Market Roundup
- Japan to downgrade fiscal ’16 growth forecast, +1.7% to +0.9% - Nikkei.
- Japan Inc – economy top priority, not constitution – Nikkei.
- Tight family budgets crimping Japanese spending – Nikkei.
- Japan PM Abe eyes broader public pension coverage to bolster demand – Nikkei.
- EconMin Ishihara – Mindfulof Brexit fallout in compiling stimulus package, risk Japan not full out of deflation – Reuters.
- Japan June domestic corp goods prices -0.1% m/m, -4.2% y/y, May +0.1%, -4.3%.
- PBOC fixes yuan at 6.6950 vs USD, weakest level since October ’10.
- Cleveland Fed Mester (in Sydney) – Financial stability should not be third Fed mandate, positive on US jobs market, not behind curve on rates, rates on gradual upward slope, timing of hikes dependent on data – Reuters.
- New UK PM May to make Brexit a success, to favor social order – FT.
- UK June BRC like-for-like retail sales -0.5% y/y, total sales +0.2%, May +0.5%, +1.4%, BCC balance of mfg expecting improvement lowest since Q3 ’12.
- IMF – Italy facing monumental challenge, cuts growth outlook to just under 1% in ’16, around 1% in ’17 – Reuters.
- Australia June NAB biz conditions index +12, confidence +6, May +10, +3, conditions highest since global financial crisis, upbeat despite Brexit.
- Citi – Brexit panic to give way to commodity revival – Globe&Mail, Bloomberg.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Jun CPI, +0.1% m/m, +1.0% y/y eyed; last +0.2%, +0.6%.
- (0330 ET/0730 GMT) Sweden Jun CPIF, +0.1% m/m, +1.5% y/y eyed; last +0.2%, +1.1%.
- (0600 ET/1000 GMT) United States Jun NFIB business optimism index; last 93.8.
- (1000 ET/1400 GMT) United States May wholesale sales/inv, +0.6%/+0.2% m/m eyed; last +1.0%/+0.6%.
- (1000 ET/1400 GMT) United States May JOLTS job openings, 5.7 mln eyed; last 5.79 mln.
Key Events Ahead
- N/A International court rules on Philippine challenge to China sea claims.
- N/A EcoFin meeting in Brussels, BoI monthly report on money and banks.
- (0400 ET/0800 GMT) Austria FinMin Schelling to announce bank levy overhaul.
- (0430 ET/0830 GMT) BoE June 28 Financial Policy Committee meeting minutes.
- (0440 ET/0840 GMT) Spain 6 and 12-month treasury bill auctions.
- (0500 ET/0900 GMT) Italy E6.5 bln 12-month BOT auction.
- (0530 ET/0930 GMT) BoE Gov Carney parliamentary testimony on financial stability report.
- (0530 ET/0930 GMT) UK DMO GBP500 mln 4.0% 2060 Gilt auction.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E44 bln allotment eyed, E44.1 bln maturing.
- (0540 ET/0940 GMT) Belgium E1.7-2.1 bln 3 and 12-month treasury certificate auctions.
- (0915 ET/1315 GMT) Fed Gov Tarullo speaks at Washington DC conference.
- (0915 ET/1315 GMT) St Louis Fed Bullard presentation in St Louis.
- (1330 ET/1730 GMT) BoS Gov Linde speaks at Zaragoza Spain ’16 conference.
- (1530 ET/1930 GMT) United States Tsy DepSec Raskin speaks at Washington DC FINRA event.
- (1730 ET/2130 GMT) Minny Fed Kashkari speaks at Marquette, MI town hall.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent lower at 96.35, pulling away from a 4-month high of 96.79 touched in the previous session.
EUR/USD: The euro extended gains on the back of improving market sentiments, but it struggled to regain the 1.1100 level. The euro trades 0.1 percent higher at 1.1075, having touched an early high of 1.1090. The gains in the major were capped as the bid tone around the dollar remains supported by strong U.S. economic data and comments from Federal Reserve officials appear to strengthen the prospects a Fed interest rate rise in September. Markets now await series of economic data from the U.S. and Fed official's Tarullo and Bullard speeches for further momentum. Immediate resistance is located at 1.1120, break above could take the pair to 1.1130/1.1154. On the lower side, support is seen at 1.1028, break below targets 1.1002.
