Market Roundup
• IMF cuts world economic growth forecasts on tariff war, emerging market strains.
• Trump repeats threat of more tariffs if China retaliates on trade.
• Britain sees Brexit progress, again calls on EU to "meet us halfway".
• UK and EU could agree terms of Brexit divorce by Monday - Dow Jones.
• U.S. labor market hot, jobs hard to fill -Fed's Harker.
• US Sep NFIB Business Optimism Idx, 107.90, 108.80 previous.
• US 6 Oct w/e Redbook m/m, 0.4%, 0.3% previous.
• US 6 Oct w/e Redbook y/y, 6.5%, 5.7% previous.
• Italy's Savona says budget could change due to market pressure –Ansa.
• Argentine peso extends rally; central bank debt a worry.
• CA Sep House Starts, Annualized, 188.7k, 210.0k forecast, 201.0k previous, 198.8 revised.
Looking Ahead - Economic Data (GMT)
• 9 Oct 21:45 New Zealand Sep Electronic Card Retail Sales mth, 1.0% previous
• 9 Oct 21:45 New Zealand Sep Elec Card Retail Sales y/y, 6.3% previous
• 9 Oct 23:30 Australia Oct Consumer Sentiment, -3.0%
• 9 Oct 23:50 Japan Aug Machinery Orders m/m, -4.0% forecast, 11.0% previous
• 9 Oct 23:50 Japan Aug Machinery Orders y/y, 1.6% forecast, 13.9% previous
Looking Ahead - Events, Other Releases (GMT)
• Oct 10 N/A Riksbank’s Henry Ohlsson visits the Western Sweden Chamber of Commerce in Gothenburg, Sweden.
• Oct 10 16:15 Chicago Fed’s Charles Evans speaks on the economy at a Flint & Genesee Chamber of Commerce luncheon in Flint, Michigan
• Oct 10 09:00 BoE’s Andy Haldane speaks at a conference in London.
Currency Summaries
EUR/USD is likely to find support at 1.1400 levels and currently trading at 1.1491 levels. The pair has made session high at 1.1503 and hit lows at 1.1428 levels. The euro recovered from seven-week low against the U.S. dollar on Tuesday as investors positioned themselves as concerns persisted about a row in the European Union over Italy's budget kept investors cautious. The euro was also helped by a Dow Jones report that an agreement on the terms for Britain to leave the economic bloc may be reached. The euro has tended not to budge in response to spikes in Italian bond yields triggered by developments in the dispute, with investors judging that Rome's spending plans will not impact the monetary policy of the European Central Bank. But the threat of a showdown along with weakness in stock markets worldwide has seen traders who had bet on a fourth quarter euro rebound ditch the single currency. Italian Economy Minister Giovanni Tria struck a resolute tone on his controversial budget plans in Rome's parliament and that saw Italy's benchmark 10-year government bond yield move towards a 4-1/2-year high. Italy's Deputy Prime Minister on Monday denounced European Commission President Jean-Claude Juncker and Economics Commissioner Pierre Moscovici as enemies of Europe. The euro fell to a seven-week low of $1.1432. It was last at $1.1493, up 0.08 percent.
GBP/USD is supported in the range of 1.3050 levels and currently trading at 1.3135 levels. It reached session high at 1.3150 and dropped to session low at 1.3045 levels. Britain's pound rose against the dollar on Tuesday after Dow Jones reported that the UK and European Union were making progress in Brexit talks and divorce terms could be settled next week. The report said both parties had narrowed their differences around the Irish border but some differences remained. Britain is due to leave the EU in March, but talks on managing the unprecedented split have been stalled over differences on how to avoid border checks between EU-member Ireland and Britain's province of Northern Ireland. Many investors have preferred to sit on the sidelines rather than try to profit amid the political unpredictability and the currency's sharp price swings. The pound rose 0.4 percent to hit $1.3143, after trading at around $1.31 before the report. Against the euro sterling rose 0.4 percent to 87.38, its highest level since June 21.Sterling has done well against the euro in recent weeks, partly as concerns about a row between Brussels and Rome over Italy's proposed budget deficit targets have added to the euro's woes in recent session.
