Market Roundup
- BREXIT jitters hit stocks hard-FTSE off 1.9%, DAX down 2.1%
- EUR/USD -0.2%, USD/JPY -0.3%, GBP/USD -0.05%, NZD/USD -0.08%
- DXY +0.1%, CAC -1.9%, Brent -1.4%, Gold -0.25%
- Germany May Final HICP 0.0% y/y vs 0.0% exp, 0.0% previous
- Germany May Final CPI 0.1% y/y vs 0.1% exp, 0.1% previous
- UK Apr Construction Output -3.7% y/y vs -4.8% exp, -4.5% previous
- BoE May survey 41% of public exp rate rise in nxt 12-mths vs 38% last
- Ladbrokes & William Hill-3/1 Britain votes to leave EU, 1/4 Britain votes to remain
- Labour MP & TSC member John Mann advocates Brexit, in The Sun
- 80% of BT.com readers are planning to vote to leave EU on June 23
- OECD says ECB should ease further if infl. remains below tgt longer than expected
- Russian CB cuts key rate 0.5% to 10.5%-Risk infl. will not reach target
- Japan EconMin Ishihara – Closely eyeing UK EU membership vote
- BPCE launches Y60.6 bln 3-tranche samurais via Daiwa, MUFJ/MS et al – IFR
- Lipper – Investors pull money from US-based stock funds for 6th straight week
- Lipper strong inflows into bond, emerging market funds at rate fears ebb
Economic Data Preview
- (0830 ET/1230 GMT) The Canadian economy is likely to have added 3,800 jobs in May, recovering from the loss of -2,100 jobs it witnessed the month before and keeping the unemployment rate unchanged at 7.1 percent.
- (0900 ET/1300 GMT) Mexican industrial output is expected to have declined 0.1 percent for a third month in a row in April after falling 0.2 percent in March. The annual output is expected to have increased 0.8 percent from a drop of 2 percent in March.
- (1000 ET/1400 GMT) The University of Michigan is likely to report that U.S. preliminary consumer sentiment index edged down 94.0 in June compared to a final reading of 94.7 in May.
- (1400 ET/1800 GMT) The Treasury Department issues a monthly budget report for the month of May, which is likely to show a deficit of $60 billion compared to a $106 billion surplus in April.
Key Events Ahead
- (1500 ET/1900 GMT) Tentative O/R Agency Mtg-Backed Secs Ops Schedule.
FX Beat
USD: The dollar index, against a basket of currencies stood 0.1 percent higher at 94.22 and on track for a modest weekly gain of 0.3 percent.
EUR/USD: The euro declined below the 1.1300 level, nearing the 1.1280 mark. The major was weighed down by risk-aversion sentiment and growing concerns that Britain could vote to leave the European Union. The pair trades lower at 1.1305, pulling away from a low 1.1280 touched earlier in the session. On the higher side resistance is around 1.133 (hourly Tenken-Sen) and any violation above will take the pair to next immediate resistance 1.13650 (61.8% retracement of 1.14154 and 1.1.12818)/1.1400 in the short term. The support is at 1.1270 and break below targets 1.1240 (21 day MA)/1.12150 (100 day MA).
USD/JPY: The Japanese yen gained as the dollar failed to sustain gains above the 107 level. The yen continues to rise on risk-off sentiment prevailing across global financial markets, as investors remain cautious ahead of next week's monetary policy decisions from US Federal Reserve and the Bank of Japan. Markets now await U.S. prelim consumer sentiment data for further momentum on the pair. The greenback trades 0.2 percent lower at 106.81, hovering towards session low of 106.67. The short term trend is weak as long as resistance 108 holds. The major resistance is around 108 and any break above confirms minor trend reversal, a jump till 109/109.55. On the lower side minor support is around 106.60 any break below 106.60 will drag the pair till 105.80/105.50.
GBP/USD: Sterling edged lower as the cost of hedging against swings in sterling's exchange rate rose to the highest in seven years on worries that Britain will vote to leave the European Union. Better-than-expected Britain’s consumer inflation expectations and construction output failed to strengthen the major. The economy's consumer inflation expectations rose 2.0 percent from 1.8 percent prior, while construction output for the month of April increased 2.5 percent versus market consensus of 1.7 percent gain and previous 3.6 decline. Sterling trades 0.2 percent lower at 1.4424, having touched a low of 1.4410 earlier in the session. Against the euro, the pound trades at 78.33 pence. The short term trend is weak as long as resistance 1.4525 (200 day 4H MA) holds. Any break above 1.45250 will take the pair till 1.4580/1.4660. The minor resistance is around 1.4480. On the lower side any break below 1.4440 will drag it till 1.4350/1.4330.
USD/CHF: The Swiss franc nudged up against the euro and dollar, on risk-aversion sentiments as Britain could vote to leave the European Union at a referendum in less than two weeks' time. It has gained 1.6 percent over the past five days, its biggest 5-day gain since March 2015, hitting an 8-week high of 1.0879 franc per euro earlier in the session. It last stood at 1.08886, on track for a weekly increase of 1.8 percent. Against the dollar, it was trading up at 0.9638. Any break below 0.9580 will drag the pair down till 0.9540/0.9500 in the short –term. On the higher side any break above 0.9660 will take it till 0.9695/0.9745. Overall bearish invalidation is only above 0.9960.
