Asia Roundup: Dollar hits 9-1/2-month high against  yen, crude oil surge triggers risk-on sentiment, gold hovers near 10-month low - Thursday, December 1st, 2016

Market Roundup

• BoJ Policy Board Sakurai – Sticks to recent majority mantra, current policy working fine, BoJ to continue to buy massive amounts of JGBs, government, and private sector must help too, global uncertainties still loom large – RTRS.
   
• ADB head Nakao – Don’t expect Fed policy to have lasting impact on capital flows between US-emerging economies – Reuters.
   
• Riksbank DepGov Skingsley – Will intervene in SEK if necessary to maintain current inflation trade, SEK to appreciate in medium-term – Reuters.
   
• Japan MoF survey – Q3 CAPEX -1.3% y/y, first fall since Q1 ’13, excl software +0.4% q/q, recurring profits +11.5% y/y, first rise in year, sales -1.5%.
   
• MoF flow data week-ended Nov 26 – Japanese buy net Y117.8 bln foreign stocks, Y112.3 bln bonds, Y16.6 bln bills; foreign investors buy net Y330.5 bln Japanese stocks, Y22.0 bln bonds, Y160.4 bln bills.
   
• Japan plans tax breaks for small businesses that hike pay – Nikkei.
   
• Trump economic policies would boost Japan, says IMF official – Nikkei.
   
• Japan Nov mfg PMI – final 51.3, flash 51.1, Oct final 51.4.
   
• China Nov Caixin Mfg PMI 50.9, 50.8 forecast, Oct 51.2, output-input prices up.
   
• China Nov official Mfg PMI 51.7, best in two years, 51.0 forecast, Oct 51.2.
   
• China Nov official services PMI 54.7, Oct 54.0.
   
• PBOC Huang Yiping warns of risks to ’17 growth – China Securities Journal.
   
• PBOC fixes CNY at 6.8958 vs USD, yesterday 6.8865.
   
• Australia Q3 new CAPEX -4.0% q/q, ‘16/17 latest estimate A$106.9 bln, -2.5% and A$111 bln forecast, Q3 bldg CAPEX -5.7%, plant/machinery -1.9%, risks to GDP.
   
• Australia Nov PMI +3.3 points to 54.2.
   
• Australia Nov CoreLogic home prices +0.2% m/m, 11th straight gain, +9.5% y/y.
   
• New Zealand Q3 terms of trade -1.8% q/q, import prices -1.0%, export prices -2.8%.
   
• New Zealand Nov QV residential property index +12.4% y/y, “slowest” since May.
   
• BoI - Italy’s top three banks systemically important, need buffer – Reuters.
  ​

Economic Data Ahead

• (0230 ET/0730 GMT) Sweden Nov PMI mfg, 57.0 forecast; last  58.4.
   
• (0300 ET/0800 GMT) Norway Nov PMI mfg, 52.5 forecast; last  52.7.
   
• (0315 ET/0815 GMT) Switzerland Oct retail sales; last -2.3% y/y.
   
• (0315 ET/0815 GMT) Spain Nov PMI mfg, 53.8 forecast; last  53.3.
   
• (0330 ET/0830 GMT) Switzerland  Nov PMI mfg, 54.4 forecast; last  54.7.
   
• (0345 ET/0845 GMT) Italy Nov PMI mfg, 51.8 forecast; last  50.9.
   
• (0350 ET/0850 GMT) France Nov PMI mfg, 51.5 forecast; flash 51.5.
   
• (0355 ET/0855 GMT) Germany Nov PMI mfg, 54.4 forecast; flash 54.4.
   
• (0400 ET/0900 GMT) Italy Oct unemployment, 11.6% forecast; last 11.7%.
   
• (0400 ET/0900 GMT) Eurozone Nov PMI mfg, 53.7 forecast; flash 53.7.
   
• (0430 ET/0930 GMT) Great Britain Nov PMI mfg, 54.5 forecast; last  54.3.
   
• (0500 ET/1000 GMT) Eurozone Oct unemployment, 10.0% forecast; last 10.0%.
   
• (0500 ET/1000 GMT) Italy Q3  GDP – final, +0.3% q/q, +0.9% y/y forecast; prelim +0.3%, +0.9%.
   
• (0730 ET/1230 GMT) United States Nov Challenger layoffs; last 30.74k.
   
• (0830 ET/1330 GMT) United States w/e initial jobless claims, 253k forecast; last 251k.
   
• (0945 ET/1445 GMT) United States Nov Markit PMI mfg – final; flash 53.9.
   
• (1000 ET/1500 GMT) United States Oct construction spending, +0.5% m/m forecast; last -0.4%.
   
• (1000 ET/1500 GMT) United States Nov ISM PMI mfg, 52.2 forecast; last 51.9.
   
