Asia Roundup: Antipodeans ease following worse-than-expected Chinese manufacturing PMI, dollar index recovers from 2-1/2 month lows, Asian shares down as PBoC hikes short-term rates - Friday, February 3rd, 2017

Market Roundup

• BoJ Dec 19-20 Policy Board meeting minutes – Momentum towards 2% inflation goal maintained, recent JPY depreciation helpful only in short-run, yield curve control working, policy must remain easy to hit inflation target, inappropriate to think BoJ guiding JGB 10s in -0.1% to +0.1% range, BoJ to set amount of JGB buys as deemed fit, to decrease incrementally, policy to be in line with improvements to economic inflation prospects – Reuters.
   
• PM Abe – Not considering use of GPIF for help in US infra investment.
   
• FinMin Aso – Acting in accordance with G20 agreement against competitive currency devaluation, monetary policy has domestic objectives, not to manipulate currency, no comment on recent Trump remarks on Japan - Reuters.
   
• Japan Jan services PMI 51.9, Dec 52.3, still above 50 threshold, employment in services up for first time in eight months.
   
• PBOC ups rates for standing lending facility loans, o/n 2.75% to 3.1%, week 3.25% to 3.35% effective today; repo rates also up 10 bps/term - Reuters.
   
• China Jan Caixin Mfg PMI 51.0, 51.8 eyed, Dec 51.9, off but new export orders rise at best pace since September ’14.
   
• Foreign CB US debt holdings -$5.314 bln to $3.165 trillion Feb 1 week, Treasury holdings -$7.361 bln to $2.847 trillion, agencies +$534 mln to $256.035 bln.
   
• NY Fed – Swaps with foreign CBs $392 mln Feb 1 week, BoJ $122 mln, rest ECB.
   
• Lipper – US-based stock funds attract $13.8 bln in latest week.
   
• Reuters poll – RBA to hold cash rate at 1.5% record low February 7, views mixed for later in year, many see more ease, some see hike.
   
• Australia Jan AIG PMI 54.5, Dec 57.7.
   
• Australia Jan VFACTS new vehicle sales +0.6% y/y, record pace momentum still.
   
• New Zealand Jan ANZ commodity price index -0.1% m/m, weaker dairy cited.
   
• ECB Coeure – Monetary policy stance can evolve depending on data, hopes current int’l economic framework not upset by new US policies – Reuters.
  ​

Economic Data Ahead

• (0230 ET/0730 GMT) Sweden Jan PMI – services; last 59.90.
   
• (0315 ET/0815 GMT) Spain Jan PMI – services,  54.8 eyed; last  55.0.
   
• (0330 ET/0830 GMT) Sweden Dec industrial output, +0.5% m/m, +3.0% y/y eyed; last +1.2%, +0.1%.
   
• (0330 ET/0830 GMT) Sweden Dec new manufacturing orders; last -3.1% y/y.
   
• (0345 ET/0845 GMT) Italy Jan PMI – services,  52.5 eyed; last  52.3.
   
• (0350 ET/0850 GMT) France Jan PMI – services,  53.9 eyed; flash 53.9.
   
• (0350 ET/0850 GMT) France Jan PMI – composite, 53.8 eyed; flash 53.8.
   
• (0355 ET/0855 GMT) Germany Jan PMI – services,  53.2 eyed; flash 53.2.
   
• (0355 ET/0855 GMT) Germany Jan PMI – composite,    54.7 eyed; flash 54.7.
   
• (0400 ET/0900 GMT) Eurozone Jan PMI – services,  53.6 eyed; flash 53.6.
   
• (0400 ET/0900 GMT) Eurozone Jan PMI – composite, 54.3 eyed; flash 54.3.
   
• (0430 ET/0930 GMT) Great Britain Jan PMI – services,  55.8 eyed; last  56.2.
   
• (0500 ET/1000 GMT) Eurozone Dec retail sales, +0.3% m/m, +1.8% y/y eyed; last -0.4%, +2.3%.
   
• (0830 ET/1330 GMT) United States Jan non-farm payrolls, +175k eyed; last +156k.
   
• (0830 ET/1330 GMT) United States Jan unemployment, 4.7% eyed; last 4.7%, participation 62.7%.
   
• (0830 ET/1330 GMT) United States Jan average earnings, +0.3% m/m eyed; last +0.4%.
   
