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Asia Roundup: Aussie steadies as RBA stands pat, greenback eases as U.S. Treasury yields slump, Asian shares tumble over U.S.-China trade tensions - Tuesday, December 4th, 2018

Market Roundup

  • U.S. expects immediate action from China on trade commitments
     
  • Trump urges 'full sentence' for his ex-lawyer Cohen in Russia probe
     
  • Treasury yields extend decline, 2-yr/10-yr spread at new 11-year low
     
  • Britain's May launches high-stakes parliamentary debate on Brexit plan
     
  • UK consumer spending slows in run-up to Brexit - industry data
     
  • China c.bank chief says will keep monetary policy flexible
     
  • 'Yellow vest' protesters knock wind out of French business, economy
     
  • Australia Q3 Current Account Balance SA, -10.7 bln, -10.2 bln f’cast, -13.5 bln prev, -12.1 bln r'vsd
     
  • Australia Q3 Net Exports Contribution, 0.4%, 0.2% f’cast, 0.1% prev
     
  • Australia Dec RBA Cash Rate, 1.50%, 1.50% f’cast, 1.50% prev

Economic Data Ahead

  • (0430 ET/0930 GMT) Great Britain Nov Markit/CIPS Cons PMI, 52.5 f'cast, 53.2 prev
     
  • (0500 ET/1000 GMT) EZ Oct Producer Prices (y/y), 4.5% f'cast, 4.5% prev

Key Events Ahead

  • N/A ECB Vice President Luis de Guindos participates in ECOFIN meeting in Brussels
     
  • N/A BoE Governor Mark Carney speaks to parliament's Treasury Committee about the central bank's report on what Brexit might mean for Britain's economy in London.
     
  • (0300 ET/0800 GMT) European Union Finance Ministers' meeting in Brussels
     
  • (1000 ET/1500 GMT) New York Fed President John Williams participates in a panel discussion in New York
     
  • (1300 ET/1800 GMT) BoE Monetary Policy Committee Member Gertjan Vlieghe speaks in Plymouth
     

FX Beat

DXY: The dollar index eased to a 5-day low after the U.S. 10-year Treasury yield fell to its lowest level since mid-September. The greenback against a basket of currencies trades 0.2 percent down at 96.73, having touched a high of 97.54 on Wednesday, its highest since Nov 13. FxWirePro's Hourly Dollar Strength Index stood at -114.22 (Highly Bearish) by 0500 GMT.

EUR/USD: The euro rose, extending previous session gains after Eurozone finance ministers stated that Italy's draft 2019 budget was breaking European Union rules and they agreed with the European Commission that Rome should revise it. The European currency traded 0.2 percent up at 1.1377, having touched a high of 1.1401 on Thursday, its highest since Nov. 23. FxWirePro's Hourly Euro Strength Index stood at -4.25 (Neutral) by 0500 GMT. Investors’ attention will remain on a series of data from the Eurozone economies, and EZ producer price index, ahead of the New York business confidence index and economic optimism, and FOMC member William's speech. Immediate resistance is located at 1.1420 (November 16 High), a break above targets 1.1472 (November 20 High). On the downside, support is seen at 1.1305 (November 30 Low), a break below could drag it till 1.1263 (November 26 Low).

USD/JPY: The dollar slumped to a near 1-week low, as U.S. Treasury yields declined to 3-month lows after the Federal Reserve indicated that it may be nearing an end to its three-year rate hike cycle.  The U.S. 10-year Treasury yield eased to 2.94 percent, its lowest level since mid-September, while the difference in yield between the U.S. 2-year and 10-year tightened to its smallest since July 2007. The major was trading 0.5 percent down at 113.09, having hit a high of 114.03 on Wednesday, its highest since November 13. FxWirePro's Hourly Yen Strength Index stood at 121.52 (Highly Bullish) by 0500 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the New York business confidence index and economic optimism, and FOMC member William's speech.. Immediate resistance is located at 114.03 (November 28 High), a break above targets 114.23 (November 12 High). On the downside, support is seen at 112.88 (November 22 Low), a break below could take it lower 112.42 (November 19 Low).

