Market Roundup
- BoJ Gov Kuroda - JPY appreciation temporary, export weakness too, inflation target achievable despite oil price drop, wages up, labor market tightening, clear price increases since April, QQE having desired effects, to continue policy, many options, ready to adjust policy either way, Fed rate hike would signal confidence in US recovery, positive for global economy, China growth losing momentum but 6-7% growth still possible, market too negative on China, impact on Japan exports minimal?
- MoF flow data week-ended Aug 22 - Japanese buy net Y258.1 bln foreign stocks, sell Y273.8 bln bonds, buy Y79.9 bln bills; foreign investors sell net Y461.9 bln Japanese stocks, Y5.3 bln bonds, buy Y179.4 bln bills.
- China PBOC fixes USD/CNY mid-point at 6.4085, CNY weakest since '11, 7-day reverse repo rate guidance rate at 2.35%, previous setting 2.50%.
- Poor US bond sales raise concerns about foreign demand
- Australia Q2 new CAPEX -4.0% q/q, -2.5% eyed, 3rd est '15/16 CAPEX A$114.8 bln prev est A$104.0 bln, plant/machinery -1.2%, building -5.6%.
- Thai July customs-cleared trade balance +0.77 bln dlrs (vs +0.38 bln dlrs in reuters poll) - commerce ministry
- Japan 2-year JGB auction lowest price 100.1800, average price 100.1830, bids accepted at lowest price 46.1133 pct
- Indonesia's chief economics minister says preparing policy package, including tax holidays, to help prop up Rupiah
- Indonesian c.bank gov says raising benchmark interest rate now would be "difficult"
- S.Korea c.bank says economy has been recovering from Mers impact since early July
- China cbank sets 7-day reverse repo guidance rate at 2.35 percent, down from 2.50 percent previous setting
- PBoC sets yuan mid-point at 6.4085 / dlr vs last close 6.4105, weakest level since 2011
Economic Data Ahead
- (0200 ET/ 0600 GMT) Germany Jul import prices, -0.3% m/m eyed; last -0.5%.
- (0200 ET/ 0600 GMT) United Kingdom Aug Nationwide HPI, +0.4% m/m eyed; last +0.4%.
- (0245 ET/ 0645 GMT) France Q2 industry investment; last +7.0% AR.
- (0245 ET/ 0645 GMT) France Aug business climate index, 101.0 eyed; last 102.0.
- (0300 ET/ 0700 GMT) Spain Q2 GDP - final, +1.0% q/q, +3.1% y/y eyed; prelim +1.0%, +3.1%.
- (0315 ET/ 0715 GMT) Switzerland Q2 industrial production; last -0.5% y/y.
- (0330 ET/ 0730 GMT) Sweden Jul household lending growth, +7.0% y/y eyed; last +6.9%.
- (0400 ET/ 0800 GMT) Euro Zone Jul money supply M3, +4.9% AR eyed; last +5.0%, 3-mo mov avge +5.1%.
- (0400 ET/ 0800 GMT) Euro Zone Jul private loans, +0.8% eyed; last +0.6%.
Key Events Ahead
- N/A Final day Mannheim EEA Congress, Western Balkans Summit in Vienna.
- N/A Sweden SEK500 mln each 0.125/1.0% 2019/2025 index-linked bond auctions.
- N/A Italy bln 6-month BOT auction.
- (0700 ET/ 1100 GMT) ECB Coeure speech at Paris conference.
- N/A Kansas City Fed annual Jackson Hole symposium beings (till August 29).
FX Recap
NZD/USD: Antipodeans on a firmer footing on Thursday on return of risk-sentiment after China stocks rallied along with other Asian indices. The New Zealand dollar rose to $0.6471 levels, from $0.6430 early, recovering from a drop to a six-year low of $0.6200 earlier this week. The pair has given up some of the early gains and is trading at 0.6437, kiwi remains vulnerable to more losses if another bout of market volatility prompts risk-aversion. Next resistance is located at 0.6517 (Aug 26 High) levels and above which it could extend gains 0.6586 (Aug 17 High) levels. To the downside immediate support might be located at 0.6442 (Today's Low) below that at 0.6400.
