Market Roundup
- BoJ Policy Board Sakurai – Plenty room to ease more, deepen NIRP, easy bias, base money inflation targets to remain as is, policy reassessment more a fine tuning of policy tools, foreign bond buys-helicopter money-FX moves not options – Reuters.
- Japan FinMin Aso – Hopes G20 to agree on all policy steps for growth
- S&P - Japan ratings affirmed at A+/A-1, outlook remains stable.
- Japan Aug monetary base Y404.529 trln, July Y403.9463 trln, +24.2% y/y.
- Nomura REIT aims to expand portfolio 50% to Y1.5 trln in five years – Nikkei.
- Putin says Japan compromise possible in World War II island row – Bloomberg.
- Japan METI Seko denies Nikkei’s Japan Rosneft investment report – Reuters.
- US hedge fund TPG-Axon to shut Tokyo, Hong Kong offices – Reuters.
- Foreign CB US debt holdings -$18.143 bln to $3.188 trln Aug 31 week, Treasury holdings -$16.193 bln to $2.866 trln, agencies -$2.310 bln to $262.565 bln.
- NY Fed–FX swaps with foreign CBs $1.351 bln Aug 31 wk, BoJ $11 mln, rest ECB.
- Lipper – Stock funds post $748 mln outflows latest wk, rate hike fears weigh.
- US Aug auto sales 16.98 mln AR, -4.2% y/y, Japan car sales off too.
- New Zealand Q2 residential bldg work done +5.6% q/q, non-residential +5.3%.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Q2 current account balance; last SEK64.3 bln surplus.
- (0400 ET/0800 GMT) Italy Q2 GDP – final, unch q/q, +0.7% y/y forecast; prelim unch, +0.7%.
- (0400 ET/0800 GMT) Norway Aug unemployment, 3.1% nsa forecast; last 3.2% nsa, 101.36 k sa.
- (0430 ET/0830 GMT) Great Britain Aug construction PMI, 46.1 forecast; last 45.9.
- (0500 ET/0900 GMT) Eurozone Jul producer prices, +0.1% m/m, -2.9% y/y forecast; last +0.7%, -3.1%.
- (0830 ET/1230 GMT) United States Aug non-farm payrolls, +180k forecast; last +255k.
- (0830 ET/1230 GMT) United States Aug unemployment, 4.8% forecast; last 4.9%, participation 62.8%.
- (0830 ET/1230 GMT) United States Aug avge earnings/work wk, +0.2% m/m, 34.5 hrs forecast; last +0.3%, 34.5.
- (0830 ET/1230 GMT) United States Jul int’l trade bal, $42.7 bln deficit forecast; last $44.5 bln deficit.
- (0945 ET/1345 GMT) United States Aug ISM-New York sentiment, conditions; last 721.1, 60.7.
- (1000 ET/1400 GMT) United States Jul factory orders, +2.0% m/m forecast; last -1.5%.
Key Events Ahead
- N/A Austria CB Alpbach conference, ECB/Austria CB Nowotny press briefing.
- (0600 ET/1000 GMT) UK DMO GBP0.5/2.5/3.0 bln 1/3/6-month treasury bill auctions.
- (1300 ET/1700 GMT) Richmond Fed Lacker speaks in Richmond.
- Saturday Hangzhou, China G20 Summit (till Sunday).
FX Beat
DXY: The dollar index, against a basket of currencies trades lower at 95.64, having touched a low of 95.60 following downbeat U.S. manufacturing data.
EUR/USD: The euro edged up, extending gains above the 1.1200 handle, as the dollar weakened following an unexpected contraction in U.S. manufacturing in August, raising doubts on the strength of U.S. economic growth ahead of employment data due later in the day. Data released by the Institute for Supply Management (ISM) showed national factory activity index declined 3.2 percentage points to a reading of 49.4 against consensus of 52.0, recording its first contraction since February. The European currency trades 0.1 percent up at 1.1206, extending gains from a 3-week low of 1.1123 hit on Wednesday. Investor’s attention now remains of Eurozone's producer price index, ahead of closely watched U.S. non-farm payroll data. Immediate resistance is located at 1.1225 (10-DMA), break above could take it near 1.1250. On the lower side, support is seen at 1.1177 (5-DMA), break below could drag it till 1.1153.
