Market Roundup
- Japan seen cutting tax view in a test for Abenomics - Nikkei.
- Japan Nov monetary base +22.2% y/y to Y419.84 trln, a fresh record high.
- Japanese unions look to keep wage demands at ’16 levels – Nikkei.
- CBA issues Y20 bln ’26 subordinated notes – Reuters.
- PBOC CNY fix 6.8794 vs USD, yesterday 6.8958.
- HKMA – Yuan deposits see a noticeable drop in first 3 weeks of Nov – Reuters.
- Foreign CB US debt holdings +$6.369 bln to $3.126 trln Nov 30 week, Treasury holdings +$4.458 bln to $2.802 trln, agencies +$2.362 bln to $264.425 bln.
- NY Fed swaps with foreign CBs $1.34 bln Nov 30 week, all with ECB.
- Lipper – Investors yank $3 bln from US-based bond funds during week.
- US Nov light vehicles sales 1.38 mln units, +3.7% y/y, steep discounts helped, 17.87 mln SAAR, Oct 18.02 mln – Autodata.
- Australia Oct retail sales +0.5% m/m, +0.3% forecast, Sept +0.6%.
Economic Data Ahead
- (0145 ET/0645 GMT) Switzerland Q3 GDP, +0.3% q/q, +1.8% y/y forecast; last +0.6%, +2.0%.
- (0200 ET/0700 GMT) Norway Nov unemployment, 2.8% nsa, 101.64k forecast; last 2.8%, 101.44k.
- (0300 ET/0800 GMT) Spain Nov unemployment, -25.6k forecast; last +44.7k.
- (0330 ET/0830 GMT) Sweden Q3 current account balance; last SEK36.0 bln surplus.
- (0430 ET/0930 GMT) Great Britain Nov PMI construction, 52.2 forecast; last 52.6.
- (0500 ET/1000 GMT) Eurozone Oct producer prices, +0.2% m/m, -1.0% y/y forecast; last +0.1%, -1.5%.
- (0830 ET/1330 GMT) United States Nov non-farm payrolls, +175k forecast; last +161k.
- (0830 ET/1330 GMT) United States Nov unemployment, 4.9% forecast; last 4.9%, participation 62.8%.
- (0830 ET/1330 GMT) United States Nov average earnings/work week, +0.2% m/m, 34.4 hrs forecast; last +0.4%, 34.4.
- (0945 ET/1445 GMT) United States Nov New York ISM index; last 719.3.
Key Events Ahead
- N/A Tokyo ADP conference, various speakers, attendees (final day).
- N/A BoE Chief/Econ Haldane speaks in Middlesbrough.
- N/A Washington, DC TOFR/Cleveland Fed conference (final day).
- (0500 ET/1000 GMT) Sweden 0.25/0.125% 2022/26 inflation-linked government bond auctions.
- (0600 ET/1100 GMT) UK DMO GBP0.5/1.5/2.0 bln 1/3/6-month treasury bill auctions.
- (0845 ET/1345 GMT) Fed Gov Brainard speaks at Washington, DC Fed-hosted event.
- (1230 ET/1730 GMT) European socialist leaders gather in Prague for meetings.
- Saturday BoS Gov Linde at Seville conference.
- Saturday NY Fed Dudley in New York Group of Thirty-panel discussion.
- Sunday Italy constitutional change referendum, Austria presidential election.
FX Beat
DXY: The dollar lost ground versus its major peers, as investors turned cautious ahead of U.S. non-farm payroll report due later in the day. The greenback against a basket of currencies trades 0.16 percent down at 100.79, hovering towards a low of 100.67 hit on Nov 28 and was on track to lose 0.5 percent this week. FxWirePro's Hourly Dollar Strength Index stood at 5.86 (Neutral) by 0500 GMT.
