Market Roundup
- Fed gives banks five years to comply with Volcker Rule limits - Reuters.
- CNY firms as state banks sell retreating USD, PBOC fix 6.8934 – Reuters.
- China Stats Bureau – Able to keep CNY basically stable, FX reserves ample, economy stable, more positive but still faces uncertainties at home abroad, property control measures working, inflation to remain benign, employment stable, November jobless sub-5%.
- China Nov industrial output +0.51% m/m, +6.2% y/y, +6.1% y/y forecast.
- China Nov retail sales +0.97% m/m, +10.8% y/y, +10.1% y/y forecast.
- China Jan-Nov fixed asset investment +8.3%, as forecast, private-sector +3.1%.
- China Jan-Nov property investment +6.5%, Nov +7.9% y/y, lowest since ’15.
- China Nov fiscal revenues +3.1% y/y, expenditures +12.2%, Jan-Nov +5.7%, +10.2%, planner approved $38.26 bln fixed-asset investment projects in Nov.
- Moody’s – China banks face increasing risks including rising interconnectedness.
- China SIC - Deficit may rise to 3.5% in ’17 – 21st Century Business Herald.
- South Korea FX deposits hit five-month low in November – Reuters.
- ADP lowers ’16 growth forecast for developing Asia to 5.6% (from 5.7%).
- Australia Nov NAB business conditions index +5, confidence +5, Oct +7, +4.
- Australia Q3 home price index +1.5% q/q, +3.5% y/y, +2.3% q/q forecast.
- New Zealand Q3 terms of trade index -1.8% q/q, export volumes -0.7%, prices -2.8%, import prices -1.0%.
- New Zealand Q3 manufacturing sales volumes +2.1% q/q.
Economic Data Ahead
- (0200 ET/0700 GMT) Germany Nov CPI – final, +0.1% m/m, +0.8% y/y forecast; flash +0.1%, +0.8%.
- (0200 ET/0700 GMT) Germany Nov HICP – final, unch m/m forecast; flash unch.
- (0300 ET/0800 GMT) Spain Nov CPI, +0.3% m/m, +0.7% y/y forecast; last +1.1%, +0.7%.
- (0300 ET/0800 GMT) Spain Nov HICP, +0.2% m/m, +0.5% y/y forecast; last +0.8%, +0.5%.
- (0330 ET/0830 GMT) Sweden Nov CPI, unch m/m, +1.4% y/y forecast; last +0.3%, +1.2%.
- (0330 ET/0830 GMT) Sweden Nov CPIF, unch m/m, +1.6% y/y forecast; last +0.4%, +1.4%.
- (0400 ET/0900 GMT) Italy Oct industrial output, +0.2% m/m, +1.4% y/y forecast; last -0.8%, +1.8%.
- (0430 ET/0930 GMT) Great Britain Nov CPI, +0.2% m/m, +1.1% y/y forecast; last +0.1%, +0.9%.
- (0430 ET/0930 GMT) Great Britain Nov – core, +0.1% m/m, +1.3% y/y forecast; last unch, +1.2%.
- (0430 ET/0930 GMT) Great Britain Nov RPI, +0.2% m/m, +2.1% y/y forecast; last unch, +2.0%.
- (0430 ET/0930 GMT) Great Britain Nov RPIX; last unch m/m, +2.2% y/y, index 264.8.
- (0500 ET/1000 GMT) Eurozone Q3 employment; last +0.4% q/q, +1.4% y/y.
- (0500 ET/1000 GMT) Germany Dec ZEW economic sentiment index, 14.0 forecast; last 13.8.
- (0500 ET/1000 GMT) Germany Dec ZEW current conditions index, 59.1 forecast; last 58.8.
- (0600 ET/1100 GMT) United States Nov NFIB business optimism index; last 94.9.
- (0830 RT/1330 GMT) United States Nov export/import prices, -0.2%, -0.4% m/m forecast; last +0.2%, +0.5%.