USD/JPY: The greenback steadied after declining from a high of 104.00 yen hit on Thursday, its highest level in over a month. The major weakened after Markit manufacturing PMI and ISM index missed expectations, indicating contraction in the U.S. factory activity and temper revived Fed rate hike expectations. However, labor market growth could push the Federal Reserve closer to raising interest rates in near term. In Japan, BoJ Board Member Sakurai stated that the central bank had enough room to buy more ETFs, deepen negative interest rates and increase asset purchases. The pair trades 0.1 percent higher at 103.34, retreating from a low of 103.05 hit yesterday. Markets await U.S. non-farm payroll data, which is expected to have added 180,000 jobs in August. Immediate resistance is located at 104.00, break above targets 104.80/ 105.00. On the downside, support is seen at 102.96 (5-DMA), break below could take it near 102.45/102.00.
GBP/USD: Sterling advanced, extending previous session’s gains after data showed the British manufacturing sector rebounded from Brexit shock. The major rose as high as 1.3317, rising above $1.33 for the first time in four weeks, as factory activity gauge advanced to a 10-month peak of 53.3 in August, recovering from the 3-year low it hit in July after Brexit results. Sterling trades 0.1 percent up at 1.3279, attempting to regain the 1.3300 handle. Investors will closely watch UK's construction PMI data for further cues on the pair. Immediate resistance is located at 1.3317 (Previous Session High), break above could take it near 1.3400. On the downside, support is seen at 1.3171, break below targets 1.3100. Against the euro, the pound trades flat at 84.31 pence, having touched a high of 83.87 pence, it’s strongest since August 4.
AUD/USD: The Australian dollar stood firm, but gains were capped as investors remained cautious ahead of the US non-farm payrolls release. The Aussie trades 0.1 percent up at 0.7557, after gaining around half a cent overnight, though that just lifted it back to where it ended the previous week. Investors await U.S. employment report and factory orders data, ahead of Australia's AiG service sector index due next week for further momentum on the major. Immediate support is seen at 0.7528, break below could drag it near 0.7500. On the upside, resistance is located at 0.7572 (10-DMA), break above targets 0.7600.
NZD/USD: The New Zealand dollar consolidates below the 0.7300 handle, having gained overnight largely on the back of the disappointing U.S manufacturing data. The Kiwi trades 0.2 percent up at 0.7290, hovering just below the 0.7300 level. In absence of relevant data from New Zealand, markets focus will remain on series of U.S. economic reports: including employment data, factory order and Richmond Fed President Jeffrey M. Lacker's speech. Immediate resistance is located at 0.7300, break above targets 0.7340. On the downside, support is seen at 0.7257 (5-DMA), break below could drag it till 0.7220.
Equities Recap
Asian shares edged down, as investors nervously await potential U.S. employment data, which would raise chances of a Federal Reserve rate hike in near term.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat for the day.
Tokyo's Nikkei ended 0.01 pct down at 16,925.68, Australia's S&P/ASX 200 index fell 0.78 pct at 5,373.50 points and South Korea's KOSPI added 0.24 percent at 2,037.98 points.
Shanghai composite index lost 0.2 percent at 3,056.97 points, while CSI300 index was trading 0.04 percent up at 3,302.97 points.
Hong Kong’s Hang Seng was trading 0.4 percent higher at 23,255.96 points. Taiwan shares edged down 0.15 percent to 8,987.55 points.
Commodities Recap
Crude prices declined for the sixth consecutive session after falling more than 3 percent a day earlier, with investors cautious ahead of U.S. employment data that could provide insights on the world's largest economy and oil consumer. International Brent crude fell 0.2 percent to $45.69 a barrel by 0404 GMT, while U.S. West Texas Intermediate crude was also down by 0.2 percent at $43.36 a barrel. Both are on course for their biggest weekly losses since mid-January, weighed down by oil inventory pile up.
Gold edged up, after recovering from its lowest in over 2-months in the previous session, as weak U.S. manufacturing data increased doubts on the U.S. economy's strength ahead of highly influential nonfarm payroll numbers. Spot gold was up at $1,314.02 per ounce by 0411 GMT, having touched a low of $1,302.94 On Thursday, its lowest since June 24. U.S. gold futures were nearly unchanged at $1,317.50.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5818 percent up by 0.012 bps, while 5-year was at 1.1914 percent higher by 0.009 bps.
The New Zealand government bonds closed modestly lower, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year bond rose 1/2 basis point to 2.285 percent and the yield on 7-year note also ended 1/2 basis point higher at 1.995 percent and the yield on short-term 2-year note climbed 1/2 basis point to 1.865 percent.
The Australian government bonds traded nearly flat as investors await the Reserve Bank of Australia monetary policy decision. The yield on the benchmark 10-year Treasury note hovered around at 1.903 percent and the yield on short-term 2-year bounced 2 basis points to 1.494 percent.
Canadian government bond prices were higher across the maturity curve, with the 2-year bond up 3.5 Canadian cents to yield 0.563 percent and the benchmark 10-year adding 18 Canadian cents to yield 1.005 percent.
