Market Roundup
- Japan won’t reach nominal GDP target of Y600 trln by FY’24 even given current growth pace, PM Abe vows to keep trying – Reuters.
- Japan to double fiscal stimulus to Y6 trln – Nikkei.
- EconMin Ishihara – Structural-fiscal reforms needed, need to link wages to economic growth – Reuters.
- Japan June corporate service price index to 103.0, +0.2% y/y, May +0.2%.
- Investors flocking back to export-based Japan stocks – Nikkei.
- Corporate Japan's pension obligations hit all-time high – Nikkei.
- IMF sets new SDR calculation method to prepare for yuan’s entry – Reuters.
- New Zealand June trade surplus NZ$127 mln, NZ$150 mln eyed, imports NZ%4.13 bln, exports NZ$4.26 bln, NZ$4.15 bln and NZ$4.23 bln eyed.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Jun PPI; last unch m/m, -4.5% y/y.
- (0430 ET/0830 GMT) Great Britain Jun BBA mortgage approvals; last 42.19k.
- (0900 ET/1300 GMT) Belgium Jul leading indicator; last 0.70.
- (0900 ET/1300 GMT) United States May CaseShiller 20, +1.1% m/m nsa, +5.5% y/y eyed; last +1.1%, +5.4%.
- (0945 ET/1345 GMT) United States Jul Markit services PMI – flash, 52.0 eyed; last 51.4.
- (0945 ET/1345 GMT) United States Jul Markit composite PMI – flash; last 51.2.
- (1000 ET/1400 GMT) United States Jul consumer confidence index, 95.9 eyed; last 98.0.
- (1000 ET/1400 GMT) United States Jun new home sales, 560k AR, +1.6% m/m eyed; last 550k, -6.0%.
- (1000 ET/1400 GMT) United States Jul Richmond Fed mfg shipments/services/comp indices; last -3/0/-7.
- (1030 ET/1430 GMT)United States Jul Dallas Fed Texas services outlook, revenues; last -7.7, 15.6.
Key Events Ahead
- N/A UK BizMin Clark in Tokyo for consultations.
- (0500 ET/0900 GMT) Italy E2-2.5 2018 CTZ and E0.5-1 bln 0.1% 2022 index-linked BTP auctions.
- (0530 ET/0930 GMT) ECB 7-day refi at zero%, E44 bln allotment eyed, E43.6 bln maturing.
- (0900 ET/1300 GMT) Italy EconMin Padoan speaks at Rome conference.
- N/A FOMC begins two-day policy meeting.
- N/A US Democratic Party national convention in Philadelphia (till July 28).
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.3 percent lower at 96.97, pulling away from a 4-month high of 97.57 touched in the previous session.
EUR/USD: The euro rose above the 1.1000 handle, supported by persistent broad based dollar weakness. The European currency trades 0.1 percent higher at 1.1009, having touched a high of 1.1020 However, the gains are limited as selling in the EUR/JPY cross continues to weigh on the major. The pair will continue to track broad based market sentiment, in absence of macro-data from the European continent. While strong consumer confidence figures, new home sales and Service PMI from the U.S docket could strengthen the case of imminent Federal Reserve interest rate hike this year. Immediate resistance is located at 1.1034 (10-DMA), break above targets 1.1083/1.1100. On the downside side, support is seen at 1.0955 (Jul-22 Low), break below could take it lower 1.0950.
USD/JPY: The Japanese yen gained more than 1 percent against the dollar, on rising expectations that the Japanese government's stimulus steps may fail to meet initial anticipations. Japan's government's projections showed that the economy will fall short of its goal of reaching nominal gross domestic product of 600 trillion yen ($5.7 trillion) in fiscal 2020, and may not achieve it even by fiscal 2024 if growth stays sluggish, which adds further pressure on policymakers to revive the economy. The dollar trades 1.4 percent lower at 104.32 yen, its lowest since July 14. Markets will continue to absorb the latest headlines from PM Abe and government forecasts ahead of the U.S. macro data due later in the day. Immediate support is located at 104.00, break below could drag it till 103.54. On the higher side, resistance is seen at 106.02, break above targets 106.53.