AUD/USD: The Australian dollar declined, breaching the 0.7400 level on the back of downbeat Chinese CPI report. The Aussie was also weighed down by broad U.S. dollar rebound amid global risk-off environment. The major trades 0.4 percent lower at 0.7401, having touched a low of 0.7391 earlier in the session. The pair faces strong support at 90 day EMA and any break below confirms minor trend reversal. On the higher side, it facing resistance at 0.7440 and any break above major resistance will take it till 0.7480/0.7515. The major support is around 0.7380 and break below will drag the pair till 0.73200/0.7260.
NZD/USD: The New Zealand dollar slipped to 0.7084, pulling slightly away from a 1-year peak of 0.7147 touched on Thursday. The kiwi retreated from recent highs on renewed risk-off sentiments and broad dollar rebound against its major peers. The major trades 0.1 percent lower at 0.7091, hovering towards sessions low, however, it is still on track for weekly gains. Immediate support is seen at 0.7020 (5-DMA), break below could take the pair lower 0.7000 level. On the higher side, resistance is located at 0.7147 (Previous Session High).
Equities Recap
European shares slumped on the back of falling banks and commodity stocks and on growing concerns about a potential British exit from the European Union.
The MSCI's All World index which tracks shares in 46 countries was down 0.4 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.5 percent, however, remains poised for a weekly gain of 1.7 percent.
Europe's FTSEurofirst 300 declined 1.6 pct, Germany's DAX lost 2.0 pct, France's CAC 40 slipped 1.7 pct and Britain's FTSE 100 dropped 1.6 pct.
Tokyo's Nikkei dropped 0.40 pct at 16,601.36, Australia's S&P/ASX 200 index skidded 0.93 pct at 5,312.10 points, South Korea's Seoul shares edged down 0.31 pct and Hong Kong's Hang Seng index slumped 1.2 pct at 21,042.64 points.
Commodities Recap
Oil prices declined, as a stronger dollar pulled crude off 2016 highs touched in the previous session, however, support was provided by strong refinery demand and global supply disruptions. Brent oil futures were trading at $51.31 per barrel at 10114 GMT, while U.S. West Texas Intermediate futures were down 85 cents at $49.71 a barrel.
Gold edged down as the dollar hovered away from recent lows, however, it held near a 3-week high struck in the week and was on track for a second straight weekly rise. Spot gold was trading lower at $1,268.29 an ounce by 1017 GMT, after touching its highest since May 18 at $1,271.59 on Thursday . U.S. gold fell 0.3 percent to $1,268.50.
Treasuries Recap
The U.S. Treasuries saw further gains across the curve during a relatively quiet session on Friday that saw little data of great significance. Markets now look ahead to preliminary Michigan consumer sentiment and Treasury budget statement data to finish off the week on Friday. However, focus has already clearly shifted to the FOMC statement next week, accompanied by updated economic projections and followed by Fed Chair Yellen’s press conference. Although price action remains doubtful, more hawkish tones from across the FOMC spectrum have definitely highlighted an increased desire to resume policy normalization. Meanwhile, the yield on the benchmark 10-year Treasury note fell 2 basis points to 1.661 percent mark and the yield on short-term 2-year Treasury note dipped 1/2 basis point to 0.763 percent by 11:20 GMT.
UK gilts continue to hover at record low Friday, after testing its all-time low of 1.23 percent from February on Thursday and it is likely to come down to 1.20 percent in light of looming Brexit risk. In Europe and the US there are no major data releases today leaving traders to expect a continued quiet trading day ahead. Meanwhile, the yield on the benchmark 10-year gilts fell 1 basis point to 1.235 percent by 10:55 GMT.
German bunds continued to rally Friday, pushing the yield on 10-year bunds to an all time low of 0.025 percent as investors remained wary ahead of potentially seismic events this month including Britain’s referendum and the Federal Reserve meeting. Also, weak crude oil prices shifted investors’ interest towards fixed income securities. Meanwhile, the yield on the benchmark 10-year bonds fell 1 basis point to 0.029 percent by 09:35 GMT.
Japanese 10-year government bonds hit a fresh all-time low of minus 0.14 percent on Friday, following global debt prices as investors wary ahead of potentially seismic events this month including Britain’s referendum on European Union membership, Bank of Japan and the Federal Reserve meeting. Also, weak equities and tumbling crude oil prices drove investors towards safe-haven buying. The yield on the benchmark 10-year bonds fell nearly 2 basis points to -0.141 percent, yield on super long 40-year bonds also dipped more than 1-1/2 basis point to 0.333 percent and the yield on short-term 2-year bonds tumbled 2 basis point to -0.267 percent by 07:00 GMT.
Australian bonds traded modestly lower on Friday as investors remain uncertain about the global economic outlook and the near-term path of BoJ and US interest rates. Also, UK decision on whether to remain in the European Union on June 23 is also weighing on investors’ minds. The yield on the benchmark 10-year Treasury note rose more than ½ basis points to 2.118 percent, super-long 15-year bonds yield climbed 1 basis point to 2.355 percent and the yield on short-term 2-year bond jumped more than 1-1/2 basis points to 1.673 percent by 05:25 GMT.
New Zealand government bonds closed higher to finish off the week on Friday as investors wary ahead of potentially seismic events this month including Britain’s referendum on European Union membership, Bank of Japan and the Federal Reserve meeting. Also, weak crude oil prices shifted investors towards safe-haven assets. The yield on the benchmark 10-year bonds fell 3-1/2 basis point to 2.585 percent.
