Market Roundup
- Australian election cliff-hanger leaves nation in limbo, vote close, Turnbull still confident of forming government, RBA to do heavy lifting? – Reuters.
- Australian political deadlock puts AAA rating at risk - Reuters.
- Australia June MI inflation gauge +0.6% m/m, +1.5% y/y, trimmed mean +0.2%, +1.2%, petrol and food up, underlying inflation still muted.
- Australia June overall job ads +0.5% m/m, newspapers -5.3%, internet +0.6%.
- Australia May bldg approvals -5.2% m/m, -3.3% eyed, priv-sector houses +0.1%.
- CFTC IMM CTA data - Specs cut GBP shorts, USD longs post-Brexit, JPY net longs highest since early May - Reuters.
- US 30-year Treasury yield hits lowest since 1950s as bond rally – Reuters.
- Brexit puts London’s offshore renminbi lead under threat – IFR.
- Brexit triggers surprise emerging market asset rally - Reuters.
- BoJ June Tankan – Japan firms see CPI +0.7% year from now, previous +0.8%, +1.1% in three and five years, previous +1.1%, +1.2%.
- United States June total vehicle sales 16.66 mln AR, May 17.45 mln – Autodata.
Economic Data Ahead
- (0430 ET/0830 GMT) Eurozone Jul Sentix index, 5.0 eyed; last 9.9.
- (0430 ET/0830 GMT) Great Britain Jun construction PMI, 50.5 eyed; last 51.2.
- (0500 ET/0900 GMT) Eurozone May producer prices, +0.3% m/m, -4.1% y/y eyed; last -0.3%, -4.4%.
Key Events Ahead
- US Independence Day holiday, all markets closed.
- (0510 ET/0910 GMT) ECB Angelomi speaks at Barcelona Caixabank event.
- (0540 ET/0940 GMT) Netherlands E1-2 bln each 3 and 6-month DTC auctions.
- (0850 ET/1250 GMT) France E3.2-3.6/0.9-1.3/0.9-1.3 bln 3/6/12-month BTF note auctions.
- (1030 ET/1430 GMT) BoC business outlook and senior loan officer surveys.
FX Beat
USD: The dollar index, against a basket of currencies trades edged down to 95.64, having touched an early low of 95.41.
EUR/USD: The euro trades flat as markets continue to wary on the potential financial market and economic uncertainty from the Brexit vote. Trading is expected to remain subdued as U.S. markets will be closed for the Independence Day public holiday. On Friday, the major rose to as high as 1.1169, but failed to sustain gains, after the U.S. ISM manufacturing data for the month of June came-in at 53.2, surpassing consensus of 51.3. Markets attention will remain on Eurozone investor confidence and producer price index data for further momentum. Immediate resistance is located at 1.1169 (Previous Session High), break above targets 1.1200 level. On the lower side, support is seen at 1.1113 (5-DMA), break below could drag the pair lower 1.1100 level.
USD/JPY: The major continues to trade between a narrow range below 103.00, as political uncertainty seems to overshadow economics, restricting it from any recovery. Data released earlier in the day showed that Japan's monetary base for the month of June edged down to 25.4 percent y/y, against forecasts of 26.3 percent. On Friday, the greenback touched a high of 103.39, however, it failed to sustain its recovery mode, closing down at 102.44. The pair rose 0.2 percent to 102.71, attempting to gain 103 handle once again. Immediate resistance is located at 103.33 (10-DMA), while on the downside, support is seen at 102.17, break below could take it lower 102 level.
GBP/USD: Sterling steadied, but it continues to trade around 1.3200 level as investors bet that interest rates would be cut further from their current record lows in the coming months. Financial market volatility has decreased as markets realize that it might take some time before Britain and the European Union agree on Brexit conditions. Sterling trades 0.2 percent up at 1.3282, not far from a 31-year low of 1.3119 struck in the previous week. Markets will closely watch Britain's June PMI construction index, which is expected to decline to 50.5 from previous 51.2. Immediate resistance is located at 1.3349 (Previous Session High), break above targets 1.3400. On the lower side, support is seen at 1.3200.
AUD/USD: The Australian dollar recovered after slumping as low as 0.7446 following the country's weekend election that showed no clear winner. The Aussie rebounded to 0.7506, extending gains above the 0.7500 level. The major was also weighed down by disappointing building permits in May and ANZ job advertisements data for June, which slumped to -5.2 percent from previous 3.3 percent and 0.5 percent from prior 2.2 percent, respectively. However, it was support after Moody's and Fitch stated that there was no immediate risk to Australia's triple-A rating, despite political uncertainty that could ease off within the coming weeks. Markets focus mow remains on Tuesday's Reserve Bank of Australia policy review. Resistance is located at 0.7526, while support is seen at 0.7436 (20-DMA).
NZD/USD: The New Zealand dollar rose after opening on a bearish gap. The Kiwi trade 0.3 percent higher at 0.7189, hovering towards 0.7200 level. The major will be driven by broad based market sentiment ahead of Global Dairy Trade auction. Immediate resistance is located at 0.7231, break above targets 0.7271/ 0.7300. On the downside, support is seen at 0.7128 (5-DMA), break below could take the pair till 0.7169.
Equities Recap
Asian shares reversed early losses and edged higher, amid subdued trading as financial and commodity markets will be closed in observance of the U.S. Independence Day.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.5 percent, after Wall Street registered its fourth straight day of gains on Friday.
Tokyo's Nikkei rose 0.60 pct at 15,775.80, Australia's S&P/ASX 200 index gained 0.52 pct at 5,273.70 points and Seoul shares added 0.47 pct.
Shanghai composite index advanced 1.8 percent at 2,987.12 points, while CSI300 index trades gained 1.6 percent at 3,204.61 points.
Hong Kong’s Hang Seng was trading 1.5 percent higher at 21,121.84 points. Taiwan stocks rose 0.3 pct at 8,760.58 points.
Commodities Recap
Crude prices edged down, despite comments from the Saudi energy minister stating that the oil market was on the road towards balance. Brent crude oil was down 0.5 percent at $50.36 a barrel by 0408 GMT, after settling up at $50.60 on Friday. There will be no West Texas Intermediate crude settlement on Monday as U.S. financial and commodity markets are closed for the Independence Day holiday.
Gold prices extended gains, nearing $1360 a level last seen on June 24, after Britain voted to leave the European Union. Spot gold was up 0.4 percent at $1,346.15 an ounce by 0414 GMT. On Friday, it rose 1.5 percent, after ending June up about 9 percent. U.S. gold was up 0.7 percent at $1,347.80.
Treasuries Recap
The Japanese government bonds traded modestly firmer. The yield on the benchmark 10-year bonds fell ½ basis points to -0.253 percent, short-term 2-year JGB yield dipped to record -0.34 percent, JGB 5-year yield tumbled to record low of -0.375 percent and the yield on 30-year JGB slid 1 basis point to 0.095 percent.
New Zealand government bonds gained, sending yields 2 basis points lower across the curve.
The Australian government bonds slumped after a national election at the weekend failed to deliver a conclusive winner. The yield on the benchmark 10-year Treasury note rose 2-1/2 basis points to 1.999 percent and the yield on short-term 2-year note also jumped 2-1/2 basis points to 1.601 percent.
