Market Roundup
- North Korea conducts h-bomb test, US pledges massive response – Media
- Australian Q2 Business inventories, -0.4% vs forecast 0.4%, last 1.2%
- Australian Q2 Gross company profits, -4.5% vs forecast -4.0%, last 6.0%
- Australian Q2 Company profits pre-tax, -4.8%, last 0.9%
- Australia job ads climb 2 pct in August - ANZ
- New Zealand poll average puts Labour in strong position
- Merkel survives challenger's onslaught to win election TV debate
- Sharp differences over labor surface at NAFTA talks in Mexico
- EU Moscovici – EUR level not a threat for European firms
- Italy's 5-Star says euro referendum is 'last resort'
- Labor shortage, Olympic buildup seen sustaining Japan CAPEX growth – Nikkei
- Japan industrial material imports hit by changing Asia landscape – Nikkei
- Foreign Investment – Japan better bet than US? – Barron’s
- China's Xi says BRICS must promote open world economy
- Trump hints at withdrawal from U.S.-South Korea free trade deal
- Speculators' net short dollar bets largest since Jan 2013 - CFTC, Reuters
Economic Data Ahead
- (0500 ET/0900 GMT) Great Britain Aug Markit/CIPS Mfg PMI, 52.0 eyed, last 51.9
- (0500 ET/0900 GMT) EU Sep Sentix Index, 27.4 eyed, last 27.7
- (0530 ET/0930 GMT) EU Jul Producer prices, 0.1% m/m, 2.2% y/y eyed; last -0.5%, 2.5%
Key Events Ahead
- (0340 ET/0740 GMT) ECB's Mersch speaks in Frankfurt, Germany
- (0540 ET/0940 GMT) Netherlands E1.0-2.0 bln for 6-month auction
- (0855 ET/1255 GMT) France E2.6-3.0/1.2-1.6/0.6-1.0 bln for 3/6/12 month auction
FX Beat
- DXY: The dollar declined across the board after North Korea launched another nuclear test on Sunday, prompting the threat of a massive military response from the United States. The greenback against a basket of currencies traded 0.2 percent down at 92.65, having touched a low of 91.62 last week, its lowest since Jan 2015. FxWirePro's Hourly Dollar Strength Index stood at -8.36 (Neutral) by 0500 GMT.
EUR/USD: The euro rose, reversing some of its previous session losses as the greenback consolidated within narrow ranges on doubts about the possibility of the U.S. Federal Reserve raising interest rates again this year. Investors now await the European Central Bank policy meeting, where it is widely expected to keep the key policy tools unchanged. The European currency traded 0.2 percent up at 1.1884, having touched a high of 1.2070 last week, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at -60.93 (Bearish) by 0400 GMT. Investors’ attention will remain on Eurozone Producer Price Index and Sentix investor confidence, amid a lack of data from the U.S. docket. Immediate resistance is located at 1.1983 (August 28 High), a break above targets 1.2070. On the downside, support is seen at 1.1817 (38.2% retracement 1.1661 and 1.2070), a break below could drag it near 1.1757 (23.6% retracement 1.1661 and 1.2070).
USD/JPY: The dollar slumped to 6-day low as the weekend’s hydrogen bomb test conducted by North Korea sent investors seeking safety into safe haven assets. Moreover, the major was also weighed down by the release of disappointing U.S. labour market report last Friday, which dampened the expectations of a December Fed rate hike. The major was trading 0.4 percent down at 109.78, having hit a high of 110.67 on Thursday, its highest since Aug. 16. FxWirePro's Hourly Yen Strength Index stood at 10.05 (Neutral) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, as the U.S. economic calendar remains absolutely data empty. Immediate resistance is located at 110.43 (August 30 High), a break above targets 111.33 (July 28 High). On the downside, support is seen at 109.49 (Session Low), a break below could take it near 109.02 (August 28 Low).
GBP/USD: Sterling consolidated within thinned ranges as the latest North Korea hydrogen bomb explosion continued to weigh on market sentiment. Investors now await the UK construction PMI report, which is expected to show UK construction sector activity expanded during August. Sterling traded flat at 1.2950, having hit a high of 1.2995 in the previous session, its highest since August 14. FxWirePro's Hourly Sterling Strength Index stood at 60.41 (Bullish) by 0400 GMT. Investors’ focus will remain on UK Markit construction PMI, as U.S. markets remained closed in observance of Labour Day. Immediate resistance is located at 1.2978 (August 29 High), a break above could take it near 1.3053 (August 8 High). On the downside, support is seen at 1.2921 (21-DMA), a break below targets 1.2884 (10-DMA). Against the euro, the pound was trading 0.2 percent down at 91.76 pence, having hit a multi-month low of 93.06 pence last week.
