Asia Roundup: Aussie declines as RBA stands pat, Brent falls below $50 per barrel, markets await BoE Governor Carney speech - Tuesday, July 5th, 2016

Market Roundup

• BoE Gov Carney to kick-off policy easing Tuesday – IFR.
   
• YouGov/CEBR - Pessimism among UK businesses almost doubles after EU vote.
   
• UKIP leader Farage announces surprise departure, Corbyn clings on but Labor leadership challenge eyed, top Tory candidates differ on Brexit urgency.
   
• RBA leaves OCR as is at 1.75%, inflation quite low, to remain that way for some time, AUD could complicate economic rebalancing, overall growth eyed.
   
• Japan GPIF’s stock-heavy portfolio takes hit from Brexit turmoil, assets estimated to be down Y5 trln in Q2, JPY strength plays part - Nikkei.
   
• Japan June services PMI 49.4, in contraction, new business off most in almost five years, May 50.4.
   
• China June Caixin services PMI up to 52.7, 11-month high as new business surges, May 51.2.
   
• PBOC fixes CNY at 6.6594 vs USD, still near 5-year low.
   
• China has more room to fine tune monetary policy ibn H2 – China Sec Journal.
   
• Australia retailers battle deflation, RBA in reserve – Reuters.
   
• Australia June AIG PSI -0.2 point to 51.3, in expansion still, retail shines.
   
• Australia May retail sales +0.2% m/m, +0.3% eyed, April rev +0.1% (+0.2%).
   
• Australia May trade deficit A$2.218 bln, A$1.5 bln eyed, exp +1%, imp +2%.
   
• Australia June VFACTS new vehicle sales +33% m/m, record for June, +2.2% y/y.
   
• New Zealand Q2 business confidence +19%, capacity utilization 92.9%, Q1 +2.0%, 93.2%.
   
• New Zealand June QV residential property price index +13.5% y/y, May +12.4%.
   
• New Zealand June ANZ commodity price index +3.7% m/m, -5.4% y/y.
   
• Brexit mess boosts prospects of Asia central bank easing – Reuters.
   
• ECB Angeloni – Some state support for EZ banks can be justified – Reuters.
   

Economic Data Ahead

• (0315 ET/0715 GMT) Spain Jun PMI services,  55.3 eyed; last  55.4.
   
• (0330 ET/0730 GMT) Sweden May industrial output, +0.3% m/m, +2.8% y/y eyed; last +0.1%, +3.5%.
   
• (0330 ET/0730 GMT) Sweden May mfg new orders; last +0.4% y/y.
   
• (0345 ET/0745 GMT) Italy Jun PMI services,  50.2 eyed; last  49.8.
   
• (0350 ET/0750 GMT) France Jun PMI services,  49.9 eyed; flash 49.9.
   
• (0350 ET/0750 GMT) France Jun PMI composite; last 49.4.
   
• (0355 ET/0755 GMT) Germany Jun PMI services,  53.2 eyed; flash 53.2.
   
• (0355 ET/0755 GMT) Germany Jun PMI composite, 54.1 eyed; flash 54.1.
   
• (0400 ET/0800 GMT) Eurozone Jun PMI services,  52.4 eyed; flash 52.4.
   
• (0400 ET/0800 GMT) Eurozone Jun PMI composite, 52.8 eyed; flash 52.8.
   
• (0430 ET/0830 GMT) Great Britain Jun PMI services,  52.7 eyed; flash 53.5.
   
• (0500 ET/0900 GMT) Eurozone May retail sales, +0.4% m/m, +1.6% y/y; last unch, +1.4%.
   
• (0500 ET/0900 GMT) Norway Jun housing prices; last +7.3% y/y.
   
• (0945 ET/1345 GMT) United States Jun ISM - New York index; last 718.1.
   
• (1000 ET/1400 GMT) United States May factory orders, -0.9% m/m eyed; last +1.9%, ex-transport +0.5%.
   

Key Events Ahead

• N/A   ECB Statistics Conference in Frankfurt, ECB Pres Draghi, others to speak.
   
• N/A   UK Chanc Exch Osborne meeting with major banks on Brexit, implications.
   
• (0300 ET/0700 GMT) EU Juncker speaks on Brexit at EU parliament in Strasbourg.
   
• (0500 ET/0900 GMT) Austria E1.1 bln max 0.75% and 6.25% 2026 and 2027 RAGB auctions.
   
• (0530 ET/0930 GMT) BoE bi-annual Financial Stability Report/10:00 BoE Gov Carney presser.
   
• (0530 ET/0930 GMT) ECB 7-day zero% refi, E50 bln allotment eyed, E53.054 bln maturing.
   
• (0540 ET/0940 GMT) Belgium E1.3-1.7 bln 3 and 6-month treasury certificate auctions.
   
• (0630 ET/1030 GMT) UK DMO GBP2.5 bln 1.5% 2021 Gilt auction (delayed due to FSR release).
   
• (0630 ET/1030 GMT) ESM E1.5 bln 3 month bill auction.
   
• (1430 ET/1830 GMT) NY Fed Dudley speaks in Binghamton, New York.
   

FX Beat

USD: The dollar index, against a basket of currencies trades edged up to 95.62, pulling away from a low of 95.43 touched in the previous session.