GBP/USD: Sterling declined after BoE’s MPC member Weale said that monetary policy action in August would not strengthen economy straight away, and any further action is unlikely to pull Britain out from recession if growth starts to contract. The major trades 0.1 percent lower at 1.3113, having breached 1.3100 handle to hit a low of 1.3082 earlier in the session. Attention now shifts towards the UK's BBA mortgage approvals data ahead of the U.S. economic releases. Immediate support is located at 1.3047, break below could take it lower 1.3000. On the higher side, resistance is seen at 1.3181 (10-DMA), break above targets 1.3290. Against the euro, the pound trades 0.2 percent lower at 83.85 pence.
AUD/USD: The Australian dollar regained 0.7500 handle, largely on the back of broad based USD selling pressure. The Aussie advanced 0.7 percent to 0.7519, retreating from a low of 0.7442 touched last week on expectations of further easing by the Reserve Bank of Australia. Markets now await quarterly CPI release on Wednesday, which would determine if RBA would ease monetary policy August 11 to combat deflationary pressure. Traders will also eye the outcome of FOMC meeting, where it is expected to stand pat; however, investors will look for further cues over prospects of any further rate-hike during 2016. Immediate resistance is located at 0.7550, break above targets 0.7575/0.7592. On the lower side, support is seen at 0.7451, break below could take it till 0.7407.
NZD/USD: The New Zealand dollar rallied after the economy recorded a trade surplus of NZD 127 million in the month of June, surpassing forecasts of NZD 125 million. On an annual basis, trade deficit narrowed to NZD 3.3 billion from May’s NZD 3.6 billion. The value of exports declined to NZD 4.26 billion, while imports dropped to NZD 4.13 billion in June. The Kiwi trades 0.9 percent higher at 0.7057, extending gains above 0.7000 handle. Markets will continue to digest the trade balance data, ahead of the U.S. consumer confidence figures, new home sales and Service PMI. Immediate resistance is located at 0.7083 (10-DMA), break above targets 0.7100 handle. On the lower side, support is seen at 0.6974 (Jul-22 Low), break below could take it till 0.6950.
Equities Recap
Asian shares were volatile as markets remained cautious ahead of central bank meetings in the United States and Japan, which strengthened the demand for the safe-haven Japanese yen.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent, still consolidating after touching fresh 9-month highs.
Tokyo's Nikkei slumped 1.43 pct at 16,383.04, Australia's S&P/ASX 200 index ended down 0.06 pct at 5,530.00 points and Seoul shares gained 0.74 pct.
Shanghai composite index trades 0.1 percent down at 3,008.40 points, while CSI300 index trades flat at 3,233.39 points.
Hong Kong’s Hang Seng was trading 1.1 percent higher at 22,245.10 points. Taiwan shares edged up 0.4 pct at 9,024.79 points.
Commodities Recap
Oil prices gained, pulling away from a near 3-month low touched on Tuesday, amid rising concerns over ongoing oversupply, which raised markets expectation on further price falls. International Brent crude oil was trading 0.3 percent up at $44.79 per barrel by 0620 GMT. U.S. West Texas Intermediate crude was at $43.16, up just 3 cents per barrel.
Gold price edged up, as the dollar weakened and equities eased ahead of Federal Reserve and BoJ policy meetings in this week. Spot gold trades 0.3 percent higher at $1,319.13 an ounce at 0620 GMT, having declined 0.5 percent on Monday. U.S. gold was little changed at $1,319.10 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5576 percent down by 0.015 bps, while 5-year was 0.01 bps lower at 1.1266 percent.
The Australian government bonds remained nearly flat s investors were eagerly waiting for the latest second-quarter inflation figures. The yield on the benchmark 10-year Treasury note hovered around 1.92 percent mark and the yield on short-term 2-year note jumped more than 1-1/2 basis points to 1.562 percent.
The New Zealand government bonds closed modestly higher as investors had anticipated further easing from the Reserve Bank of New Zealand (RBNZ) in its upcoming policy meeting in wake of rising deflationary pressure. The yield on benchmark 10-year bond slid 1 basis point to 2.235 percent, the yield on 7-year note dipped 1/2 basis point to 1.985 percent and the yield on short-term 2-year note ended 1 basis point lower at 1.870 percent.
Canadian government bond prices were mostly lower across the maturity curve, although prices for 20-year and 30-year bonds rose. The 2-year price slipped 3 Canadian cents to yield 0.578 percent and the benchmark 10-year lost 7 Canadian cents to yield 1.107 percent. The Canada-U.S. 2-year bond spread widened to -16.1 basis points, while the 10-year spread was -46.8 basis points.