AUD/USD: The Australian dollar eased as the heightened tensions in the Korean Peninsula undermined demand for the risky assets. Moreover, data showing Australia's company gross operating profits slumping 4.5 percent in the second quarter also weighed heavily on the major. The Aussie trades flat at 0.7961, having hit a high of 0.7995 on Wednesday, it’s strongest since Aug. 1. FxWirePro's Hourly Aussie Strength Index stood at 80.40 (Slightly Bullish) by 0500 GMT. Investors will continue to digest downbeat domestic data, amid a lack of U.S. economic releases. Immediate support is seen at 0.7910 (21-DMA), a break below targets 0.7866 (August 24 Low). On the upside, resistance is located at 0.7982 (August 29 High), a break above could take it above 0.8000.
NZD/USD: The New Zealand dollar steadied after declining for four straight sessions, ahead of the general election later this month. The major fell to multi-month lows last week after a poll showed support for opposition Labour overtaking that of the governing National party. The Kiwi trades 0.3 percent up at 0.7175, having touched a low of 0.7131 on Thursday, its lowest level since Jun. 6. FxWirePro's Hourly Kiwi Strength Index was at -162.58 (Highly Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, as U.S. markets remained closed in observance of Labour Day. Immediate resistance is located at 0.7207 (5-DMA), a break above could take it near 0.7263 (August 28 High). On the downside, support is seen at 0.7126 (August 6 Low), a break below could drag it till 0.7100.
Equities Recap
Asian shares tumbled, while safe-haven assets such as the Japanese yen, gold, and sovereign bonds rose after North Korea conducted its most powerful nuclear test.
MSCI's broadest index of Asia-Pacific shares outside Japan slumped 0.4 percent.
Tokyo's Nikkei declined 0.9 percent to 19,511.00 points, Australia's S&P/ASX 200 index fell 0.4 percent to 5,702.50 points and South Korea's KOSPI eased 0.8 percent to 2,339.78 points.
Shanghai composite index rose 0.3 percent to 3,376.19 points, while CSI300 index was trading 0.3 percent up at 3,840.49 points.
Hong Kong’s Hang Seng was trading 0.6 percent lower at 27,795.64 points. Taiwan shares shed 0.2 percent to 10,569.87 points.
Commodities Recap
Crude oil prices traded in a volatile market, with U.S. crude rising on production shutdowns and on signs that the damage from Hurricane Harvey to the Gulf Coast energy infrastructure was not as bad as initially feared. International benchmark Brent crude was trading 0.4 percent at $52.52 per barrel by 0436 GMT, having hit a high of $52.91 the prior session, its strongest since Aug. 18. U.S. West Texas Intermediate was trading 0.2 percent up at $47.42 a barrel, after falling as low as $45.57 on Thursday, its lowest since Jul. 24.
Gold prices hit their highest in nearly 11 months after North Korea's latest nuclear test sent investors seeking safe-haven assets. Spot gold rose 0.6 percent to $1,333.33 per ounce by 0441 GMT, having hit a high of $1,337.81 earlier, its highest since September 2016. U.S. gold futures for December delivery were up 0.6 percent at $1,338.60.
Treasuries Recap
The 10-year U.S Treasury yield stood at 2.165 percent higher by 0.009 bps, while 5-year yield was 0.007 bps up at 1.740 percent.
The Japanese government bonds traded flat as investors remained cautious ahead of the country’s 10-year as well as super-long 30-year auction scheduled to be held on September 5 and 7 by 03:45GMT respectively. The yield on the benchmark 10-year Treasury note hovered around 0.01 percent, the yield on the long-term 30-year flat at 0.82 percent and the yield on short-term 2-year traded tad higher at -0.15 percent.
The Australian bonds jumped at the start of the trading week as investors wait to watch the Reserve Bank of Australia’s (RBA) monetary policy decision, followed by Governor Lowe’s speech, scheduled to be held on September 5 by 04:30GMT and 09:10GMT respectively. The yield on the benchmark 10-year Treasury note slumped nearly 2-1/2 basis points to 2.65 percent, the yield on 15-year note plunged nearly 3 basis points to 2.95 percent and the yield on short-term 2-year traded 1-1/2 basis points lower at 1.85 percent.
The New Zealand bonds closed on a mixed note as investors wait to watch the country’s GlobalDairyTrade price auction, scheduled to be held on September 5 amid a silent trading week that will witness little data of major economic significance. At the time of closing, the yield on the benchmark 10-year Treasury note hovered around 2.86 percent, the yield on 7-year note rose nearly 1 basis point to 2.70 percent and the yield on short-term 2-year ended 1 basis point lower at 2.00 percent.
