarter due later in the day. Immediate resistance is located at 1.3181 (10-DMA), break above will take the pair till 1.3200/1.3290. On the lower side, any break below 1.3050 confirms minor weakness, a decline till 1.3000 is possible. Against the euro, the pound trades 0.1 percent lower at 83.73 pence.
AUD/USD: The Australian dollar reversed gains after rallying as high as 0.7565 on the back of better-than-expected inflation data. RBA trimmed mean came in at 0.5 percent q/q and 1.7 percent y/y, surpassing forecasts of 0.4 percent and 1.5 percent, respectively. The headline CPI q/q was at 0.4 percent, in line with consensus, while CPI y/y stood at 1.0 percent, missing estimate of 1.1 percent. The spike in the major faded away as markets felt that the inflation report did little to keep the RBA from cutting interest rate next week. The Aussie trades 0.1 percent lower at 0.7490, having touched an early low of 0.7457. Traders will continue to digest the RBA CPI report, ahead of Fed monetary policy decision. Immediate support is located at 0.7451, break below could drag it till 0.7407. On the higher side, resistance is seen at 0.7565 (Session High), break above targets 0.7600.
NZD/USD: The New Zealand dollar's recovery mode ran out of steam, as intense selling pressure around its fellow Antipodean and lower oil prices, dampened market sentiments. The Kiwi trades 0.2 percent lower at 0.7039, having declined as low as 0.7004, not far from a 6-week trough of 0.6952 touched last week. It has skidded 1.7 percent this month after the RBNZ flagged more rate cuts ahead. The major will continue to track the broad based market sentiment, ahead of Federal Reserve's policy announcement. Immediate support is seen at 0.6974 (Jul-22 Low), below could take it lower 0.6950. On the higher side, resistance is located at 0.7086 handle, break above targets 0.7100/0.7115.
Equities Recap
Asian shares rose to fresh near 1-year highs, supported by risk-on market sentiment as investors await central bank meetings this week that could provide fresh stimulus in Japan and further clues on Fed interest rate hike.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent, advancing to its highest since Aug. 11 2015.
Tokyo's Nikkei gained 1.72 pct at 16,664.82, Australia's S&P/ASX 200 index ended flat at 5,537.20 points and Seoul shares edged down 0.08 pct.
Shanghai composite index trades 2.6 percent down at 2,971.24 points, while CSI300 index trades 2.4 percent lower at 3,188.15 points.
Hong Kong’s Hang Seng was trading 0.1 percent lower at 22,101.97 points. Taiwan shares edged up 0.4 pct at 9,063.39 points.
Commodities Recap
Oil prices edged up, after having declined to a 2-1/2 month low of $44.11 in the previous session as large supplies and slowing economic growth weighed on market sentiments, however, traders expect the current downtrend to be modest and see a recovery in near-term. International Brent crude oil was trading 0.5 percent higher at $44.77 at 0358 GMT, pulling way from previous session low. U.S. West Texas Intermediate crude also rose by 0.5 percent to $42.83.
Gold edged lower as the dollar and equities gained ahead of the Federal Reserve's policy decision due later in the day. Spot gold declined 0.2 percent to $1,317.88 an ounce at 0401 GMT, after rising by 0.4 percent on Tuesday. U.S. gold fell 0.3 percent to $1,317.50 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5800 percent up by 0.017 bps, while 5-year was 0.015 bps higher at 1.1702 percent.
The Australian government bonds slumped as investors poured into safe-haven assets following upbeat second quarter consumer inflation data, in line with market expectations. The yield on the benchmark 10-year Treasury note rose 4 basis points to 1.965 percent and the yield on short-term 2-year note jumped nearly 3 basis points to 1.589 percent.
The New Zealand government bonds closed marginally firmer as investors remained cautious ahead of the Federal Reserve monetary policy. The yield on benchmark 10-year bond, which moves inversely to its price, slid 1/2 basis point to 2.290 percent, the yield on 7-year note also dipped 1/2 basis point to 2.035 percent and the yield on short-term 2-year note ended 1 basis point lower at 1.910 percent.
Canadian government bond prices declined across the maturity curve. The 2-year price was down 3.5 Canadian cents to yield 0.595 percent while the benchmark 10-year fell 16 Canadian cents to yield 1.123 percent. The Canada-U.S. 2-year bond spread narrowed to -16.3 basis points, while the 10-year spread came in to -44.2 basis points.
