Market Roundup
- ECB likely to point to more easing as it charts steady course – Reuters.
- BoJ DepGov Nakaso – Nothing new, sticks to script, will act as necessary.
- More talk from BoJ, and maybe fewer surprises – Nikkei.
- Japan Q2 GDP revised up, +0.2% q/q, +0.7% AR, prelim unch, +0.2%, unch forecast for both, Q2 CAPEX rev -0.1% q/q, -0.4% prelim and forecast, private consumption, external demand contribution unchanged, at +0.2%, -0.3%, Q3 GDP better?
- Japan July c/a surplus Y1.9382 trln, Y2.090 trln forecast.
- MoF August flow data – Japanese buy net Y994.9 bln foreign stocks, Y2.2863 trln bonds, sell Y313.4 bln bills; foreign investors sell net Y528.5 bln Japanese stocks, buy Y1.1279 trln bonds, sell Y3.6291 trln bills; Japanese life insurers, investment trusts, commodity funds, trust banks buy for-bonds.
- MoF flow data week ended Sept 3 – Japanese buy net Y76.6 bln foreign stocks, sell Y1.3264 trln bonds, buy Y70.7 bln bills; foreign investors buy net Y1.9 bln Japanese stocks, Y666.9 bln bonds, sell Y112.2 bln bills.
- Japan Aug bank outstanding bank loans +2% y/y to Y499.913 trln, July +2.1%.
- StanChart sells Y45 bln 5-year samurais via MUFJ/MS, Mizuho, SMBC Nikko -IFR.
- China Aug trade surplus $52.05 bln, $58 bln forecast, exports -2.8% y/y, imports +1.5%, -4% and -4.9% forecast, pressure on exports expected to ease in Q4, imports up for first time in 22 months.
- China Aug CNY trade surplus 346 bln, exports +5.9% y/y, imports +10.8%.
- China commodity trade mixed, coal-crude oil imports up but iron-copper off.
- RBA Gov-to-be Lowe – Capital flow could cause discomfort but important for prosperity – MNI.
- Australia July trade deficit A$2.41 bln, A$2.75 bln forecast, exports +3% m/m, imports unch m/m, deficit narrows on non-monetary gold exports.
Economic Data Ahead
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 265k forecast; last 263k.
- (1500 ET/1900 GMT) United States Jul consumer credit, $16.0 bln forecast; last $12.32 bln.
Key Events Ahead
- N/A EuroGroup meeting in Bratislava.
- (0500 ET/0900 GMT) Ex-BoE MPC Bean parliamentary testimony.
- (0500 ET/0900 GMT) Ireland E1 bln 1.0% 2026 IGB auction.
- (0745 ET/1145 GMT) ECB policy announcement, no change in zero% refi, -0.4% depo rates forecast.
- (0830 ET/1230 GMT) ECB Pres Draghi press conference.
- (1035 ET/1435 GMT) UK ChancExch Hammond parliamentary testimony.
- (1205 ET/1605 GMT) BoC DepGov Lane presentation in Thunder Bay.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent lower at 94.89, having touched a near 2-week low of 94.69 in the previous session.
EUR/USD: The euro steadied as investors await fresh cues on monetary stimulus from the European Central Bank policy meeting due later in the day. The central bank is expected to stand pat on its interest rate decision, however, markets anticipate ECB to extend its asset purchase programme and improve the parameters to ease supply scarcity issues. The major trades 0.1 percent higher at 1.1252, having touched near 2-week high of 1.1271 in the previous session. The pair continues to trade between a narrow range as investors are reluctant to take positions ahead of ECB meeting. Immediate resistance is located at 1.1297, break above could take it over 1.1300. On the lower side, support is seen at 1.1209 (5-DMA), break below could drag it till 1.1150.
USD/JPY: The yen gained following Bank of Japan Deputy Governor Hiroshi Nakaso's speech. BoJ's Dep Gov stated that means toward reducing level of monetary policy accommodation will not be on agenda at September comprehensive review. The central bank considers real interest rate effects as basic mechanism of QQE with negative rate policy, he added. The dollar trades 0.2 percent lower at 101.50, hovering towards a low of 101.20 struck in the previous session, it’s lowest since Aug. 26. Investors expect the BoJ to announce additional easing steps on Sept 21, however, there is no clear consensus on what the Japanese central bank will unveil at the comprehensive policy review it promised in July. Immediate resistance is located at 102.00, break above targets 102.40. On the downside, support is seen at 101.20 (Previous Session Low), break below could take it lower 101.00.