• (0830 ET/1330 GMT) United States Jan average workweek,  34.3 hrs eyed; last  34.3.
   
• (0945 ET/1445 GMT) United States Jan Markit PMI services  – final; flash 55.1.
   
• (0945 ET/1445 GMT) United States Jan Markit PMI composite – final; flash 55.4.
   
• (1000 ET/1500 GMT) United States Jan ISM PMI Non-Mfg, 57.0 eyed; last 56.6.
   
• (1000 ET/1500 GMT) United States Dec factory orders, +1.0% m/m eyed; last -2.4%, ex-transport +0.1%.
   
• (1700 ET/2200 GMT) United States Jan total auto sales, 17.61 mln AR eyed; last 17.55 mln.

Key  Events Ahead

• N/A   Norges Bank DepGov Matsen speaks in Bergen.
   
• (0600 ET/1100 GMT) UK GBP0.5/1.0/2.0 bln 1/3/6-month treasury bill auctions.
   
• (0745 ET/1245 GMT) ECB VP Constancio speaks at Brussels event.
   
• (0915 ET/1415 GMT) Chicago Fed Evans speaks at Prairie State College breakfast event.
   

FX Beat

DXY: The dollar steadied after declining to multi-week lows versus its major peers, as investors’ attention shifted towards the U.S. employment report for clues to the timing of the Federal Reserve's next interest rate hike. The greenback against a basket of currencies traded 0.06 percent up at 99.88, pulling away from a low of 99.23 hit in the previous session, its lowest since Nov. 14. FxWirePro's Hourly Dollar Strength Index stood at -59.53 (Bearish) by 0500 GMT.

EUR/USD: The euro edged down, extending previous session losses, as the dollar rebounded amid higher U.S. treasury yields. On Thursday, the major rose to a 2-month high after data showed Eurozone's producer price index climbed at an annualized rate of 1.6 percent in December, surpassing consensus of 1.3 percent and previous 0.1 percent. The European currency traded down at 1.0755, after rising as high as 1.0828 the prior day, it’s highest since Dec. 8. FxWirePro's Hourly Euro Strength Index stood at 19.48 (Neutral) by 0400 GMT. Investors’ focus now shifts on the Eurozone Markit Services and Retail Sales data, ahead of the U.S. Nonfarm Payroll report, employment data and Markit Services PMI figures. Immediate resistance is located at 1.0800, a break above targets 1.0840 (Nov 14-High). On the downside, support is seen at 1.0711 (Jan 25 Low), a break below could drag it lower 1.0700.

USD/JPY: The dollar rose above the 113.00 handle, retreating from a 2-month low hit in previous session losses, as investors’ eagerly awaited U.S. employment report for further clues to the timing of the Federal Reserve's next interest rate hike. The U.S. nonfarm payrolls report is expected to show employers added 175,000 jobs in January, after data released on Thursday indicated that the number of Americans filing for unemployment benefits declined more than expected last week. The major trades 0.2 percent higher at 113.04, after falling as low as 112.05 in the previous session, it’s lowest since Nov 30. FxWirePro's Hourly Yen Strength Index stood at -10.56 (Neutral) by 0400 GMT. Investors will continue to track overall market sentiment, ahead of the U.S. macroeconomic fundamental drivers. Immediate resistance is located at 113.49 (10-DMA), a break above targets 114.00. On the downside, support is seen at 112.51 (Session Low), a break below could take it near 112.00.

GBP/USD: Sterling continued to drift away from a 1-1/2 month high after the Bank of England held refi-rate and the asset purchase facility at 0.25 percent and £435 billion, respectively. The major trades down at 1.2520, after rising as high as 1.2705 in the previous session, it’s strongest since Dec. 14. FxWirePro's Hourly Sterling Strength Index stood at -72.94 (Bearish) by 0400 GMT. Investors’ now await the UK service PMI, ahead of series of U.S. economic data. Immediate resistance is located at 1.2600, a break above could take it near 1.2670. On the downside, support is seen at 1.2465 (Jan-10 Low), a break below targets 1.2400. Against the euro, the pound trades 0.1 percent down at 85.92 pence, having hit a low of 86.33 earlier in the week, it’s weakest since Jan. 24.

