Market Roundup
• Fed Governor Quarles eyes a bit more dovish policy path.
• Fed's current policy path would boost recession risk –Bullard.
• US 13 Oct w/e Initial Jobless Claims, 210k, 212k forecast, 214k previous, 215k revised
• US 13 Oct w/e Jobless Claims 4-Wk Avg, 211.75k, 209.50k previous, 209.75 revised
• US 6 Oct w/e Continued Jobless Claims, 1.640M, 1.665M f'cast,1.660M previous, 1.653M revised
• US Oct Philly Fed Business Index, 22.2, 20.0 forecast, 22.9 previous
• Italy defends budget as EU warns of "unprecedented" rules breach
• ECB's Draghi: undermining EU budget rules carries high price for all
• Despite "big gaps", Britain and EU talk up Brexit prospects
Looking Ahead - Economic Data (GMT)
• 18 Oct 23:30 Japan Sep CPI Core Nationwide y/y, 1% forecast,, 0.9% previous
• 18 Oct 23:30 Japan Sep CPI Nationwide Core CPI m/m, 0.40% previous
• 18 Oct 23:30 Japan Sep CPI Overall Nationwide y/y, 1.3% previous
• 18 Oct 23:30 Japan Sep CPI Ex Fresh Fd and Eng, 0.4% previous
• 18 Oct 23:30 Japan Sep CPI m/m NSA, 0.59% previous
• 19 Oct 02:00 China Q3 GDP y/y, 6.6% forecast,, 6.7% previous
• 19 Oct 02:00 China Q3 GDP q/q SA, 1.6% forecast,, 1.8% previous
• 19 Oct 02:00 China Sep Urban Investment ytd y/y, 5.3% forecast, 5.3% previous
• 19 Oct 02:00 China Sep Industrial Output y/y, 6% forecast,, 6.1% previous
• 19 Oct 02:00 China Sep Retail Sales y/y, 9% forecast,, 9% previous
Looking Ahead - Events, Other Releases (GMT)
• 06:30 BOJ's Haruhiko Kuroda makes brief remarks at a Japanese Trust Banks Associating meeting in Tokyo
• 15:30 BoE's Mark Carney speaks at the Economic Club of New York in New York
• 16:00 Atlanta Fed's Raphael Bostic participates in armchair discussion on the economic outlook, in Macon, GA
• 16:45 Dallas Fed's Robert Kaplan speaks before Manhattan Institute event, "10 Years After the Crisis: the State of Monetary and Fiscal Policy," in New York
Currency Summaries
EUR/USD is likely to find support at 1.1429 levels and currently trading at 1.1452 levels. The pair has made session high at 1.1516 and hit lows at 1.1449 levels. The euro declined against the dollar on Thursday after the European Commission said Italy's 2019 budget draft is in serious breach of EU budget rules. The Commission said in a letter to Economy Minister Giovanni Tria, published on its website, that planned government spending was too high, the structural deficit - excluding one-offs and business cycle effects - would rise instead of fall, and that Italian public debt would not fall in line with EU rules. The single currency also dropped as summit talks in Brussels failed to resolve a Brexit standoff between London and the EU over the status of the Irish border, an issue playing an increasingly dominant role in negotiations. On the data front, new applications for U.S. unemployment benefits dropped last week and the number of Americans on jobless rolls fell back to levels last seen in 1973, suggesting a further tightening in labor market conditions. Initial claims for state unemployment benefits decreased 5,000 to a seasonally adjusted 210,000 for the week ended Oct. 13, the Labor Department said. Claims fell to 202,000 during the week ended Sept. 15, which was the lowest level since November 1969.
GBP/USD is supported in the range of 1.3000 levels and currently trading at 1.3019 levels. It reached session high at 1.3107 and dropped to session low at 1.3014 levels. Sterling declined against the dollar on Thursday as summit talks in Brussels failed to resolve a Brexit standoff between London and the EU over the status of the Irish border, an issue playing an increasingly dominant role in negotiations. Prime Minister Theresa May said late in the day that a solution to the impasse might come through the option of extending the Brexit transition period. But that failed to lift the British currency from lows hit after she earlier said European Union proposals for avoiding a hard Irish border were unacceptable. A flurry of data this week, including the strongest wage growth for a decade, have briefly focused traders' attention on the UK economy and away from Brexit negotiations, although investors say the pound remains at the mercy of the talks. On Thursday, data showed UK retail sales fell by the most in six months in September. The sales volumes dropped by 0.8 percent in September from August a bigger fall than economists had expected in a poll after the largest decline in food purchases since October 2015, official data showed. Sterling fell as low as $1.3057, down 0.4 percent on the day, from near $1.31 before May spoke, and dropped 0.3 percent versus the euro to 88.03 pence.