AUD/USD: Australia Capex data for Q2 arrived lower than expected, at -4.0% compared to -2.5% forecasted. AUD/USD was initially offered to 0.7105 on the release of the Capex data, but bounced back to currently trade at 0.7113. The Australian dollar rose to $0.7142, from $0.7110 early, pulling away from a 6-1/2-year trough touched on Monday. Resistance was found at $0.7155 where dealers cited stops. The Aussie regained some ground against the yen at 85.71 AUDJPY=R, having dropped to a low of 82.16 earlier in the week.
USD/JPY: The yen nursed losses against the dollar on Thursday as gains in Chinese equities helped underpin risk sentiment for now and dampened demand for the safe haven Japanese currency. The dollar edged up 0.1 percent to 120.03 yen JPY= in the wake of its 0.9 percent gain on Wednesday. The dollar had set a seven-month low of 116.15 yen earlier in the week. Against a basket of six major currencies, the dollar stood at 95.074, having recovered from a seven-month low of 92.621 set earlier this week. The dollar index is still down about 2 percent from last week's high of 97.078.
USD/CNY: China's yuan edged up against the dollar by midday on Thursday as a recovery in the country's major stock indexes boosted sentiment on the currency in spite of a weaker midpoint. The People's Bank of China set the midpoint rate at 6.4085 per dollar prior to market open, 0.07 percent weaker than the previous fix 6.4043 and at its weakest level since 2011 for the second straight day. The spot market opened at 6.4155 per dollar and was changing hands at 6.4080 at midday, 0.04 percent stronger than the previous close. Offshore yuan was trading 1.08 percent weaker than the onshore spot at 6.4778 per dollar.
Equity Recap
Asian stocks extended gains on Thursday as a sharp rebound on Wall Street and gains in battered Chinese shares eased fears of a deep and protracted global market rout, while the dollar rallied as risk aversion eased.
Japan's Nikkei share average rose 1.8 percent, adding to the previous day's 3.2 percent gain, after U.S. stocks racked up their biggest one-day gain in four years.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.8 percent, pulling away from a three-year low hit earlier in the week.
Chinese shares rose in early trading, with the CSI300 index adding 2.5 percent and the Shanghai Composite Index gaining 2.1 percent. The indexes had plunged more than 20 percent over the past week.
Treasury Recap
Japanese government bond prices slipped on Thursday as Tokyo stocks extended gains on the back of ebbing risk aversion. The benchmark 10-year JGB yield rose one basis point to 0.380 percent, moving away from a 3-1/2-month low of 0.350 percent reached last week when a global turmoil in the equity markets hit investor risk appetite hard. September 10-year JGB futures lost 0.07 point to 147.90. The two-year yield rose half a basis point to 0.010 percent.
New Zealand government bonds fell, pushing yields as much as 8 basis point higher at the long end of the curve.
Improving risk sentiment dented appetite for Australian government bond futures, with the three-year bond contract off 6 ticks at 98.180. The 10-year contract dropped 9 ticks to 97.2300, leading to a bearish steepening of the curve.
Commodity Recap
Gold steadied on Thursday after suffering its biggest fall in five weeks in the prior session as stock markets recovered. Spot gold was up 0.2 percent at $1,127.35 an ounce by 0259 GMT, after dropping 1.3 percent on Wednesday, its steepest decline since July 20. U.S. gold for December delivery edged up 0.2 percent to $1,127.10 an ounce.
Brent crude climbed by more than $1 a barrel on Thursday on an unexpected fall in U.S. crude inventories and a rally in global equity markets. Front-month Brent, the global oil benchmark, had gained $1.10 to $44.24 a barrel by 0300 GMT, having ended down 7 cents at $43.14 on Wednesday. U.S. crude's front-month contract rose 91 cents to $39.51 a barrel, after settling down 71 cents, or 1.8 percent, at $38.60 a barrel.
