Market Roundup
- South Korea December L-Money Supply Growth Decreases to +9.0 % vs previous 9.2 %
- Japan considering letting public pension fund invest directly in stocks, as early as '16, passive investment likely allowed too (use of Nikkei stock average, other indices) - Nikkei.
- Japanese policymakers propose expanding corporate tax break for REIT-like funds that invest in infrastructure - Reuters.
- Tokyo eyes longer exemption for infrastructure funds - Nikkei.
- Japan Oct core machinery orders +10.7% m/m, +10.3% y/y, -1.5% and +1.4% forecast, biggest m/m gain since March '14, government ups assessment of series.
- Japan Nov money supply M2 +3.3% y/y, M3 +2.7%, broadest liquidity +4.0%.
- China FinMin - To adjust import-export taxes to aid economic restructuring.
- China Nov CPI unch m/m, +1.5% y/y, -0.1% and +1.4% forecast; Nov food CPI +2.3% y/y, non-food +1.1%.
- China Nov PPI -0.5% m/m, -5.9% y/y, as forecast.
- PBOC fixes yuan at 6.4140 vs USD, weakest since August '11.
- BoC Gov Poloz - CAD-oil correlation quite strong, economy far from needing extraordinary stimulus - Reuters.
- British Chambers of Commerce - Downgrades UK growth forecasts, '15 +2.4% from +2.6%, +2.5% in '16 and '17, previous estimate +2.7%.
- Australia Dec Westpac/MI consumer confidence index -0.8% to 100.8, Nov +3.9%.
- Australia Oct owner-occupied housing finance -0.5% m/m, -1.0% forecast, value of investment housing finance -6.1%.
Economic Data Ahead
- (0145 ET/0645 GMT) Switzerland Nov unemployment, 3.4% sa forecast; last 3.4% sa, 3.3% nsa.
- (0200 ET/0700 GMT) Germany Oct trade balance, E20.0 bln surplus forecast; last E19.4 bln surplus.
- (1000 ET/1500 GMT) United States Oct wholesale sales, +0.4% m/m forecast; last +0.5%.
- (1000 ET/1500 GMT) United States Oct wholesale inventories, +0.1% m/m forecast; last +0.5%.
Key Events Ahead
- N/A UN COP 21 conference in Paris (till December 11).
- N/A BoE MPC begins two-day meeting.
- N/A Sweden SEK2 bln each 4.25% and 5.0% 2019 and 2020 govt bond auctions.
- N/A Norway NOK2 bln 1.75% 2025 NST477 bond auction.
- N/A Spain max E4 bln 6/12-mo, Greece E1/1.25 bln 13/26-wk t-bill auctions.
- (0200 ET/0700 GMT) ECB Lautenschlaeger speech in Abu Dhabi.
- (0300 ET/0800 GMT) Iceland central bank policy announcement.
- (0400 ET/0900 GMT) Estonia CB macro forecasts/11:00 ECB/CB Gov Hansson press conference.
- (0500 ET/1000 GMT) ECB/Austria CB Nowotny speaks in Vienna on Austrian economy.
- (0530 ET/1030 GMT) Germany E3 bln zero% 2017 Schatz auction.
- (0215 ET/1715 GMT) United States Tsy Weiss speaks on Puerto Rico debt at Peterson Institute.
- (1500 ET/2000 GMT) RBNZ policy announcement, 25 bp cut in OCR to 2.5% forecast.
FX Beat
EUR/USD: The euro traded at $1.0911, adding to its 0.5 percent gains on Tuesday and edging back towards a 1-month high of $1.0981 hit on Thursday after the European Central Bank's stimulus turned out to be smaller than expected. Against the NOK the euro hit a 2-month high of 9.6072 crowns after commodity currencies suffered heavy losses in the past two days from a selloff in oil and bulk commodities. Against the yen, the euro inched up to 133.85. EUR/USD is currently trading at 1.0908 levels, having touched a daily high of 1.0637 levels and a low of 1.0568 levels. It faces resistance at 1.0979 levels and support is seen at 1.0796 levels.