GBP/USD: Sterling steadied above the 1.2700 handle after falling to its lowest level since the end of October in the previous session on growing concerns about British parliamentary approval for a proposed Brexit deal. The major traded 0.1 percent up at 1.2739, having hit a low of 1.2698 on Monday; it’s lowest since October 31. FxWirePro's Hourly Sterling Strength Index stood at -80.88 (Slightly Bearish) 0500 GMT. Investors’ attention will remain UK construction PMI and BoE Carney's speech, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2809 (November 30 High), a break above could take it near 1.2884 (November 19 High). On the downside, support is seen at 1.2695 (October 30 Low), a break below targets 1.2661 (August 15 Low). Against the euro, the pound was trading 0.1 percent down at 89.26 pence, having hit a low of 89.27 earlier, it’s lowest since Nov. 19.

AUD/USD: The Australian dollar held firm near a 3-month peak, after the Reserve Bank of Australia held its rates at 1.5 percent at its monthly policy meeting, as widely expected, but remained upbeat on the economy. Moreover, data showing the country's current account deficit narrowed to A$10.7 billion in the third quarter supported the upside. The Aussie trades 0.2 percent up at 0.7369, having hit a high of 0.7393 on Monday; it’s highest since August 9. FxWirePro's Hourly Aussie Strength Index stood at 117.42 (Highly Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7333 (August 22 Low), a break below targets 0.7307 (August 27 Low). On the upside, resistance is located at 0.7405 (August 6 High), a break above could take it near 0.7441 (July 31 High).

NZD/USD: The New Zealand dollar rallied to a 5-1/2 month peak, as oil prices surged, amid expected OPEC-led supply cuts and a mandated reduction in Canadian output. The Kiwi trades 0.4 percent up at 0.6954, having touched a high of 0.6962, its highest level June 15. FxWirePro's Hourly Kiwi Strength Index was at 63.31 (Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6976 (June 15 High), a break above could take it near 0.7023 (May 31 High). On the downside, support is seen at 0.6888 (December 3 Low), a break below could drag it below 0.6816 (November 9 Low).

Equities Recap

Asian shares plunged amid growing doubts over whether the United States and China will be able to resolve trade differences.

MSCI's broadest index of Asia-Pacific shares outside Japan traded dropped 0.3 percent.

Tokyo's Nikkei declined 2.4 percent to 22,036.05 points, Australia's S&P/ASX 200 index fell 1.01 percent to 5,713.10 points and South Korea's KOSPI eased 1.1 percent to 2,109.21 points.

Shanghai composite index surged 0.2 percent to 2,657.88 points, while CSI300 index traded 0.05 percent down at 3,260.34 points.

Hong Kong’s Hang Seng traded 0.4 percent lower at 27,078.11 points. Taiwan shares shed 0.5 percent to 10,083.54 points.

Commodities Recap

Crude oil prices surged, extending gains from the previous session amid expected OPEC-led supply cuts and a mandated reduction in Canadian output. International benchmark Brent crude was trading 0.8 percent up at $62.32 per barrel by 0449 GMT, having hit a high of $62.58 on Monday, its highest since November 23. U.S. West Texas Intermediate was trading 0.8 percent up at $53.49 a barrel, after rising as high as $53.83 on Monday, its highest since the November 23.

Gold prices rose to a more than 4-week high earlier in the session, as the greenback declined after the United States and China agreed to a temporary truce in their trade conflict. Spot gold was 0.5 percent up at $1,236.51 per ounce at 0455 GMT, having touched a high of $1,236.96, its highest level since Nov. 1. U.S. gold futures were down 0.1 percent at $1,238.2 per ounce.

Treasuries Recap

The Japanese government bond prices gained and the yield curve flattened. with the benchmark 10-year JGB yield 1 basis point lower at 0.070 percent, its lowest since Aug. 1. The 30-year JGB yield declined 2 basis points to a four-month low of 0.790 percent. The spread between the 10-year and 30-year JGB yields narrowed to 72 basis points, the flattest in three months.

The Australian government bond futures jumped, with the three-year bond contract up 4 ticks at 97.955. The 10-year contract rose 7.5 ticks to 97.4550, flattening the yield curve.

The New Zealand government bonds gained, sending yields 5 basis points lower at the long end of the curve.

The Canadian government bond prices were higher across a flatter yield curve. The 10-year yield touched its lowest intraday level since Sept. 6 at 2.234 percent.

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