Market Roundup
- RBA leaves OCR as is at 1.5%, global economy growing at below-average pace, steady OCR consistent with growth-inflation targets, China growth moderating, rising AUD could complicate economic adjustment.
- BoJ Gov Kuroda – No immediate NIRP damage to banking sector – Reuters.
- BoJ Sept Tankan price survey – Firms forecast CPI +0.6% in year, +1% in three years, +1% in five years, previous survey +0.7%, +1.1%, +1.1%.
- Reuters poll – Nikkei to reach 17.5k by year-end, 18k by mid-’17, July poll 17.5k and 18.35k, ’16 to see first annual drop in five years.
- Japan Sept monetary base Y412.84 trln, +22% y/y, fresh record high.
- Japan Sumitomo Dainippon Pharma buys US Cynapsus via US unit, $624 mln.
- JPMorgan aims global bond index at yield-hungry investors – Reuters.
- US Sept total vehicle sales 17.76 mln AR, Aug 17.0 mln.
- Australia Sept job ads -0.3% m/m, +3.7% y/y, Aug +1.7%, +8.0%, trend slows.
- Australia Aug bldg approvals -1.8% m/m, -7% forecast, priv-sector homes -1.3% July rev +12.0% (prelim +11.3%), y/y +10.1% vs +3.1%.
- Reuters poll – S&P/ASX 200 to end ’16 at 5.5k, end-June ’17 at 5.55k.
- Year's two biggest Australian IPOs could turn market around – Bloomberg.
- New Zealand Q3 NZIER QSBO - Business confidence net +26% see improvement, highest since mid-’14, Q2 +19%, inflation subdued, cap utilization 92.5% vs 92.9%.
- New Zealand Sept QV residential property index +14.3% y/y, Aug +14.6%.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Sep construction PMI, 49.0 forecast; last 49.2.
- (0500 ET/0900 GMT) Eurozone Aug producer prices, -0.1% m/m, -2.1% y/y forecast; last +0.1%, -2.8%.
- (0945 ET/1345 GMT) United States Sep ISM-New York index; last 719.9.
Key Events Ahead
- China markets closed all week.
- N/A EU-Philippines business summit in Manila.
- N/A UK Tory party conference in Birmingham (till tomorrow).
- N/A ECB ChiefEcon Praet speaks at Madrid forum.
- N/A Italy EUR 50-year bond via IMI, BNP Paribas, GS, HSBC, JPM, UC – IFR.
- (0530 ET/0930 GMT) UK DMO GBP2.75 bln 0.5% 2022 Gilt auction.
- (0530 ET/0930 GMT) Belgium E1.3-1.7 bln 3 and 6-month treasury certificate auctions.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E38 bln allotment forecast; E38.7 bln maturing.
- (0630 ET/1030 GMT) ESM E1.5 bln 3-month bill auction.
- N/A IMF/World Bank annual meetings (till Oct 9).
- (0700 ET/1100 GMT) Fonterra GDT daily auction, last auction prices +1.7%.
- (0805 ET/1205 GMT) Richmond Fed Lacker speaks at Charleston, WV conference.
- (0900 ET/1300 GMT) IMF World Economic Outlook release, press conference.
- (1950 ET/2350 GMT) Chicago Fed Evans speaks at Auckland, NZ luncheon.
FX Beat
DXY: The dollar rose to a 13-day high versus the yen following upbeat U.S. ISM data, strengthening investors’ appetite. The dollar index against a basket of currencies trades 0.2 percent higher at 95.92, hovering towards a peak of 95.96 struck on Friday.
EUR/USD: The euro declined below the 1.1200 handle, extending losses for the second straight day as the dollar boosted following better-than-expected U.S. macro-fundamentals. The greenback rallied after the Institute for Supply Management showed that the gauge for the U.S. manufacturing sector in September returned to expansion. The major trades 0.1 percent down at 1.1198, attempting to regain the 1.1200 level. Investors will continue to track developments surrounding the Deutsche Bank, ahead of Eurozone's producer price index and U.S. economic data for further cues on the pair. Immediate resistance is located at 1.1236 (Sept 28 High), break above could take it till 1.1257/ 1.1284. On the downside, support is seen at 1.1180 (Aug 26 Low), break below could drag it till 1.1120/ 1.1100.
USD/JPY: The dollar rallied above the 102.00 handle, as risk appetite improved after OPEC oil agreement and easing Deutsche Bank worries boosted prospects of Federal Reserve December rate hike. However, the gains were capped as investors await the action in the Deutsche Bank shares, which traded in the negative zone on Monday. The major rose 0.5 percent at 102.21, having touched an early high of 102.39, its highest since September 21. The movements in the pair will be driven by broad-based market sentiment, amid lack of relevant data from the U.S. economy. Immediate resistance is located at 102.80, break above targets 103.00/103.40. On the downside, support is seen at 101.36 (5-DMA), break below could take it near 101.00.