EUR/USD: The euro reversed its upward momentum, as the greenback strengthened against major peers, except the yen amid risk-off market profile. The major trades 0.2 percent lower at 1.1129, but retained most of the gains made since its 3 1/2-month low of 1.0911. Markets continue to remain wary on the economic outlook, as they expect Britain may invoke article 50 in the near term, which may spur a fresh risk aversion wave across the financial markets. Investors will closely watch Eurozone's Markit composite PMI and retail sales data, ahead of U.S. factory orders and IBD/TIPP Economic Optimism data due later in the day. Immediate support is seen at 1.1097 (Previous Session Low), break below could take the pair till 1.1072. On the higher side, resistance is located at 1.1169, break above targets 1.1200. 

USD/JPY: The Japanese yen gained against the dollar, amid declining equity markets and oil prices. Investors expect the Bank of Japan to expand its monetary easing, as a prolonged period of uncertainty threatens a downshift in trade and investment. The greenback trades 0.5 percent lower at 101.94 yen, failing to sustain above the 102 level. Markets now await U.S. economic data and Fed's William Dudley speech for further momentum on the major. Immediate support is located at 101.56, break below could take the pair lower 101 level. On the higher side, resistance is seen at 102.80, break above targets 103 level.

GBP/USD: Sterling edged down as investors wary on Britain invoking the Article 50, the mechanism for a state to leave the EU. The major inched down 0.3 percent to 1.3231, within the sight of last week's low of 1.3198. Markets now focus on Markit Services PMI and BoE Governor Carney speech for further cues on the economy's outlook. Immediate support is seen at 1.3200 level, break below could take the pair near 31 year low. On the higher side, resistance is located at 1.3349, break above targets 1.3400 level. Against the euro, the pound was trading flat at 83.97 pence, having touched a 2-1/2-year low of 84.04 pence earlier in the session.  

AUD/USD: The Australian dollar declined after the Reserve Bank of Australia kept interest rates at an all-time low of 1.75 percent. The central bank gave no clear no guidance on whether it might ease any further, amid political uncertainty and lack of latest information on domestic inflation. The Aussie trades 0.3 percent lower at 0.7513, having touched an early low of 0.7493. Markets will continue to absorb the central bank decision effect, ahead of the US factory orders data. Immediate support is seen at 0.7473 (10-DMA), break below could take the pair till 0.7446. On the higher side, resistance is located at 0.7550 level.

NZD/USD: The New Zealand dollar trades 0.4 percent lower at 0.7201, attempting to sustain above the 0.7200 level. On Monday, the major rose as high as 0.7240, from a low of 0.7158. The economy's residential property price index for June rose 13.5 percent  y/y, from 12.4 percent in May, however, the  Kiwi ignore the data. Markets now await global dairy auction results for further cues. Immediate support is seen at 0.7169 (5-DMA), while on the upside, resistance is located at 0.7254 (Jun-23 High).

Equities Recap

Asian shares declined after five consecutive days of gains, while the safe-haven yen strengthened from worrying signs in China's service sector.

MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.7 percent, but was still within reach of its June 9 High.

Tokyo's Nikkei declined 0.67 pct at 15,669.33, Australia's S&P/ASX 200 index slumped 1.09 pct at 5,224.00 points and Seoul shares edged down 0.26 pct.

Shanghai composite index rose 0.4 percent at 3,002.86 points, while CSI300 index was flat at 3,205.57 points.

Hong Kong’s Hang Seng was trading 0.5 percent lower at 20,944.22 points. Taiwan shares dropped 0.5 pct at 8,716.07 points.

Commodities Recap

Crude prices declined, with Brent falling back below $50 per barrel as analysts expect the demand to weaken later this year amid concerns about the global economic outlook. International benchmark Brent crude oil was trading 0.7 percent lower at $49.73 per barrel at 0404 GMT, while U.S. West Texas Intermediate crude futures was down 0.9 percents at $48.34 a barrel.

Gold prices edged down from a near 2-year high, as the dollar strengthened against its peers, expect the yen. Spot gold was down 0.5 percent at $1,343.92 an ounce by 0415 GMT. It touched a high of $1,357.75 an ounce in the previous session, less than $1 below last month's high. Silver also dropped after rising as much as 7 percent and breaking above $21 an ounce for the first time in two years on Monday.

Treasuries Recap

The 10-year U.S treasury yield stood at 1.4171 percent down by 0.044 bps, while 5-year was 0.028 bps lower at 0.9785 percent.

The Australian government bonds rallied after the Reserve Bank of Australia maintained its key interest rate at a record low of 1.75%, as expected. The yield on the benchmark 10-year Treasury note fell 7 basis points to 1.941 percent and the yield on short-term 2-year note also dipped 1-1/2 basis points to 1.596 percent.

New Zealand government bonds edged up, sending yields 1.5 basis points lower across the curve.

Canadian government bond prices were mixed across a flatter maturity curve. The 2-year price was flat to yield 0.517 percent and the benchmark 10-year climbed 15 Canadian cents to yield 1.044 percent. The 10-year yield touched its lowest since Feb. 12 at 1.031 percent, while the 30-year yield hit set a record low at 1.668 percent.