USD/JPY: The dollar dropped against the yen to 122.78 yen from this week's high of 123.48 yen. The Bank of Japan will have more latitude to maintain its current policy stance if a Federal Reserve interest rate rise triggers a selloff in the yen. The pair touched a daily high of 123.046 levels and low of 122.63. Resistance is seen at 123.66 levels and support at 122.29 levels. It breaks below 122.90, remains on a back foot heading into the European session as bullish pressure on the JPY mounts. Nikkei's decline accelerated on intensified risk-off, also denting the pair. Further downside is expected to be limited around 122.20, a strong zone, which is set to hold the bears in the short term. Break below this level will expose the pair towards next support level located at 121.50. Immediate resistance is seen at 122.92 (10 DMA) and then at 122.98 (Daily Tenkan).
AUD/USD: The Australian dollar was steady at $0.7229 after dropping below 72 U.S. cents overnight. It has lost around a cent and a half since Friday when it hit a 3-month peak of $0.7386. Support was found at $0.7186. It was under pressure for the second consecutive session on Wednesday after a massive selloff in oil and commodities saw speculators add to already bearish positions. Dealers expect the run on commodities could end soon, as the focus will then shift to next week's Federal Reserve policy review, where a U.S. interest rate hike is considered.
USD/CAD: The Canadian dollar settled at C$1.3587 to the greenback, weaker than the Bank of Canada's official close of C$1.3513, or 74.00 U.S. cents. In the two weeks to last Friday, the loonie had traded between C$1.3280 and C$1.3436. The currency's strongest level of the session was C$1.3496, while it hit its weakest level since mid-2004 at C$1.3623. Firm Canadian housing data did offset pressure on the Canadian dollar, while sluggish Chinese trade data fed concern about slower global growth.
NZD/USD: The New Zealand dollar was steady at $0.6637, having dropped 1.6 percent so far this week after posting 1-month high of $0.6787 on Friday. RBNZ meet tomorrow weighing on the Kiwi, renewed offered tone pushing the pair to session lows at 0.6622. Selloff in oil and bulk commodities also weighed heavily on commodity currencies. Price action has been contained within the daily cloud, pair traded sideways within narrow 0.6630/40 corridor before latest slip. Immediate support lies at 0.6612 Tues low and further below at 0.6608 (50% retrace Nov/Dec rise). Cloud top at 0.6667 is immediate resistance on the upside ahead of 0.6680 (Dec 2nd highs)
USD/CNY: China's yuan opened weaker against the dollar on Wednesday after the PBoC set its midpoint fix at 6.414 per dollar prior to market open a 4-year low, 0.1 percent weaker than the previous fix of 6.4078. The spot market opened at 6.4205 per dollar and was trading at 6.4197 in early trade, 25 pips away from the previous close, hitting its weakest level since late August. The offshore yuan was trading 1.06 percent weaker than the onshore spot at 6.4885 per dollar.
Equities Recap
Asian stocks were down on Wednesday as crumbling oil prices and data pointing to cooling demand from China sapped investor appetite for risk assets.
MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.2 percent and edged towards its November trough, a break of which would take it to its lowest level since early October.
Australia's S&P/ASX 200 Index closed down 0.49 pct at 5,083.60 points, while Nikkei ended down 0.98 pct at 19,301.07 with Seoul Shares edged down 0.02 pct.
Commodities Recap
Gold extended gains on Wednesday, supported by softness in the dollar but upside was limited as investors anticipated a Federal Reserve rate hike next week. Spot gold increased 0.3 percent to $1,077.06 an ounce by 0347 GMT, after rising 0.4 percent on Tuesday as the dollar dropped against a basket of major currencies.
Oil prices increased as U.S. crude stocks slipped,U.S. West Texas Intermediate (WTI) crude futures were at $38.24 per barrel at 0600 GMT, up 73 cents from their last settlement. Internationally traded Brent futures were up 58 cents at $40.84 a barrel.
Treasuries Recap
U.S. 10-Year Treasuries yield stood at 2.22 percent down by 0.018.
Australian government bond futures were firm as 3-year bond contract was steady at 97.870 with the 10-year contract was unchanged at 97.1250, while the 20-year contract shed 1.5 ticks to 96.6050.
New Zealand government bonds were mixed with change across the curve.
Canadian government bond prices were higher across the maturity curve, with the 2-year price up 6.5 Canadian cents to yield 0.566 percent and the benchmark 10-year rising 11 Canadian cents to yield 1.508 percent while the 30-year issue dropped 2 Canadian cents to yield 2.239 percent. The Canada-U.S. 2-year bond spread was 3.5 basis points wider at -36.9 basis points, trading at its deepest negative spread as Canada's 2-year bond outperformed.