EUR/USD: The euro rose, extending previous session gains, as cautious tone ahead of U.S. non-farm payroll report weakened the bid tone around the greenback. On Thursday, the major strengthened after a report showed that the number of Americans claiming unemployment benefits rose to its highest level in five months last week, which softened the sentiment around the dollar. The pair will continue to rise on expectations that the European Central Bank will extend its bond purchases beyond next March next week, however, Sunday’s Italian referendum could limit gains. The European currency trades 0.26 percent up at 1.0686, having hit a fresh 2-week high of 1.0689 and was on track to rise 0.8 percent on the week. FxWirePro's Hourly Euro Strength Index stood at 82.00 (Slightly Bullish) by 0400 GMT. Investors now await Eurozone's Producer Price Index and U.S. Non-farm payroll data for further momentum on the major. Immediate resistance is located at 1.0700, a break above targets 1.0760. On the downside, support is seen at 1.0614 (10-DMA), a break below could drag it lower 1.0600.
USD/JPY: The dollar declined below the 114.00 handle as cautious tone ahead of U.S. non-farm payroll report triggered a fresh bout of risk aversion, which boosted the safe-haven yen appeal. On Thursday, the major rose to a 9-1/2-month high on the back of rising U.S. Treasury yields and a surge in oil prices, which support risk sentiment, however, it reversed gains following worse-than-expected U.S. unemployment benefits claim print. The pair trades 0.2 percent down at 113.84, after rising as high as 114.82 in the previous session, its highest since mid-Feb. FxWirePro's Hourly Yen Strength Index stood at -54.63 (Bearish) by 0400 GMT. Investors focus will remain on U.S employment report and FOMC member Lael Brainard speech for fresh cues on the strength of the labor market and prospects of this month's U.S. interest rate hike. Immediate resistance is located at 115.00, a break above targets 115.30/ 115.84. On the downside, support is seen at 113.13 (7-EMA), a break below could take it near 112.00.
GBP/USD: Sterling extended gains after rising multi-month highs in the previous session after Britain's Brexit minister David Davis said the government would consider making payments to the EU budget for market access. On Thursday, the pound hit a 2-month high against the dollar and 3-month peak versus the euro following Davis's comments. Sterling trades 0.1 percent up at 1.2605, after rising to a high of 1.2695 in the prior session, its highest since Oct. 6. FxWirePro's Hourly Sterling Strength Index stood at 150.11 (Highly Bullish) by 0400 GMT. Markets will closely watch the UK construction PMI report, ahead of the U.S. employment report and Fed official speech for further momentum on the major. Immediate resistance is located at 1.2700, a break above could take it near 1.2760/1.2800. On the downside, support is seen at 1.2524 (7-EMA), a break below targets 1.2450. Against the euro, the pound trades down at 84.73 pence, having hit a high of 83.69 pence the day before, it’s strongest since Sep. 6.
AUD/USD: The Australian dollar traded within narrow ranges, as investors stood on the sidelines ahead of the crucial U.S. non-farm payroll data. The major failed to benefit much from a better-than expected Australian retail sales figures, which came in at 0.5 percent for the month of October, compared with estimates of 0.3 percent and previous reading of 0.6 percent. Moreover, losses in the commodities’ prices and persistent risk-aversion market profile will keep the upside capped. The Aussie trades 0.1 percent lower at 0.7406, attempting to sustain gains above the 0.7400 handle. FxWirePro's Hourly Aussie Strength Index stood at -49.82 (Neutral) by 0500 GMT. Investors will continue to track board based markets sentiment, ahead of U.S. employment report and Fedspeaks due later in the day. Immediate support is seen at 0.7369 (Previous Session Low), a break below could drag it near 0.7300. On the upside, resistance is located at 0.7470, a break above targets 0.7500.