GBP/USD: Sterling steadied after hitting fresh a 3-month low earlier in the session as markets continue to wary over Brexit's March deadline for the formal separation procedure from the European Union to begin. On Monday, the pound fell more than 1 percent to 1.2817, its weakest since early July and within the sight of a 31-year low of 1.2789 hit following the June 23 referendum on EU membership. Sterling trades flat at 1.2842, after declining to an early low of 1.2816, it’s lowest since July 6. Investors' will closely watch Britain's construction for further momentum on the pair. Immediate resistance is located at 1.2900, break above could take it near 1.2927 (5-DMA). On the downside, support is seen at 1.2816 (Session Low) , break below targets 1.2800. Against the euro, the pound trades 0.1 percent up at 87.18 pence, having touched a 3-year low of 87.46 in the previous session.
AUD/USD: The Australian dollar rose after Reserve Bank of Australia left interest rates unchanged at 1.5 percent, indicating that the rate decision remains consistent with sustainable growth in the economy. Moreover, data released earlier showed that the country's building permits came in better-than-expected at -1.8 percent against consensus of -7.0 percent, keeping the bid tone around the Aussie intact. The major trades up at 0.7676, extending gains for the third consecutive session. Traders will continue to digest the RBA policy outcome, in absence of significant economic data from both the continents. Immediate support is seen at 0.7651 (10-DMA), break below could drag it till 0.7623. On the upside, resistance is located at 0.7700, break above targets 0.7750.
NZD/USD: The New Zealand dollar rose above the 0.7300 handle on the back of improved risk-on market sentiment. However, the major trimmed gains as the U.S. dollar extends its bullish momentum, in wake of upbeat U.S. macro-fundamental released yesterday. The Kiwi trades 0.2 percent higher at 0.7287, having touched 1-week of high of 0.7310 earlier in the session. Investors will remain cautious ahead of the Global Dairy Trade price index figure, amid data-empty US calendar today. Immediate resistance is located at 0.7320, break above targets 0.7340/ 0.7370. On the downside, support is seen at 0.7260 (Sept 27 Low), break below could drag it till 0.7220/ 0.7200.
Equities Recap
Asian shares tumbled as markets worried over diminishing hopes for a reduced Deutsche Bank fine and growing expectations of a Federal Reserve interest rate hike pressured Wall Street.
MSCI's broadest index of Asia-Pacific shares outside Japan was slightly higher in early deals.
Chinese banks will be closed in observance of National Day.
Tokyo's Nikkei gained 0.83 percent at 16,735.65 points, Australia's S&P/ASX 200 index lost 0.12 percent at 5,471.80 points and South Korea's KOSPI added 0.5 percent at 2,053.86 points.
Hong Kong’s Hang Seng was trading 0.1 percent up at 23,609.07 points. Taiwan shares rose 0.6 percent at 9,287.77 points.
Commodities Recap
Crude oil prices edged down from a 6-week high touched in the previous session, dragged down by a rise in Iranian exports that added to a global supply glut, however, they were provided support by a planned OPEC-led supply cut later this year. International benchmark Brent crude was trading 0.1 percent down at $50.72 per barrel at 0353 GMT, having touched 6-week high of $51.11 on Monday. U.S. West Texas Intermediate crude edged down 0.1 percent at $48.55 a barrel, after rising to 48.99 in the prior session, its highest since August 22.
Gold slumped, extending losses for the sixth consecutive session as the dollar strengthened following upbeat U.S. economic data release. Spot gold nudged down 0.1 percent to $1,310.31 an ounce by 0404 GMT, having declined to a near 2-week low of $1,307.85 earlier in the session. U.S. gold futures were nearly flat at $1,313.10 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.6256 percent higher by 0.002 bps, while 5-year was 0.002 bps up at 1.1849 percent.
The Japanese government bonds traded modestly lower, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. Moreover, future course in bond prices are likely to be ruled by the movements in the crude oil market. The yield on the benchmark 10-year bonds rose nearly 1 basis point to -0.059 percent and the yield on short-term 2-year bonds climbed ½ basis point to -0.266 percent.
The Australian government plunged after Reserve Bank of Australia kept its official rate unchanged at 1.50 percent after cutting 25 basis points in August. The yield on the benchmark 10-year Treasury note rose 13 basis points to 2.082 percent, the yield on 15-year note jumped 12 basis points to 2.420 percent and the yield on short-term 2-year climbed 6-1/2 basis points to 1.615 percent.
The New Zealand government bonds closed modestly higher on as investors remained cautious ahead of the Global Dairy Trade price index figure. The yield on benchmark 10-year bond fell 1 basis point to 2.415 percent, yield on 7-year note also dipped 1 basis point to 2.160 percent and the yield on short-term 2-year note ended 1 basis point lower at 1.960 percent.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The 2-year fell 2.5 Canadian cents to yield 0.536 percent and the benchmark 10-year declined 12 Canadian cents to yield 1.010 percent. The 2-year yield fell 1.8 basis points further below its U.S. equivalent to leave the spread at -26.2 basis points, the largest gap since June 8.