AUD/USD: The Australian dollar eased, pulling away from a near 3-month high, after data showed the Caixin Chinese manufacturing sector activity came in below expectations. Moreover, the major also dropped following worse-than expected AiG performance of service performance index, which fell to 54.5 in December from 57.7 in January indicating business conditions in the Australian service sector weakened during the same period. The Aussie trades 0.1 percent down at 0.7649, drifting away from a high of 0.7696 hit on Thursday, it’s strongest since Nov. 10. FxWirePro's Hourly Aussie Strength Index stood at 124.95 (Highly Bullish) by 0500 GMT. Investors will continue to track board based market sentiment, ahead of the U.S. Nonfarm payroll data, Service PMI released by ISM And Markit. Immediate support is seen at 0.7605 (10-DMA), a break below could drag it lower 0.7550. On the upside, resistance is located at 0.7700, a break above targets 0.7750.

NZD/USD: The New Zealand dollar declined as poor Chinese manufacturing PMI data weakened market sentiment. China's Caixin manufacturing PMI came at 51.0 in January against expected 51.8 and previous 51.9 indicating that output and new orders slowed down last month. The Kiwi trades 0.16 percent down at 0.7273, hovering away from a peak of 0.7350 touched on Tuesday, its strongest since Nov. 9. FxWirePro's Hourly Kiwi Strength Index was at -109.61 (Highly Bearish) by 0500 GMT. Investors will continue to digest downbeat Chinese manufacturing report, ahead of series of U.S. economic data. Immediate resistance is located at 0.7300, a break above could take it near 0.7350. On the downside, support is seen at 0.7250, a break below could drag it near 0.7200.

Equities Recap

Asian shares declined as Chinese markets tumbled after the People's Bank of China hiked the interest rates on open market operations by 10 basis points, amid worries over global growth in the wake of U.S. President Donald Trump's aggressive policies.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 percent, drifting away from a 3-month peak hit on Thursday.

Tokyo's Nikkei rose 0.06 percent to 18,925.10 points, Australia's S&P/ASX 200 index declined 0.44 percent to 5,620.40 points and South Korea's KOSPI was trading 0.09 percent down at 2,069.00 points.

Shanghai composite index fell 0.45 percent to 3,145.25 points, while CSI300 index was trading 0.54 percent lower at 3,369.57 points.

Hong Kong’s Hang Seng was trading 0.33 percent lower at 23,107.56 points. Taiwan shares added 0.3 percent at 9,455.56 points.

Commodities Recap

Crude oil prices edged up, extending gains for the fourth consecutive session, as news that U.S. President Donald Trump could impose new sanctions on multiple Iranian entities, triggered geopolitical tensions. International benchmark Brent crude was trading 0.16 percent higher at $56.77 per barrel by 0403 GMT, having hit a high of $57.41 in the previous session, it’s strongest since Jan. 3. U.S. West Texas Intermediate crude rose 0.35 percent at $53.80 a barrel, after rising to $54.31 on Thursday, its highest since Jan. 3.

Gold prices declined, reversing some of its previous gains, as investors locked in profits after the safe-haven metal hit 11-week highs on Thursday. Spot gold fell 0.2 percent to $1,212.56 an ounce by 0413 GMT, having hit a high of $1,225.12 in the previous session, its highest since Nov. 17. U.S. gold futures fell 0.3 percent to$1,215.60.

Treasuries Recap

The 10-year U.S treasury yield stood at 2.4754 percent higher by 0.024 bps, while 5-year yield was up by 0.027 bps at 1.9327 percent.

The Australian bonds continued to slump as investors cashed in profits on the last day of the week ahead of the Reserve Bank of Australia’s (RBA) first monetary policy of 2017, scheduled to be held on February 7 for further direction in the debt market. The yield on the benchmark 10-year Treasury note rose nearly 1 basis point to 2.77 percent, the yield on 15-year note jumped 1-1/2 basis points to 3.25 percent and the yield on short-term 2-year also surged 1-1/2 basis points to 1.84 percent.

The New Zealand government bonds closed flat Friday as investors remain reluctant to trade amid a soft session that witnessed data of least economic significance. The yield on the benchmark 10-year bond hovered around 3.40 percent at the time of closing, the yield on 7-year note also traded flat at 3.03 percent and the yield on short-term 2-year note ended 1/2 basis point lower at 2.31 percent.

Canadian government bond prices were steady to slightly higher across a flatter yield curve, with the 2-year unchanged to yield 0.774 percent, and the 10-year up 3 Canadian cents to yield 1.764 percent, after touching its lowest intraday since Jan. 24 at 1.712 percent.