Market Roundup
- Japan PM Abe postpones sales tax hike until Oct 2019
- BoJ Gov Kuroda – Important for Japan to aim for budget surplus by FY 20 - Hokkaido Shimbun
- Japan May mfg PMI 47.7, flash 47.6, April 48.2, new orders 44.7, flash 44.1
- Japan MoF survey – Q1 CAPEX +4.2% y/y
- China May Caixin mfg PMI 49.2, 49.3 eyed, April 49.4, 15th contraction month
- China push in international bonds to support weakening renminbi - FT
- Fonterra dairy auction result due circa 1400GMT. Modest GDT price rise expected
- Euro Zone May Markit Mfg final PMI 51.5 vs 51.5 previous, 51.5 exp
- German May Markit/BME Mfg PMI 52.1 vs 52.4 previous, 52.4 exp
- 41% of Brits want to remain in EU, 41% want to leave – YouGov poll for The Times
- Paddy Power-5/2 Britain votes to leave EU, 1/3 Britain votes to remain
- UK May Markit Mfg PMI 50.1 vs 49.2 previous, 49.6 exp
- Swiss Q1 GDP slightly below f/c at +0.1% q/q and +0.7% y/y
- Swiss Retail sales remain weak: April sales -1.9% y/y, March rvsd lower to -1.6%
- Swiss May PMI beats at 55.8 vs f/c 54.0 on gains in orders, prices
- Norway’s PM says weak NOK and spending help economy
Economic Data Preview
- (0900 ET/1300 GMT) Markit is expected to report that Brazil's Purchasing Managers' Index declined to a seasonally adjusted 42.6 in April, the lowest since 2009, from 46.0 in March.
- (0930/1330) The RBC reports its Canadian Manufacturing Purchasing Managers' index for the month of May. The index stood at 52.2 in April.
- (0945 ET/1345 GMT) Markit releases its final U.S. Manufacturing Purchasing Managers' Index for the month of May. The index stood at 50.5 in April.
- (1000 ET/1400 GMT) The Institute for Supply Management's national factory activity index is expected to edge down to 50.4 in the month of May from a reading of 50.8 in April.
- (1000 ET/1400 GMT) The Commerce Department is likely to report that U.S. construction spending increased 0.6 percent in April, compared with 0.3 percent gain in March.
- (1330 ET/1730 GMT) The U.S. automobile sales are likely to have summed up to 17.30 million in May. Auto sales rose to a 17.42 million-unit pace in April, compared with a 16.57 million-unit rate in March.
- (1400 ET/1800 GMT) The Fed issues its Beige Book, a compendium of anecdotes on the health of the economy.
- (1400 ET/1800 GMT) Brazil is likely to post a trade surplus of $5.50 billion.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade Ops30-yr F.Mae/Fr.Mac max $2.375 bln.
FX Beat
USD: The dollar index, against a basket of currencies trades 0.4 percent lower at 95.38, pulling further away from a high of 95.90 struck on Monday.
EUR/USD: The euro trades 0.3 percent higher at 1.1161, hovering away from a 2-1/2-month low of 1.1097 touched on Monday. The major was strengthened after eurozone's markit manufacturing PMI for the month of May stood unchanged at 51.5, in-line with market consensus and previous reading. The pair continues to rise, drifting closer to sessions’ high of 1.1167. The short term trend is slightly weak as long as 1.1170 (200 day HMA) holds. Any break above 1.1170 will take the pair to next level at 1.12168/1.12427 (May 23rd high). On the lower side major support is around 1.1100 and break below targets 1.1050/1.1000.
USD/JPY: The Japanese yen advanced against the dollar, after Japanese Prime Minister Shinzo Abe told lawmakers that he had decided to delay a scheduled sales tax hike by 2-1/2 years. The yen rose 1.2 percent to 109.30 yen, off a -month high of 111.45 struck on Monday. The greenback continues to decline, hovering towards session’s low of 109.22. The pair faces resistance around 110.50 (55 day EMA) and break above will take the pair till 111.50/112/112.80. On the lower side major support is around 109 (21 day MA) and any break below will drag the pair till 108/107.40.
GBP/USD: Sterling continues to decline, extending previous session losses, on worries that the campaign for Britain to leave the European Union was gaining lead. On Tuesday, two surveys polled by ICM showed the "Out" campaign stood three points ahead of "In" camp. Sterling trades 0.1 percent lower at 1.4461, having touched an early low of 1.4438, its weakest in nine days. Slightly-better-than-expected Britain's manufacturing purchasing managers' index (PMI) for the month of May failed to strengthen the currency. The index came in at 50.1, slightly higher than forecasts 49.6 and previous 49.2. Against the euro, pound declined to 77.22 pence, it’s weakest since May 24. Technically cable has approached near two month trend line support and any break below confirms major trend reversal. Major trend line support is around 1.4440 and any break below will drag the pair down till 1.43320 (May 16 Low)/1.4240. On the higher side resistance is around 1.4150 (21 day MA) and break above targets 1.4550/1.4600.Overall bearish invalidation only above 1.4740 (May 26 High).
USD/CHF: The Swiss franc rose against the dollar on upbeat gross domestic product and purchasing manager’s index data. The greenback trades 0.3 percent lower at 0.9899, hovering towards previous session low of 0.9886. Swiss purchasing manager’s index came in at 55.8 for the month of May versus forecast of 54.0, while gross domestic product increased 0.7 percent y/y for the first quarter versus previous 0.3 percent. On the lower side major support is around 0.9870 (10 day MA) and any break below will drag the pair till 0.9835 (200 day MA) 0.9780/0.9760 (21 day MA). The immediate resistance is at 0.9960 and break above targets 0.9980/1.000.