Key Events Ahead
- (0400 ET/0900 GMT) ECB/Finland CB Liikanen speaks at Helsinki conference.
- (0430 ET/0930 GMT) Spain 3 and 9-month treasury bill auctions.
- (0500 ET/1000 GMT) Austria E1.1 bln total 0.75% and 1.2% 2025 and 2026 RAGB auctions.
- (0530 ET/1030 GMT) Belgium E1.5-1.9 bln 3 and 12-month treasury certificate auctions.
- N/A FOMC begins a two-day meeting.
FX Beat
DXY: The dollar stood firm versus the euro and the yen as investors brace for Federal Reserve's policy meeting outcome, commencing later in the day. The greenback against a basket of currencies traded 0.1 percent up at 101.04, having touched an early low 100.84. FxWirePro's Hourly Dollar Strength Index stood at -15.75 (Neutral) by 0500 GMT.
EUR/USD: The euro edged down after recovering from a 1-week low touched in the previous session, as Rome was seen ready bail out Italian bank Monte Dei Paschi di Siena and on higher German bund yields. The major slumped to a low of 1.0525 on Monday, its lowest since Dec. 5, as markets continued to absorb dovish ECB policy outcome. The European currency trades down at 1.0631, having hit an intra-day high of 1.0650. FxWirePro's Hourly Euro Strength Index stood at -60.41 (Bearish) by 0400 GMT. Investors’ now await the German CPI, which is likely to show the cost of living rose 0.8 percent y/y in November, ahead of German and Eurozone Zew survey indices. Immediate resistance is located at 1.0685 (Nov-28 High), a break above targets 1.0700. On the downside, support is seen at 1.0600, a break below could drag it till 1.0564.
USD/JPY: The dollar steadied against the yen, after rising as high as 116.12 to hit a 10-month high on Monday, as the market braced for the Federal Reserve's policy meeting commencing later in the day. Markets are pricing in a 25bps hike and speculate that the Fed would hike more times in 2017 than expected. Moreover, the major was also supported by risk-on market sentiment, triggered by better-than-expected Chinese industrial production and retail sales data. The pair trades 0.1 percent up at 115.13, having hit an intra-day low of 114.73. FxWirePro's Hourly Yen Strength Index stood at -77.20 (Slightly Bearish) by 0400 GMT. Investors will continue to track overall market sentiment, ahead of the U.S. import/export price index figures. Immediate resistance is located at 116.00, a break above targets 116.50. On the downside, support is seen at 114.48 (7-EMA), a break below could take it lower114.00.
GBP/USD: Sterling nudged up, extending gains from the previous session, as investors braced for Britain's consumer price index (CPI) report. The economy's inflation figures are expected to show a slight rise to 1.1 percent in November, indicating the country fared well despite Brexit shock vote. Sterling trades flat at 1.2671, attempting to regain the 1.2700 handle. FxWirePro's Hourly Sterling Strength Index stood at 64.10 (Bullish) by 0400 GMT. Investors’ attention will remain on series of the UK economic data including retail sales, producer price index, and CPI report, ahead of the U.S. import/export price index figures. Immediate resistance is located at 1.2700, a break above could take it over 1.2744. On the downside, support is seen at 1.2620 (9-EMA), a break below targets 1.2548 (Dec- 8 Low). Against the euro, the pound trades 0.1 percent lower at 83.91 pence, pulling away from a 1-week high of 83.61 pence hit in the previous session.
AUD/USD: The Australian dollar rose to a 4-week high above the 0.7500 handle following better-than-expected Chinese industrial production and retail sales report, however, it failed to sustain gains and turned lower as weaker domestic fundamentals weigh on the Aussie. The NAB's business conditions for November declined to 5 from previous 7, while Business confidence edged up to 5 from 4, indicating business conditions softened in the same period. A separate report showed house prices moderated to 1.5 percent in the third quarter from prior 2.0 percent. The major traded lower at 0.7491, retreating from a high of 0.7514, it’s highest since Nov. 16. FxWirePro's Hourly Aussie Strength Index stood at 18.36 (Neutral) by 0500 GMT. Markets will continue to digest downbeat Australian report, ahead of the U.S. economic data. Immediate support is seen at 0.7442 (21-DMA), a break below could drag it near 0.7400. On the upside, resistance is located at 0.7533, a break above targets 0.7570.