• (1330 ET/1830 GMT) United States Nov total vehicle sales, 17.7 mln AR forecast; last 18.02 mln.
  ​

Key Events Ahead

• N/A   ADB Institute Tokyo conference, various speakers (till tomorrow).
   
• N/A   Energy conference in Bratislava, Slovakia, various speakers.
   
• N/A   Norges Bank DepGov Matsen speaks in Oslo.
   
• (0430 ET/0930 GMT) Spain E2-3 bln 0.75/1.3/4.7% 2021/26/41 Bono auctions.
   
• (0430 ET/0930 GMT) Spain E250-750 mln 0.55% 2019 index-linked Bono auction.
   
• (0450 ET/0950 GMT) France E2.5-3.5 bln 1.5/4.5% 2031/41 OAT auctions.
   
• (0500 ET/1000 GMT) Sweden 3.75/1.5% 2017/23 inflation-linked government bond auctions.
   
• (0530 ET/1030 GMT) UK DMO GBP2.75 bln 0.5% 2022 Gilt auction.
   
• (0730 ET/1230 GMT) US TsySec Lew, IMF Lagarde, others speak at Washington, DC USAID forum.
   
• (0830 ET/1330 GMT) Cleveland Fed Mester speaks at Washington, DC TOFR conference.
   
• (0900 ET/1400 GMT) Dallas Fed Kaplan speaks at San Antonio breakfast event.
   
• (1100 ET/1600 GMT) Dallas Fed Kaplan on CNBC Squawk Alley program.
   

FX Beat

DXY: The dollar rose to a 9-1/2 -month high versus the yen on the back of higher Treasury yields and upbeat U.S. economic data. The greenback against a basket of currencies trades 0.2 percent down at 101.31, hovering towards a high of 101.83 hit in the previous session. FxWirePro's Hourly Dollar Strength Index stood at -18.47 (Neutral) by 0500 GMT.

EUR/USD: The euro edged up, however, remained close to a 5-day low touched in the previous session as the dollar was broadly firm after the release of upbeat U.S. economic data. The ADP employment report showed that private payrolls increased by 216,000 jobs in November, well above expectations for a gain of 165,000 jobs, while consumer spending rose in October, indicating signs of economic strength that could further strengthen the case for an interest-rate hike from the Federal Reserve this month. The European currency trades 0.12 percent up at 1.0601, hovering away from a low of 1.0552 hit on Wednesday, its lowest since Nov. 25. FxWirePro's Hourly Euro Strength Index stood at -37.49 (Neutral) by 0400 GMT. Investors focus will remain on Manufacturing PMI from both the continents, ahead of the U.S. ISM PMI manufacturing employment sub-index for further cues on the pair. Immediate resistance is located at 1.0660, a break above targets 1.0700/1.0745. On the downside, support is seen at 1.0538, a break below could drag it lower 1.0500.

USD/JPY: The dollar rose to a fresh 9 1/2-month high against the yen earlier in the session, however, it ran into profit-taking, reversing a part of intra-day gains. The major extended its bullish momentum as the gains in oil prices triggered inflation expectations, which sent the U.S. Treasury yields higher. The major trades 0.1 percent down at 114.25, having touched an early high of 114.82, its highest since mid-Feb. FxWirePro's Hourly Yen Strength Index stood at -61.26 (Bearish) by 0400 GMT. Investors now await series of U.S economic data including manufacturing PMI from both ISM and Markit, unemployment benefit claims and construction spending figures for further momentum. Immediate resistance is located at 115.00, a break above targets 115.30/ 115.84. On the downside, support is seen at 112.89 (7-EMA), a break below could take it near 112.00.

GBP/USD: Sterling extended gains above the 1.2500 handle to hit more than 2-week high as a risk-on rally after a surge in oil prices and a minor correction in the U.S. dollar boosted sentiments around the British currency. Sterling trades 0.1 percent up at 1.2520, after rising as high as 1.2540 earlier in the session, its highest since Nov. 14. FxWirePro's Hourly Sterling Strength Index stood at 96.36 (Slightly Bullish) by 0400 GMT. Markets will closely watch the UK manufacturing PMI report, ahead of the U.S. unemployment claims and ISM manufacturing data due later in the day for fresh cues on the major. Immediate resistance is located at 1.2550), a break above could take it near 1.2600. On the downside, support is seen at 1.2472 (9-EMA), a break below targets 1.2450. Against the euro, the pound trades up at 84.67 pence, having hit a high of 84.50 pence earlier in the day, its strongest since Sep. 13.