NZD/USD: The New Zealand dollar consolidated between a thin range, as markets refrained from taking any positions ahead of the U.S. payrolls data and an Italian referendum on constitutional reform during the weekend. The major initially rose above the 0.7100 handle, however, it trimmed gains as risk-aversion market sentiment and losses in commodities’ prices, especially oil and copper limited gains. The Kiwi trades 0.05 percent up at 0.7092, hovering just below the 0.7100 level and was on track to end the week 0.7 percent higher, recording its second straight weekly gain. FxWirePro's Hourly Kiwi Strength Index was at -95.81 (Slightly Bearish) by 0500 GMT. The major will be driven by overall market sentiment, ahead of U.S. NFP report and FOMC member Lael Brainard speech. Immediate resistance is located at 0.7124 (21-DMA), a break above could take it near 0.7200. On the downside, support is seen at 0.7063 (10-DMA), a break below could drag it till 0.7000.
Equities Recap
Asian shares reversed some of their recent gains, following a subdued session on Wall Street, while crude oil prices and the 10-year U.S. Treasury yields retreated from multi-month highs hit overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.6 percent, however, were set to end the week up 0.6 percent.
Tokyo's Nikkei fell 0.78 percent at 18,369.32 points, Australia's S&P/ASX 200 index lost 0.94 percent at 5,448.70 points and South Korea's KOSPI was trading 0.76 percent down at 1,968.89 points.
Shanghai composite index slumped 0.83 percent to 3,246.00 points, while CSI300 index was trading 1.03 percent lower at 3,527.82 points.
Hong Kong’s Hang Seng was trading 1.17 percent down at 22,610.25 points. Taiwan shares shed 0.8 percent at 9,189.49 points.
Commodities Recap
Crude oil prices edged down on profit taking after Brent touched 16-month high in the previous session. International benchmark Brent crude was 0.2 percent down at $53.53 per barrel by 0405 GMT, after rising to a 16-month high of $54.50 on Thursday. U.S. West Texas Intermediate crude inched down 0.05 percent at $50.78 a barrel, after rising as high as $51.77 the prior day, its highest since Oct. 20.
Gold prices steadied after declining to its lowest since early February on Thursday as the dollar eased across the board ahead of U.S. jobs data, however, the safe-haven metal was on track for a fourth straight weekly decline. Spot gold was up 0.3 percent at $1,175.53 an ounce by 0410 GMT, having dropped to its lowest since Feb. 5 at $1,160.58 in the previous session and was down 0.7 percent for the week. U.S. gold futures gained 0.5 percent at $1,175.60 per ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.5339 percent lower by 0.007 bps, while 5-year yield was down by 0.008 bps at 1.8868 percent.
The Australian government bonds plunged, following weakness in the U.S. debt market. Also, expectations of steady policy rate from the Reserve Bank of Australia (RBA) in its next week’s monetary policy meeting drove-out investors from safe-haven buying. The yield on the benchmark 10-year Treasury note rose 6 basis points to 2.86 percent, the yield on 15-year note also climbed 6 basis points to 3.28 percent and the yield on short-term 2-year inched 2-1/2 basis points to 1.89 percent.
The New Zealand government bonds ended the week on a softer note following the current rout in the global debt market. The yield on the benchmark 10-year bond closed 5-1/2 basis points higher at 3.28 percent, hitting highest since January this year.
The Chinese sovereign bonds were pushed lower across the curve, following weakness in the U.S. debt market. Also, the 10-year bond yields finally breached our previous forecast of 3 percent mark, inching afar from 2016 high. The yield on the benchmark 10-year bonds rose 11 basis points to 3.02 percent, the long-term 30-year bond yield climbed nearly 9 basis points to 3.38 percent and the yield on the short-term 2-year bonds bounced 19 basis points to 2.66 percent.
Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries as higher oil prices spurred inflation expectations. The 2-year bond fell 9.5 Canadian cents to yield 0.754 percent, and the benchmark 10-year declined 71 Canadian cents to yield 1.666 percent. The 20-year bond price slumped C$1.87 to yield 2.244 percent, while both the 10-year and 20-year yields were at their highest since December 2015.
