Market Roundup
- Gen markets multi-tranche senior/T2 samurais, SocGen, among leads - IFR.
- Nissan may sell entire Calsonic Kansei stake, valued at Y100 bln+ - Nikkei.
- A rare look inside China’s central bank shows slackening resolve to revamp Yuan – Wall Street Journal.
- Philly Fed Harker –2-3 hikes likely this year, June hike appropriate unless data suggests otherwise, GDP growth for rest of year likely considerably more upbeat, Brexit a consideration but not fundamental to US economy, US risks related to China economy receded, Fed may not return to pre-crisis portfolio.
- RBA Gov Stevens – Committed to inflation targeting, below target but not eyeing knee-jerk reaction, growth continuing, not bad, AUD doing what is expected to do – Reuters.
- New Zealand June household inflation expectations stuck at 1.8%, 1-year ahead 2.2%.
- Resurgent dollar could revive emerging market fear – Reuters BreakingViews.
Economic Data Ahead
- (0245 ET/0645 GMT) France May business climate index, 104.0 eyed; last 104.0.
- (0330 ET/0730 GMT) Sweden Apr unemployment, 7.7% nsa eyed; last 7.7% nsa, 7.2% sa.
- (0430 ET/0830 GMT) Great Britain Apr PSNB, GBP5.8 bln eyed; last GBP4.17 bln, PSNCR GBP16.6 bln.
- (0430 ET/0830 GMT) Great Britain Apr – ex-banks, GBP6.55 bln eyed; last GBP4.77 bln.
- (0500 ET/0900 GMT) Germany May ZEW economic sentiment index, 12.0 eyed; last 11.2.
- (0500 ET/0900 GMT) Germany May ZEW current conditions index, 48.9 eyed; last 47.7.
- (1000 ET/1400 GMT) United States Apr new home sales, 520k AR, +2.0% m/m eyed; last 510k, -1.5%.
- (0500 ET/0900 GMT) Germany May Richmond Fed mfg shipments/services/comp indices; last 14/15/14.
Key Events Ahead
- N/A EuroGroup meeting in Brussels.
- N/A Madrid IIF Spring meeting, various ECB speakers (till tomorrow).
- N/A Riksbank Gov Ingves at Stockholm Dagens Industri banking conference.
- (0300 ET/0700 GMT) ECB ChiefEcon Praet at NABE/OECD Paris economics symposium.
- (0330 ET/0730 GMT) BoS Gov Linde speaks at Madrid Islamic finance seminar.
- (0400 ET/0800 GMT) ECB Financial Stability Report pre-release.
- (0500 ET/0900 GMT) BoE Gov Carney, et al parliamentary testimony on May inflation report.
- (0500 ET/0900 GMT) ECB/Finland CB Liikanen parliamentary testimony.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E50 bln allotment eyed, E49.95 bln maturing.
- (0630 ET/1030 GMT) ECB VP Constancio speaks at London workshop.
FX Beat
USD: The dollar index, against a basket of currencies, was at 95.23, still with sight of Thursday's peak of 95.52, its highest level since March 29.
EUR/USD: The euro nudged down to 1.1212, edging back towards a 7-week low of 1.1179 struck last Thursday. The dollar continues to strengthen on increasing speculation that the Fed was set to raise interest rates sooner than many investors had anticipated, despite signs of persistent global weakness. Markets await comments from Fed Chair Janet Yellen, who will appear at a panel at Harvard University on Friday. Later in the day, traders will closely watch ECB's Praet speech and U.S. new home sales data for further cues. The major touched an intra-day low of 1.1202, before climbing back to its current levels. Immediate support is seen at 1.1187 (Previous Session Low), break below could drag the pair to 1.1179 (7-week low). On the higher side, resistance is seen at 1.1230 (May 19 High).
USD/JPY: The Japanese yen edged down as the greenback made a minor recover. However, the yen was supported by investors' risk aversion and reducing expectations that Japan will weaken the currency after a warning by the United States last week against intervention. The greenback trades at 109.28, moving back towards Friday's 3-week high of 110.58, after declining to as low as 109.11 on Monday when it shed nearly 1 percent. Immediate resistance is located at 109.65 (May 17 High), break above could take the pair to 109.75. On the lower side, support is seen at 109.11 (Previous Session Low).