USD/CAD is supported at 1.2905 levels and is trading at 1.2944 levels. It has made session high at 1.2997 and lows at 1.2935 levels. The Canadian dollar edged higher against its U.S. counterpart on Tuesday, clawing back its losses from earlier in the session as oil prices rose and the recent move higher in U.S. Treasury yields stalled. U.S. long-dated Treasury yields fell from multi-year highs in choppy trading as investors took a breather from selling bonds. Higher interest rates and the U.S.-China trade war are among factors that are diminishing prospects for economic expansion, said the International Monetary Fund as it cut its forecast for global growth in 2018 and 2019.Canada's economy could suffer if global growth slows, since it exports many commodities, including oil. The loonie declined 0.3 percent last week despite a deal to revamp the North American Free Trade Agreement and data on Friday showing a jump in domestic jobs. On the data front, Canadian housing starts fell in September to a seasonally adjusted annualized rate of 188,683 units, the third straight month of decline, data on Tuesday from the Canadian Mortgage and Housing Corp showed. Economists had expected starts to rise to 210,000. The Canadian dollar was last trading 0.1 percent higher at 1.2943 to the greenback, or 77.26 U.S. cents.
USD/JPY is supported around 112.54 levels and currently trading at 112.96 levels. It peaked to hit session high at 113.31 and made session lows at 112.91 levels. Japanese yen strengthened against the U.S. dollar on Tuesday as simmering anxiety about higher U.S. bond yields, the Sino-U.S. trade war and political turmoil in Europe increased demand for safe heaven Japanese yen. Investors dumped U.S. bonds last week on fears that domestic inflation might accelerate and prompt the Federal Reserve to hasten the pace of interest rate hikes. Federal Reserve Bank of Dallas President Robert Kaplan also expressed some concern about the jump in U.S. yields, noting it suggests "conflicting factors" and along with a proposed new North America Agreement trade agreement has created uncertainty among investors over future economic growth prospects. Meanwhile, U.S. President Donald Trump repeated a threat to impose tariffs on $267 billion worth of additional Chinese imports if Beijing retaliates for the recent levies and other measures the United States has taken in the countries' escalating trade war. The dollar index fell 0.08 percent, with the euro up 0.03 percent to $1.1494. The Japanese yen strengthened 0.24 percent versus the greenback at 112.92.
Equities Recap
European shares managed to end a choppy session in positive territory and above 6-month lows on Tuesday as concerns about a likely clash in Europe over Italy's budget plans eased and heavyweight energy stocks lifted benchmarks.
The UK's benchmark FTSE 100 closed up by 0.1 percent, FTSEurofirst 300 ended the day up by 0.34 percent, Germany's Dax ended up by 0.3 percent, and France’s CAC finished the up by 0.5 percent.
The Dow and S&P 500 ended slightly lower on Tuesday as investors, worried about global growth prospects, fled from materials and industrials stocks but falling bond yields kept declines in check in the three major indexes.
Dow Jones closed down by 0.20 percent, S&P 500 ended down 0.13 percent, Nasdaq finished the day up by 0.05 percent.
Treasuries Recap
U.S. long-dated Treasury yields fell on Tuesday in choppy trading, as investors took a respite from selling bonds that took rates to multi-year highs following recent economic data and on interest rate prospects over the next year and a half.
U.S. 10-year yields were last at 3.204 percent, down from 3.227 percent late on Friday. Earlier in the session, 10-year yields hit 3.261 percent, the highest since early May 2011.
U.S. 30-year yields were at 3.363 percent, after earlier rising to 3.446 percent, its strongest since July 2014. Last Friday, the 30-year yield was at 3.397 percent.
U.S. 7-year yields also rose earlier, hitting 3.199 percent, the highest in 8-1/2 years. It was last at 3.148 percent.
Commodities Recap
Oil prices rose about one percent on Tuesday on growing evidence of falling Iranian crude exports before the imposition of new U.S. sanctions, as well as a partial production shutdown in the Gulf of Mexico because of Hurricane Michael.
Brent crude futures rose $1.09 to settle at $85.00 a barrel, a 1.30 percent gain. The global benchmark hit a four-year high of $86.74 last week but slipped as low as $82.66 on Monday.
U.S. West Texas Intermediate (WTI) crude futures rose 67 cents to settle at $74.96 a barrel, a 0.90 percent gain.
Gold was steady on Tuesday as pressure from the dollar's strength and a bullish U.S. rate outlook was balanced by falling stock markets.
Spot gold was unchanged at $1,188.20 per ounce as of 1422 p.m. EDT (1822 GMT), after earlier touching its lowest since Sept. 28 at $1,183.04.
U.S. gold futures settled up $2.9, or 0.24 percent, at $1,191.5 an ounce.
