Market Roundup
- Japan MoF ViceMin Asakawa - Yen intervention will stay in toolbox – FT. MoF flow data week-ended May 21 – Japanese buy net Y182.3 bln foreign stocks, Y684.0 bln bonds, Y60.7 bln bills; foreign investors buy net Y40.4 bln Japanese stocks, Y492.0 bln bonds, sell Y49.6 bln bills.
- Japan May Reuters Tankan mfg index +2, non-mfg +19, April +10, +23, mfg index lowest since April ’13, higher JPY cited, +5 and +18 eyed for August.
- Japan April corporate service prices -0.2% m/m, +0.2% y/y at 102.9.
- EU Pres Tusk – Brexit, China, Russia-Ukraine, trade on G7 agenda – Reuters.
- PBOC planning commercial paper exchange – 21st Century Business Herald.
- Australia Q1 new CAPEX -5.2% q/q, -3% eyed, ‘15/16 est A$126.8 bln, ‘16/17 A$89.2 bln, Q1 plant/machinery CAPEX -0.5% q/q, building -7.9%.
- New Zealand on better-than-expected budget surplus track, ‘15/16 NZ$668 mln, ‘16/17 NZ$719 mln, ‘17/18 NZ$2.455 bln, ‘15/16 net debt 24.9%, eyes 19.3% ‘20/21, economic outlook positive, dairy prices to recover, inflation to remain low, one further 25-bp OCR cut assumed this year.
- New Zealand Fonterra ‘16/17 farmgate milk price forecast for $4.25/k, high NZD impacting prices, forecasts, conditions challenging.
- Crude oil (Brent) breaks above $50/brl for first time in ‘16.
Economic Data Ahead
- (0300 ET/0700 GMT) Spain Q1 GDP, +0.8% q/q, +3.4% y/y eyed; prelim +0.8%, +3.4%.
- (0300 ET/0700 GMT) Sweden May consumer confidence index, 97.8 eyed; last 97.1, mfg 107.9.
- (0330 ET/0730 GMT) Sweden Apr PPI; last +0.8% m/m, -3.7% y/y.
- (0330 ET/0730 GMT) Sweden Apr trade balance; last SEK3.9 bln surplus.
- (0400 ET/0800 GMT) Italy Mar retail sales; last +0.3% m/m, +2.7% y/y.
- (0400 ET/0800 GMT) Norway Q2 oil investment fcst; last NOK189.6 bln this yr, 163.9 bln next.
- (0430 ET/0830 GMT) Great Britain Q1 GDP - 2nd release, +0.4% q/q, +2.1% y/y eyed; prelim +0.4%, +2.1%.
- (0430 ET/0830 GMT) Great Britain Apr BBA mortgage approvals; last 45.1k.
- (0500 ET/0900 GMT) Italy Apr wage inflation; last unch m/m, +0.8% y/y.
- (0830 ET/1230 GMT) United States Apr durable goods orders, +0.5% m/m eyed; last +1.3%, ex-def -1.1%.
- (0830 ET/1230 GMT) United States Apr - ex-transport, +0.3% m/m eyed; last -0.2%.
- (0830 ET/1230 GMT) United States Apr – non-def cap ex-air, +0.4% m/m eyed; last -0.8%.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 275k eyed; last 278k.
- (1000 ET/1400 GMT) United States Apr pending home sales, +0.6% m/m; last +1.4%, index 110.5.
- (1100 ET/1500 GMT) United States May KC Fed composite, mfg indices; last -4, -8.
Key Events Ahead
- N/A Japan Ise-Shima G7 Summit (till tomorrow).
- N/A Croatia EUR bond syndication, leads Citi, HSBC, MS, Unicredit.
- (0500 ET/0900 GMT) Italy E2.5 bln 2018 CTZ auction.
- (0515 ET/0915 GMT) St Louis Fed Bullard speaks at Singapore forum.
- (1215 ET/1615 GMT) Fed Gov Powell speaks at Washington, DC Peterson Institute.
FX Beat
USD: The dollar index, against a basket of currencies declined 0.2 percent to 95.14, moving away from a 2-month high of 95.661 touched in the previous session.
EUR/USD: The euro rose 0.2 percent to 1.1185, pulling away from 10-week low of 1.1128 struck on Wednesday. The major continued to extend gains as eurozone governments offered Greece debt relief, approving to release 10.3 billion euros ($11.5 billion) in new funds, on Wednesday. Fed Chair Yellen is due to speak on Friday, and could strengthen expectations that the central bank might raise interest rates as early as June or July. Looking ahead in the day, markets attention will remain on series of U.S. economic data, including durable goods orders, initial jobless claims and pending home sales. Immediate resistance is seen at 1.1209 (Mar-11 High), break above could take the pair to 1.1227. On the lower side, support is seen at 1.1149 (Session Low).