AUD/USD: The Australian dollar gained after the economy's first-quarter growth exceeded market forecasts and prompted investors to draw back expectations for the Reserve Bank of Australia to lower rates soon. The Aussie dollar rose to 0.7298, pulling away from a 2-1/2 month low of 0.7145 touched last week. The major was trading at 0.7252, up 0.3 percent for the day. On the higher side resistance is around 0.7300 any break above major resistance will take the pair till 0.7336/0.7380. The major support is around 0.7209 and break below will drag the pair till 0.7180/0.7150.
NZD/USD: The New Zealand dollar trades 0.6 percent higher at 0.6802, boosted by better-than-expected first quarter terms of trade data. The kiwi rose to 0.6813, pulling away from a low of 0.6675 struck on Monday. Traders now await U.S. ISM manufacturing PMI for further momentum on the major. Immediate resistance is located at 0.6830 (May-13 High), break above targets 0.6848. On the lower side, support is seen at 0.6759 (Session Low).
Equities Recap
European shares were weighed down by a near 2 percent drop in the resources sector as declining oil prices hurt energy-related shares and a series of disappointing economic data weakened demand for riskier assets.
MSCI world equity index, which tracks shares in 45 countries, lost 0.1 percent, while the STOXX Europe 600 index fell 0.5 percent.
Europe's FTSEurofirst 300 was down 0.2 pct in early deals, Germany's DAX and France's CAC 40 both lost 0.7 pct and Britain's FTSE 100 declined 0.6 pct.
Tokyo's Nikkei slumped 1.62 pct to 16,955.73, Australia's S&P/ASX 200 index declined 0.96 pct to 5,327.00 points and MSCI Asian-Pacific shares outside Japan shed 0.1 percent
Shanghai Composite index edged down 0.1 pct to 2,913.51 points, while CSI300 index dropped 0.3 pct at 3,160.55 points. Hong Kong’s Hang Seng index also ended down 0.3 pct at 20,760.98 points.
Commodities Recap
Oil prices declined on expectations of OPEC inaction on output, while growing worries about Chinese economy weighed on the demand outlook. Brent crude was at $49.11 per barrel at 1032 GMT, while U.S. crude futures were down 74 cents at $48.36 a barrel.
Gold held steady, supported by an easing dollar and weaker Asian stocks. Spot gold was little changed at $1,215.57 an ounce at 1034 GMT. It had gained 0.8 percent on Tuesday, its biggest single-day percentage gain since May 13. U.S. gold was nearly flat at $1,218.50.
Treasuries Recap
The U.S. Treasuries pushed higher across the curve alongside equity market weakness in the wake of weaker than expected Chicago PMI and Conference Board consumer confidence releases that showed continued struggles in manufacturing and a less than positive outlook from consumers. Nevertheless, data was only part of the story as greater focus was paid to struggles in equities. The yield on the benchmark 10-year Treasury note fell 1 basis point to 1.825 percent by 11:30 GMT.
The European bonds mixed as investors await European Central Bank (ECB) monetary policy. The benchmark German 10-year bonds yield, which moves inversely to its price fell 2 basis points to 0.130 percent, French 10-year bunds yield dipped 1-1/2 basis points to 0.471 percent, Irish 10-year bonds yield moved down 2 basis points to 0.757 percent, Italian equivalents inched rose 1 basis points to 1.382 percent, Netherlands 10-year bonds yield tumbled 1 basis points to 0.345 percent, Portuguese 10-year bonds yield up 1 basis point to 3.089 percent, Spanish 10-year bonds yield ticked higher 1 basis point to 1.499 percent and British 10-year bonds yield fell 2 basis points to 1.411 percent by 09:20 GMT.
The German bunds gained as investors poured into safe-haven instruments amid losses in riskier assets including crude oil and stocks. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 1 basis point to 0.135 percent by 08:35 GMT. The Russian 10-year bonds slumped on Wednesday, following weak cues emerging from crude oil prices, pushing the yield of 10-year bonds higher 7 basis points to 8.950 percent by 10:40 GMT.
The Japanese long-term bonds traded lower after BoJ announced that it would buy less in some bond zones under its asset purchase programme. The yield on the benchmark 10-year bonds, which moves inversely to its price, hovered at -0.0110 marks, yield on super-long 40-year bonds jumped 3 basis points to 0.404 percent and 30-year bonds yields also climbed 3 basis points to 0.332 percent by 07:10 GMT.
The UK gilts strengthened as Brexit fears and global growth angst continue to weigh on the markets. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 3 basis points to 1.405 percent and the yield on the short-term 2-year bonds also dipped 2 basis points to 0.410 percent by 10:00 GMT.
The Australian bonds traded modestly firmer, despite data showed higher than expected first quarter Gross Domestic Product (GDP) figure, which reduces the possibilities for a June cut. On the contrary, tumbling crude oil prices and weak equities shifted investors towards safe-haven buying. The yield on the benchmark 10-year Treasury note which moves inversely to its price fell 1 basis point to 2.312 percent and short-term 2-year bonds yield also dipped 1 basis point to 1.689 percent by 05:15 GMT.
