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Asia Roundup: Antipodeans rebound from multi-week lows, yen off 3-/2 week peak as PBoC cuts reverse repo rates, Asian shares slump- Monday, February 3rd, 2020

Market Roundup

  • Gold slides from near 4-week high
     
  • Oil extends decline
     
  • China’s central bank cut reverse repo rates

Economic Data Ahead

  • (0345 ET/0845 GMT) Italy Markit Manufacturing PMI
     
  • (0350 ET/0850 GMT) France Markit Manufacturing PMI
     
  • (0355 ET/0855 GMT) Germany Markit Manufacturing PMI
     
  • (0400 ET/0900 GMT) EZ Markit Manufacturing PMI
     
  • (0430 ET/0930 GMT) France Markit Manufacturing PMI

Key Events Ahead

  • (0315 ET/0815 GMT) ECB's De Guindos speech

FX Beat

DXY: The dollar index steadied near a 2-week low amid worries about lower demand in China, following a coronavirus outbreak. The greenback against a basket of currencies traded 0.1 percent up at 97.49, having touched a low of 97.0935 on Friday, its lowest since Jan. 17.

EUR/USD: The euro declined after rising to a 1-1/2 week peak in the previous session after European Central Bank chief economist Philip Lane stated that inflationary pressures in the eurozone are slowly building and the deflationary drag from the shift to a digital economy is unlikely to be permanent. The European currency traded 0.1 percent down at 1.1084, having touched a high of 1.1095 on Friday, its highest since January 23. Investors’ attention will remain on a series of data from the Eurozone economies, EZ Markit manufacturing PMI and ECB De Guindos' speech, ahead of the U.S. Markit manufacturing PMI and construction spending. Immediate resistance is located at 1.1102, a break above targets 1.1120. On the downside, support is seen at 1.1066, a break below could drag it below 1.1035.

USD/JPY: The dollar nudged higher, rebounding from a 3-1/2 week low hit in the prior session, as China’s central bank injected liquidity into its markets to help support firms hit by a coronavirus epidemic. Earlier in the day, China’s central bank said it will inject 1.2 trillion yuan ($174 billion) worth of liquidity into the markets via reverse repo operations. The major was trading 0.2 percent up at 108.51, having hit a low of 108.31 on Friday, its lowest since Jan. 8. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. Markit manufacturing PMI and construction spending. Immediate resistance is located at 109.13, a break above targets 109.29. On the downside, support is seen at 108.21, a break below could take it near at 108.00.

GBP/USD: Sterling eased after rising to an over 3-week peak in the previous session, as the United Kingdom faces negotiations on reaching a new trade and future relationship deal with the European Union by the end of 2020. The major traded 0.3 percent lower at 1.3164, having hit a high of 1.3209 on Friday, it’s highest since Jan. 7. Investors’ attention will remain on the trade negotiations, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3212, a break above could take it near 1.3250. On the downside, support is seen at 1.3129, a break below targets 1.3099. Against the euro, the pound was trading 0.2 percent down at 84.20 pence, having hit a low of 84.87 on Thursday, it’s lowest since Jan. 22.

AUD/USD: The Australian dollar bounced back from a 3-month low after China’s central bank said it will inject 1.2 trillion yuan worth of liquidity into financial markets via reverse repo operations to prevent economic paralysis triggered by the coronavirus outbreak. The Aussie trades 0.3 percent up at 0.6703, having hit a low of 0.6682 on Friday, it’s lowest since Oct. 2. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6710, a break below targets 0.6736 (5-DMA). On the upside, resistance is located at 0.6670, a break above could take it near 0.6745.

NZD/USD: The New Zealand dollar retreated from a 2-month low as Chinese authorities pledged to use various monetary policy tools to ensure liquidity remains reasonably ample and to support firms affected by the outbreak in Wuhan. The Kiwi trades 0.1 percent up at 0.6469, having touched a low of 0.6452 earlier, its lowest level since Dec. 2. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6512 (5-DMA), a break above could take it near 0.6540. On the downside, support is seen at 0.6424, a break below could drag it below 0.6402.

Equities Recap

Asian shares tumbled on fears the coronavirus epidemic will hit demand in the Chinese economy.

MSCI's broadest index of Asia-Pacific shares outside Japan slumped 0.4 percent.

Tokyo's Nikkei declined 1.01 percent to 22,971.94 points, Australia's S&P/ASX 200 index fell 1.3 percent to 6,923.30 points and South Korea's KOSPI plunged 0.1 percent to 2,116.51 points.

Shanghai composite index eased 8.2 percent to 2,732.36 points, while CSI 300 index traded 8.3 percent down at 3,672.23 points.

Hong Kong’s Hang Seng traded 0.2 percent higher at 26,359.38 points. Taiwan shares shed 1.2 percent to 11,354.92 points.

Commodities Recap

Crude oil prices declined, extending their losses, weighed down by worries about lower demand in China, following a coronavirus outbreak there. International benchmark Brent crude was trading 0.6 percent lower at $56.32 per barrel by 0514 GMT, having hit a low of $55.77 earlier, its lowest since Jan. 19. U.S. West Texas Intermediate was trading 0.05 percent down at $51.42 a barrel, after falling as low as $50.61 earlier, its lowest since August 7.

Gold prices slumped after hitting a near 4-week high earlier as China’s central bank cut reverse repo rates and injected liquidity into markets to help support the economy dented by a rapidly spreading coronavirus outbreak. Spot gold declined 0.7 percent to $1,579.39 per ounce by 0527 GMT, having touched a high of $1592.16 earlier, its highest since Jan. 8. U.S. gold futures shed 0.2 percent to $1,584.70.

Treasuries Recap

The Australian bonds rallied during Asian session of the first trading day of the week Monday, ahead of the Reserve Bank of Australia’s (RBA) monetary policy meeting, scheduled to be held on February 4 by 03:30GMT amid an increase in the death tolls as well as number of affected cases from the Coronavirus. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 6 basis points to 0.915 percent, the yield on the long-term 30-year bond slumped nearly 7 basis points to 1.508 percent and the yield on short-term 2-year lost nearly 4 basis points to trade at 0.619 percent.

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