USD/JPY: The Japanese yen rose as investor’s remain wary on whether a rate increase is imminent and on a pending decision on a planned sales tax hike in Japan. The greenback declined to a low of 109.41 from a session high of 110.23. It major trades 0.3 percent lower at 109.70, pulling away from a high of 110.44 struck in the previous session. The yen was strengthened by Japanese official Asakawa comments, citing, currency intervention will remain will remain in the ministry's toolbox. Immediate support is seen at 109.41 (Session Low), break below could drag the pair to 109.16. On the upside, resistance is located at 110.38 (May-19 High).
GBP/USD: Sterling extended gains as polls showed that Britain will vote to stay in the European Union at the membership referendum, further easing the Brexit worries. The currency rose 0.1 percent to 1.4718, hovering towards previous session high of 1.4728. Markets will closely watch Britain’s preliminary gross domestic product and business investment figures, ahead of U.S. economic data, for further momentum on the major. Immediate resistance is located at 1.4728 (Previous Session High), break above could take the pair to 1.4769. On the lower side, support is seen at 1.4692 (Session Low). Against the euro, the pound trades at 75.98, still within the sight of 3-1/2 month high of 75.64 struck on Wednesday.
AUD/USD: The Australian dollar extended recover following a mixed capital expenditure report, which included a slight upgrade to overall spending plans for the year ending June 2017. The Aussie rose to 0.7216, having recovered from a low of 0.7162 touched earlier in the session. Australia's Q1 private capital expenditure came at -5.2 percent q/q against market consensus of -3.5 and previous 1.8% , revised upwards from 0.8%. The estimate for 2016/17 was at $A89.2bn versus $82.6bn previous estimate. Markets now await series of U.S. economic data, ahead of speeches from RBA Assistant Governor Debelle and Federal Reserve officials. Immediate resistance is located at 0.7228 (May-24 High), break above could take the pair to 0.7236/0.7259. On the lower side, support is seen at 0.7145 a 3-month low set on Tuesday.
NZD/USD: The New Zealand dollar declined to a 2-month trough following dairy leader Fonterra's disappointing milk payout forecast. The kiwi skidded to 0.6695, having briefly dropped below 0.6700 level for the first time since late March. However, the major found some support from much better-than-expected budget figures in the year to June. The government expects to post a NZ$668 million surplus in the year to June 2016 versus its prior forecast for a deficit of NZ$401 million. The pair recovered from sessions’ low, however, trades 0.1 percent lower at 0.6726. Immediate support is located at 0.6695 (Session Low), while on the upside, resistance is seen at 0.6742 (5-DMA).
Equities Recap
Asian shares struggled to gain as a drop in mainland China stocks to 2-1/2 month lows hurt broader interest in riskier assets in Asia, offsetting Wall Street's overnight gains.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat, struggling to extend its rebound from Tuesday's 12-week low.
Shanghai composite index was down 0.4 percent at 2,803.86 points while CSI300 index dropped 0.4 percent at 3,046.44 points.
Hong Kong’s Hang Seng index was trading 0.1 percent lower at 20,346.02 points. Taiwan stocks ended flat at 8,394.12 points
Australia's S&P/ASX 200 index added 0.28 pct at 5,387.50 points, Tokyo's Nikkei nudged up 0.09 pct at 16,772.46 and Seoul shares lost 0.19 pct.
Commodities Recap
Brent oil futures advanced above $50 a barrel for the first time in nearly seven months after U.S. government data showed a sharper-than-expected reduction in crude stocks last week. Brent trades 0.4 percent higher at $50.03 a barrel by 0621 GMT, its highest since Nov. 4. It ended the previous session up $1.13, or 2.3 percent. U.S. crude futures gained 23 cents to their strongest since Oct. 12 at $49.79 a barrel, after settling the last session 94 cents higher.
Gold edged up, however, still within the sight of a near a 7-week low touched in the previous session as positive U.S. economic data strengthened expectations that the Federal Reserve would raise interest rates sooner rather than later. Spot gold had risen 0.4 percent to $1,228.84 per ounce by 0622 GMT after declining to $1,217.65 on Wednesday; it’s lowest since April 6. U.S. gold was up 0.2 percent at $1,225.9.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.8525 down by 0.018 bps.
Australian government bond futures rose, with the 3-year bond contract up 1 tick at 98.400. The 10-year contract edged up 2 ticks to 97.7150, while the 20-year contract gained 4.5 ticks to 97.1050. The premium between Australian and U.S. 2-year cash bond yields grinded lower to 72 basis points, its smallest in 15 years. It was 130 basis points in mid-April.
Canadian government bond prices were lower across the maturity curve, with the benchmark 10-year falling 21 Canadian cents to yield 1.387 percent and the 2-year price down 2 Canadian cents to yield 0.639 percent. The Canada-U.S. 10-year bond spread was 1.1 basis points less negative at -48.3 basis points as Canadian government bonds underperformed across much of the curve.