USD/JPY: The greenback rose above the 103 handle, having gained 2.2 percent on Monday, recording its biggest daily gain since October 2014. The major rose after Japanese Prime Minister Shinzo Abe signaled fresh round of fiscal stimulus spending following an election victory over the weekend. Improvement in risk sentiment and gains in equity markets also strengthened the dollar. The pair trades 0.2 percent higher at 103.10, having touched a 12-day high of 103.28 earlier in the session. Investor’s attention will now remain on BoJ's July policy meeting, to see whether it will expand its monetary stimulus. The next resistance hurdle is faced at 104.00. On the lower side, support is seen at 102.11 (10-DMA), break below targets 101.69/ 101.00.
GBP/USD: Sterling rose above the $1.3000 handle after Theresa May seem set to be confirmed as prime minister following Andrea Leadsom's withdrawal from the contest. Investors remain wary over May's approach to Brexit negotiations and whether she will call a general election to strengthen her authority. Sterling trades 0.7 percent higher at 1.3070, attempting to extend gains above the 1.300 level. Markets attention will remain on BoE Governor Mark Carney and other FPC member’s testimony on the inflation outlook, ahead of the central bank's quarterly bulletin. Immediate resistance is located at 1.3200 level, break above targets 1.3288/1.3340. On the down side support is seen at 1.2880, break below could drag the pair lower 1.2800 level. Against the euro, the pound trades 0.3 percent higher at 84.76 pence.
AUD/USD: The Australian dollar advanced on the back of risk-on trades in the equity markets, combined with a recovery in the oil prices. The Aussie trades 0.7 percent higher at 0.7586, hovering towards 0.7600 handle. The major was also supported by renewed optimism in the Australian businesses, as the National Australia Bank's (NAB) business confidence rose to 6 in June from 3 in May, while the NAB business conditions index gained 12 in May against previous 10. Markets now await series of U.S. economic data and Fed official's speeches for further cues on the major. Immediate resistance is located at 0.7600, break above targets 0.7647/0.7671. On the lower side, support is seen at 0.7507 (10-DMA), break below could take the pair lower 0.7500 handle.
NZD/USD: The New Zealand dollar rose, paring some of its overnight losses , supported by persistent risk-on sentiment and recovery in oil prices. The Kiwi trades 0.6 percent higher at 0.7263, hovering towards a high of 0.7304 touched in the previous session. The major had rallied over the weekend after Reserve Bank of New Zealand stated that increasing house prices being a possible reason to hold interest rates. The moves in the pair will be largely driven by broader market sentiment ahead of Fed and RBNZ official's speeches. Immediate resistance is located at 0.7306, while support is seen at 0.7293 (10-DMA).
Equities Recap
Asian shares advanced to a 2-1/2-month high, after Wall Street shares touched a record high on the back of strong U.S. data and expectations of more stimulus from global central banks.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 percent to hit its highest level since late April.
Tokyo's Nikkei advanced 2.46 pct at 16,095.65, Australia's S&P/ASX 200 index gain 0.47 pct at 5,362.10 points and Seoul shares edged up 0.15 pct.
Shanghai composite index gained 1.1 percent at 3,029.82 points, while CSI300 index added 1.4 percent at 3,248.37 points.
Hong Kong’s Hang Seng was trading 0.9 percent higher at 21,063.85 points. Taiwan shares rose 0.6 pct at 8,841.46 points.
Commodities Recap
Oil price gained as a stoppage in Iraqi crude loadings at Basra threatened to reduce supplies, however prices remained near to 2-month lows hit in the previous session. Brent crude oil was trading 0.5 percent up at $46.28 per barrel at 0343 GMT, but still near previous session low of $45.88. U.S. West Texas Intermediate crude was up 11 cents at $44.87 a barrel.
Gold steadied after declining in the previous session, as markets assess whether the latest U.S. employment report strengthened the chances of imminent interest rate hike by the Federal Reserve. Spot gold was trading flat at $1,355.42 per ounce by 0350 GMT. It fell 0.8 percent to $1.350.84 on Monday, recording its biggest drop in nearly two weeks. U.S. gold was little changed at $1,356 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.4471 percent up by 0.013 bps, while 5-year was 0.006 bps higher at 1.0311 percent.
The Australian government bonds slumped after data showed that business confidence has rebounded back to the strong levels seen in April. The yield on the benchmark 10-year Treasury note rose nearly 5 basis points to 1.963 percent and the yield on short-term 2-year note also jumped nearly 4 basis points to 1.655 percent.
New Zealand government bonds eased, sending yields 4.0 basis points higher at the long end of the curve.
Canadian government bond prices were lower across the maturity curve, with the 2-year price down 1.5 Canadian cents to yield 0.473 percent and the benchmark 10-year falling 20 Canadian cents to yield 0.981 percent. The Canada-U.S. two-year bond spread was -18.4 basis points, while the 10-year spread was -44.9 basis points.