GBP/USD: Sterling edged up after declining from its highest levels in 7-weeks on Wednesday following downbeat British industrial output data and Bank of England policymaker’s testimony in parliament which supported the decision to ease monetary policy aggressively in August. The major trades flat at 1.3343, having declined to a low of 1.3319 from 1.3437 peak in the previous session. In absence of relevant data from the U.K, investors’ attention will remain on ECB monetary policy decision. Immediate resistance is located at 1.3400, break above could take it near 1.3440. On the downside, support is seen at 1.3300, break below targets 1.3250. Against the euro, the pound was little changed at 84.29 pence, having touched a high of 83.33 pence on Tuesday.
AUD/USD: The Australian dollar gained after data in China showed rise in exports and imports. The major was also supported by Australia's upbeat trade balance figures in July, which showed trade deficit narrowing to $2,410 million against consensus of $2,750. Beijing reported imports rose 1.5 percent in August from a year ago, versus estimates of a 4.9 percent decline, while exports dropped 2.8 percent. The Aussie trades 0.13 percent up at 0.7682, recovering from the low of 0.7651 hit in the previous session. Markets will continue to digest the trade reports from both the economies, ahead of U.S. unemployment claims data. Immediate support is seen at 0.7651, break below could drag it near 0.7616 (20-DMA). On the upside, resistance is located at 0.7700, break above targets 0.7750.
NZD/USD: The New Zealand dollar rose, hovering closer to its 16-months high of 0.7484 hit in the previous session. The major held on to its recent gains and extended its 7-days rally largely on the back of slightly upbeat Chinese trade report combined with broad-based US dollar weakness and higher commodities’ prices. The Kiwi trades 0.2 percent higher at 0.7461, attempting to gain 0.7500 handle. The major will be driven by overall market sentiment, ahead of U.S. jobless claim data. Immediate resistance is located at 0.7500, break above targets 0.7550. On the downside, support is seen at 0.7397 (Previous Session Low), break below could drag it till 0.7350.
Equities Recap
Asian shares traded near 1-year peaks as Chinese trade data surpassed forecasts and imports recorded their first annual rise since late 2014, underpinning investor sentiments.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent, having gained in the previous four days of gains which took it to the highest since late July 2015.
Tokyo's Nikkei ended 0.32 pct down at 16,958.77 points, Australia's S&P/ASX 200 index declined 0.75 pct at 5,383.30 points and South Korea's KOSPI shed 0.1 percent at 2,059.92 points.
Shanghai composite index lost 0.1 percent at 3,088.21 points, while CSI300 index was trading 0.2 percent down at 3,334.19 points.
Hong Kong’s Hang Seng was trading 0.5 percent higher at 23,867.37 points. Taiwan shares ended flat at 9,262.89 points.
Commodities Recap
Crude oil prices extended gains, after rising by more than 1.5 percent in the previous session after American Petroleum Institute data showed U.S. crude stocks unexpectedly declining by 12.1 million barrels last week, as compared with expectations for an increase of around 200,000 barrels. Global benchmark Brent crude oil was 0.3 percent up at $48.69 a barrel by 0405 GMT, pulling further away from a low of $46.27 hit on Tuesday. U.S. West Texas Intermediate crude was at $46.26, higher by 0.3 percent.
Gold steadied, after slumping 0.3 percent in the previous session, as the dollar weakened and investors remained cautious ahead of European Central Bank policy meeting due later in the day. Spot gold edged up 0.1 percent at $1,346.30 an ounce by 0409 GMT, having touched an early low of $1341.75. U.S. gold futures were steady at $1,350.60.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5391 percent, while 5-year was at 1.1250 percent up by 0.003 bps.
The Australian government bonds traded nearly flat, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 1.90 percent mark and the yield on short-term 2-year remained steady at 1.49 percent.
The New Zealand government bonds closed lower as investors cashed in profits relishing previous gains. The yield on the benchmark 10-year bond rose 2 basis points to 2.280 percent, the yield on 7-year note ended 1-1/2 basis points higher at 1.995 percent and the yield on short-term 2-year note climbed 1 basis point to 1.855 percent.
Canadian government bond prices were higher across the yield curve, with the 2-year price up 5 Canadian cents to yield 0.542 percent and the benchmark 10-year rising 22 Canadian cents to yield 1.002 percent. The 2-year yield fell further below its U.S. equivalent, with the spread shifting 2.3 basis points to -19.6 basis points, as Canadian government bonds outperformed.