USD/CAD is supported at 1.2950 levels and is trading at 1.3081 levels. It has made session high at 1.3087 and lows at 1.3018 levels. The Canadian dollar weakened to a five-week low against its U.S. counterpart on Thursday as the greenback broadly climbed and oil prices added to a sharp decline the previous day. The price of oil was pressured by an escalating trade dispute between China and the United States and data showing ample supplies. U.S. crude oil futures settled 1.6 percent lower at $68.65 a barrel. Canada added 28,800 jobs in September, helped by a pickup in hiring in the trade, education and health care industries, according to a report from ADP released on Thursday. The number of jobs added in August was revised higher to 42,700 from 13,600, ADP said. The report, which is jointly developed with Moody's Analytics, is derived from ADP's payrolls data of about 40,000 companies. The U.S. dollar added to this week's gains against a basket of currencies, encouraged by Federal Reserve minutes signaling more interest rate hikes in store. Canadian inflation data for September and the August retail sales report are due on Friday, which could help guide expectations for additional interest rate hikes from the Bank of Canada. The Canadian dollar was last trading 0.2 percent lower at 1.3081 to the greenback.
USD/JPY is supported around 111.60 levels and currently trading at 112.16 levels. It peaked to hit session high at 112.60 and made session lows at 111.93 levels. The dollar weakened against the Japanese yen on Thursday as concerns over Italy's budget and the escalating Sino-U.S. trade war saw investors seek refuge in safer assets like Japanese yen. U.S. Treasury Secretary Steven Mnuchin pulled out of an investor conference in Saudi Arabia as the White House awaited the outcome of investigations into the disappearance of Saudi journalist Jamal Khashoggi. Mnuchin's decision sparked worries of potential strain in U.S.-Saudi relations, especially if Saudi leaders were found to have been involved in Khashoggi's disappearance. Investors raised concern that if Saudi Arabia were sanctioned, it could restrict oil supply, prompting a rise in energy prices. A warning from European Central Bank President Mario Draghi about undermining the European Union's budget rules, also weighed on investor sentiment toward holding risky assets. The greenback was bolstered at the outset of quantitative easing as the United States took the first steps toward repairing its economy after the financial crisis. As other regions such as the Eurozone get closer to rate increases, the relative opportunities may shift in Europe.
Equities Recap
European shares swung back into the red on Thursday as fears of rising rates and disappointing earnings from U.S. industrials dragged Wall Street down, while HeidelbergCement's profit warning sank European construction stocks.
The UK's benchmark FTSE 100 closed down by 0.3 percent, FTSEurofirst 300 ended the day down by 0.51 percent, Germany's Dax ended down by 1 percent, and France’s CAC finished the down by 0.5 percent.
U.S. stocks fell more than 1 percent on Thursday as the European Commission issued a warning regarding Italy's budget and concerns mounted over the possibility of strained relations between the United States and Saudi Arabia, further denting investors' appetite for risk amid global trade tensions and rising interest rates.
Dow Jones closed down by 1.28 percent, S&P 500 ended down 1.45 percent, Nasdaq finished the day up by 2.09 percent.
Treasuries Recap
U.S. Treasury yields slipped on Thursday as safe-haven demand fueled by more losses on Wall Street mitigated selling tied to worries about further interest rate increases from the Federal Reserve.
The benchmark 10-year Treasury yield was 3.173 percent, 0.6 basis point lower than late Wednesday. It reached a one-week peak of 3.179 percent earlier Thursday, which was below a 7-1/2 year peak of 3.261 percent reached last week.
The 30-year yield was the exception among maturities. It was 3.357 percent, up about 1 basis from late Wednesday following weak demand at a $5 billion auction of 30-year Treasury Inflation Protected Securities (TIPS).
Commodities Recap
Gold rose on Thursday as renewed weakness in global stock markets spurred investors to seek refuge in bullion, which has also been helped by an improved technical outlook.
Spot gold rose 0.3 percent to $1,226.11 per ounce at 2:53 p.m. EDT (1853 GMT). U.S. gold futures settled up $2.7, or 0.22 percent, at $1,230.10 an ounce.
Oil prices fell on Thursday as investors' concerns returned to the impact an escalating trade row between China and the United States will have on oil demand growth and data showing ample supplies.
Brent crude settled at $79.29 per barrel, down 76 cents. U.S. crude was down $1.10, or 1.6 percent, at $68.65.