AUD/USD: The Australian dollar retreated after declining to a 1-week low in the previous session, strengthened by upbeat domestic manufacturing activity report and better-than-expected Chinese manufacturing PMI readings amid an overnight rally in oil prices. However, disappointing Australian private capital investment data, which slumped 4.0 percent in the third quarter against estimates of 2.5 percent drop limited the upside in the major. The Aussie trades 0.3 percent higher at 0.7410, having touched a low of 0.7374 on Wednesday, it’s weakest since Nov. 25. FxWirePro's Hourly Aussie Strength Index stood at -43.05 (Neutral) by 0500 GMT. Investors now await the US weekly jobless claims and ISM manufacturing PMI releases due later in the day, ahead of Australia's retail sales data scheduled tomorrow. Immediate support is seen at 0.7364, a break below could drag it lower 0.7300. On the upside, resistance is located at 0.7440 (10-DMA), a break above targets 0.7490/ 0.7510 (21-DMA).

NZD/USD: The New Zealand dollar recovered after declining from a 3-week high hit on Wednesday, boosted by better-than-expected Chinese PMI report, amid ongoing bullish momentum in oil prices. The easing pressure in the property market and signals that the Reserve Bank of New Zealand was done cutting rates bolstered the major as high as 0.7169 in the previous session. The Kiwi trades 0.16 percent up at 0.7094, attempting to regain the 0.7100 handle. FxWirePro's Hourly Kiwi Strength Index was at 73.37 (Slightly Bullish) by 0500 GMT. Markets focus will remain on series of U.S. economic data for next direction on the major. Immediate resistance is located at 0.7136 (21-DMA), a break above could take it over 0.7200. On the downside, support is seen at 0.7055 (10-DMA), a break below could drag it near 0.7000.

Equities Recap

Asian shares advanced, strengthened by energy stocks after OPEC agreed to its first output cut since 2008 to restrain a glut, while the dollar rose sharply as Treasury yields escalated.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 percent.

Tokyo's Nikkei rose 1.04 percent at 18,498.09 points, Australia's S&P/ASX 200 index gained 0.95 percent at 5,492.00 points and South Korea's KOSPI was trading 0.19 percent up at 1,987.18 points.

Shanghai composite index advanced 0.56 percent to 3,268.10 points, while CSI300 index was trading 0.57 percent higher at 3,558.20 points.

Hong Kong’s Hang Seng was trading 0.52 percent up at 22,906.82 points. Taiwan shares added 0.3 percent at 9,263.53 points.

Commodities Recap

Crude oil prices soared over 10 percent after producer cartel OPEC and Russia agreed to cut a deal to reduce output to restrain a global supply glut. International benchmark Brent crude was 1.3 percent up at $52.06 per barrel by 0406 GMT, after rising more than 10 percent to hit a 6-week high of $52.33 in the previous session. U.S. West Texas Intermediate crude rose 1.35 at $49.63 a barrel, after rising as high as $49.87 the prior day, its highest since Oct. 27.

Gold prices declined to its lowest mark in nearly 10 months as the dollar stood firm around 9-1/2 month highs against the yen, strengthened by  growing prospects of a U.S. interest rate hike and higher inflation expectations. Spot gold was down 0.2 percent at $1,170.00 an ounce by 0412 GMT, having hit its lowest since Feb. 5 at $1,162.04 earlier in the session. U.S. gold futures dropped 0.3 percent at $1,167.20 per ounce.

Treasuries Recap

The 10-year U.S treasury yield stood at 2.3901 percent up by 0.023 bps, while 5-year yield was up by 0.02 bps at 1.8536 percent.

The Japanese government bonds slumped as investors moved away from the safe-haven buying amid rising crude oil prices that lifted inflation expectations. The benchmark 10-year bond yield rose 2 basis points to 0.03 percent, the yield on long-term 30-year note also climbed 2 basis points to 0.59 percent and the yield on short-term 2-year note bounced 1/2 basis point to -0.15 percent.

The Australian 10-year bond yields hit highest since December last year on after OPEC nations agreed to their first production cut in eight years at Vienna. The yield on the benchmark 10-year Treasury note rose 7 basis points to 2.81 percent, the yield on the 15-year note climbed 7-1/2 basis points to 3.22 percent and the yield on short-term 2-year inched 3 basis points to 1.87 percent.

The New Zealand government bonds closed slightly higher as investors covered previous short positions at the end of the trading session on Thursday. The yield on the benchmark 10-year bond closed 1/2 basis point lower at 3.22 percent, the yield on 7-year note dipped nearly 1 basis point to 2.82 percent and the yield on 5-year note also slid nearly 1 basis point to 2.21 percent.

Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The 2-year price fell 5 Canadian cents to yield 0.700 percent and the benchmark 10-year declined 64 Canadian cents to yield 1.583 percent. The 10-year yield touched its highest since December at 1.614 percent last week, as investors speculate that the United States will pursue policies that boost inflation.