NZD/USD: The New Zealand dollar rose as its U.S. counterpart slightly eased ahead of the Federal Reserve's two-day policy meeting starting later in the day. The major continues to rise after Bill English was confirmed as the new Prime Mister, following last week's surprise resignation of PM John Key. Moreover, higher oil prices and board-based risk-on sentiment will continue to boost positive momentum around the major. The Kiwi trades 0.1 percent up at 0.7196, pulling further away from a low of 0.7115 hit on Monday, it’s lowest since Dec 7. FxWirePro's Hourly Kiwi Strength Index was at 42.07 (Neutral) by 0500 GMT. Investors now await the Federal Reserve policy decision due tomorrow for next direction on the spot. Immediate resistance is located at 0.7222 (Dec 8-High), a break above could take it over 0.7265/ 0.7300. On the downside, support is seen at 0.7141 (10-DMA), a break below could drag it till 0.7100/ 0.7085.
Equities Recap
Asian shares eased as investors awaited the Federal Reserve policy outcome, with attention on how the Fed steers monetary policy following Republican Donald Trump's surprise election win on Nov. 8.
MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.1 percent.
Tokyo's Nikkei advanced 0.31 percent at 19,213.54 points, Australia's S&P/ASX 200 index fell 0.27 percent to 5,547.70 points and South Korea's KOSPI was trading 0.14 percent lower at 2,030.08 points.
Shanghai composite index declined 0.1 percent to 3,150.21 points, while CSI300 index was trading 0.15 percent lower at 3,404.00 points.
Hong Kong’s Hang Seng was trading 0.15 percent down at 22,399.31 points. Taiwan shares added 0.3 percent at 9,382.14 points.
Commodities Recap
Crude oil prices rose, extending gains for the fourth consecutive session, as a production cut organized by OPEC and other exporters materialized. International benchmark Brent crude was 0.5 percent higher at $55.68 per barrel by 0402 GMT, having hit a 17-month high of $57.50 in the previous session. U.S. West Texas Intermediate crude rose 0.6 percent at $52.73 a barrel, after rising as high as $54.48 on Monday, the highest since July 2015.
Gold prices inched up, after declining to their lowest in over 10 months in the previous session, ahead of the U.S Federal Reserve monetary policy meeting that commences later in the day. Spot gold was little changed at $1,162.33 an ounce by 0407 GMT, after falling to a low of $1,151.24 an ounce the day before, its lowest since Feb. 5. U.S. gold futures were down 0.1 percent at $1,165.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.4677 percent lower by 0.011 bps, while 5-year yield was down by 0.008 bps at 1.8808 percent.
The Australian government bonds gained after recent data showed that the country’s business conditions fell to the lowest level in 18 months in November, fuelling the Reserve Bank of Australia’s (RBA) rate cut expectations for 2017. The yield on the benchmark 10-year Treasury note fell 4 basis points to 2.83 percent, the yield on 15-year note dipped 4 basis points to 3.29 percent and the yield on short-term 2-year slid 1 basis point to 1.87 percent.
The New Zealand government bonds little changed as investors remain sidelined in any big deal ahead of the Federal Reserve’s last monetary policy decision for 2016. The yield on the benchmark 10-year bond closed flat at 3.31 percent, the yield on 7-year note ended steady at 2.87 percent and the yield on short-term 2-year note remained unchanged at 2.20 percent.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The 2-year price fell 3.5 Canadian cents to yield 0.760 percent and the benchmark 10-year declined 21 Canadian cents to yield 1.752 percent. The 10-year yield touched its highest intraday level since July 2015 at 1.781 percent.