GBP/USD: Sterling steadied after reversing some of last week's 1-percent as investors remain wary on June 23 referendum, that could see Britons vote to leave the European Union. The major edged up to 1.4486, pulling away from a low of 1.4442 struck on Monday. Markets will closely watch Britain’s public sector net borrowing and CBI distributive trade survey for further momentum on the pair. Immediate resistance is located at 1.4519 (Apr 25 High), while on the down side support is seen at 1.4461 (May 4 Low) and break below could drag the pair to 1.4442 (Previous Session Low). Against the euro, pound edged up to 77.38 pence.
AUD/USD: The Australian dollar failed to make a recovery, extending losses below the 0.7200 level, following the comments from Reserve Bank of Australia’s Governor Glenn Stevens. Stevens' speech focused upon the inflation outlook, indicating that the central is committed to the inflation target of 2-3 percent. The Aussie eased 0.3 percent to 0.7195, from an early high of 0.7228, pulling closer 0.7176 its lowest level since March. The major was also undermined by renewed weakness in commodity prices, as iron ore prices declined by 5.4 percent. Markets attention will remain on Fed officials speeches and Australia's private capital expenditure for further incentives. Immediate support is located at 0.7183 (Session Low), break below could take the pair to 0.7176 (May 19 Low). On the upside, resistance is seen at 0.7211 (May 20 High).
NZD/USD: The New Zealand dollar slumped against the greenback, amid persisting risk-off sentiment in the markets, with both the Asian equities and oil prices trading in the negative territory. The kiwi trades 0.7 percent lower at 0.6711, hovering towards a low of 0.6707. Traders will focus on U.S new home sales data and New Zealand’s trade balance figures for further direction on the pair. Immediate support is located at 0.6707 (Session Low), break below could drag the pair lower the 0.6700 mark. On the higher side, resistance is seen at 0.6771 (10-DMA).
Equities Recap
Asian shares declined to near 10-week lows and the U.S. dollar gained as investors remained cautious about the likelihood of a U.S. interest rate increase in coming weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.4 percent, taking its losses to nearly 5 percent so far this month and nearing its lowest levels since March 9.
Shanghai composite index was down 0.9 percent at 2,817.09 points while CSI300 index dropped 0.8 percent at 3,061.63 points. Hong Kong’s Hang Seng index was trading 0.3 percent lower at 19,746.269 points. Taiwan stocks ended down 0.5 pct at 8,300.66 points.
Australia's S&P/ASX 200 index fell 0.27 pct at 5,304.40 points, Tokyo's Nikkei slumped 0.94 pct at 16,498.76 and Seoul shares lost 0.73 pct.
Commodities Recap
Oil prices edged down in thin trade as the U.S. dollar strengthened, however losses were limited by a likely reduction in U.S. crude and gasoline stockpiles. Brent futures had declined 0.8 percent to $47.90 a barrel by 0636 GMT, after closing down 37 cents in the previous session. U.S. crude futures dropped 8 cents to $48.00 a barrel, having settled down 33 cents the day before.
Gold hovers near a 3-1/2 week low hit a day earlier, as prices remained under pressure on prospects that the Federal Reserve will hike interest rates as early as June. Spot gold declined 0.3 percent to $1,244.37 per ounce by 0637 GMT. On Monday, it fell to $1,243.04 an ounce, the lowest since April 28. U.S. gold futures dipped 0.3 percent to $1,248 per ounce.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.833 percent versus previous close of 1.840 percent.
JGB prices trimmed most of their earlier losses and turned firmer in the super-long zone. The 5-yr JGBs are flat at -0.22%, while the 10s are also flat at -0.105%. In the super-long zone, the 20s are down 0.5bp at 0.255%, after fluctuating in a 0.25%-0.27% range, while the 30s are down 0.5bp at 0.325%.
Australian government bond futures had a soft tone, with the 3-year bond contract off 1 tick at 98.380. The 10-year contract eased 2 ticks to 97.6950, while the 20-year contract was steady at 97.0650. The premium between Australian and U.S. 2-year cash bond yields were near its lowest in 15 years at 75 basis points. It dropped to 74 basis points last week, from 130 basis points mid-April.
New Zealand government bonds eased, pushing yields 3 bps points higher at the short end and 2 bps higher at the long end.
