Market Roundup
- Bank of Japan’s rush into stocks raises fears of market distortions –Reuters.
- BoJ Gov Kuroda limits comments to non-policy issues at Tokyo FinTech forum.
- Japan Aug flash mfg PMI 49.6, July 49.3, output 50.6 vs 49.4, first expansion since February, new orders and exports still in decline, goods prices off.
- Nikkei commentary – Normalizing Japan: Abe’s unfinished agenda.
- RBNZ Gov Wheeler – Current policy track expects 35 bp in rate cuts, flexible inflation targeting appropriate, policy constrained by offshore developments, TWI FX rate already at high level, more cuts but at slower pace - Reuters.
- James Saft: Emerging markets may enjoy secular stagnation – Reuters COLUMN.
- IIF – Emerging markets portfolio allocations highest since August ’15
Economic Data Ahead
- (0300 ET/0700 GMT) France Aug PMI mfg - flash, 48.8 forecast; last 48.6.
- (0300 ET/0700 GMT) France Aug PMI services - flash, 50.5 forecast; last 50.5.
- (0300 ET/0700 GMT) France Aug PMI composite – flash, 50.4 forecast; last 50.1.
- (0330 ET/0730 GMT) Germany Aug PMI mfg - flash, 53.5 forecast; last 53.8.
- (0330 ET/0730 GMT) Germany Aug PMI services - flash, 54.4 forecast; last 54.4.
- (0330 ET/0730 GMT) Germany Aug PMI composite – flash, 55.0 forecast; last 55.3.
- (0400 ET/0800 GMT) Eurozone Aug PMI mfg - flash, 52.0 forecast; last 52.0.
- (0400 ET/0800 GMT) Eurozone Aug PMI services - flash, 52.8 forecast; last 52.9.
- (0400 ET/0800 GMT) Eurozone Aug PMI composite – flash, 53.1 forecast; last 53.2.
- (0945 ET/1345 GMT) United States Aug Markit PMI mfg - flash, 52.7 forecast; last 52.9.
- (1000 ET/1400 GMT) United States Jul new home sales, 580k AR, -2.0% m/m forecast; last 590k, +3.5%.
- (1000 ET/1400 GMT) United States Aug Rich Fed mfg shipments/services/composite indices; last 7, 8, 10.
- (1000 ET/1400 GMT) Eurozone Aug consumer confidence index – flash, -7.6 forecast; last -7.9.
Key Events Ahead
- (0440 ET/0840 GMT) Spain E2.5-3.5 bln 3 and 9-month treasury bill auctions.
- (0530 ET/0930 GMT) ECB zero% 7-day refi, E41 bln allotment forecast, E41.652 bln maturing.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.1 percent down at 94.37, pulling away from a high of 94.96 touched in the previous session.
EUR/USD: The euro gained above the 1.1300 handle, extending its rebound from a low of 1.1270 touched in the previous session. The major's recovery was largely attributed to the extended retreat in the U.S. dollar across the board, amid persisting risk-off market profile. The European currency trades 0.1 percent up at 1.1331, hovering towards an 8-week high touched last week. Markets now await series of flash manufacturing PMI releases from across the Eurozone, ahead of U.S Markit manufacturing and homes sales data for fresh impetus. Immediate resistance is located at 1.1366, break above could take it till 1.1382/ 1.1400.
USD/JPY: The Japanese yen edged up after declining to a low of 100.93 per dollar in the previous session. The greenback weakened across the broad amid risk-off sentiment as fresh selling interest in the oil prices added to the persisting cautious environment in the markets. The dollar trades 0.2 percent down at 100.12, attempting to sustain gains above the 100 handle. Data released earlier in the session showed that Japanese flash manufacturing PMI rose to 49.6, surpassing expectations of 49.5 and previous 49.3, which strengthened the bid tone around the yen. Investor’s attention will remain on U.S. manufacturing PMI and housing data due later in the day for further momentum. Immediate support is seen at 100.00, break below could take it till 99.64. On the higher side, resistance is located at 100.93 (Previous Session High), break above targets 101.45/ 102.00.
GBP/USD: Sterling extended gains above the 1.3100 handle, after declining to a low of 1.3034 in the previous session. In absence of fresh fundamental triggers and cautious market environment, the major will continue to remain pressured amid renewed selling interest in the dollar. Sterling trades 0.1 percent up at 1.3147, hovering towards a peak of 1.3185 touched last week. Traders will look forward to the UK industrial order expectations data, U.S. home sales and manufacturing data for fresh cues on the pair. Immediate resistance is located at 1.1385 (Aug 19 High), break above could take it over 1.3200. On the down side, support is seen at 1.3101 (20-DMA), break below targets 1.3063/1.3034.
AUD/USD: The Australian dollar rose, however, it struggled to find momentum in thin liquidity as investor’s remain cautious ahead of Fed Chair Janet Yellen speech later this week at the annual economic symposium in Jackson Hole, Wyoming. The Aussie trades 0.4 percent higher at 0.7645, pulling away from a 2-week low of 0.7583 hit in the previous session. The major recovered largely on the back of a broad based US dollar retreat, however, the recovery ran out of steam as oil-price weakened amid prevalent risk-off tone in markets. Markets will continue to track broad market sentiment, ahead of U.S. economic data including flash manufacturing PMI and new home sales. Immediate resistance is located at 0.7662 (10-DMA), break above targets 0.7700. On the lower side, support is seen at 0.7583, break below could drag it near 0.7550.
NZD/USD: The New Zealand dollar rallied after Reserve Bank of New Zealand Governor Graeme Wheeler stated that he did not see the need for a rapid series of interest rate cuts. The Kiwi rose as high as 0.7329, hitting a near 2-week high and well away from previous session low of 0.7209. The major trades 0.8 percent higher at 0.7323, pulling closer to a 14-month peak of$0.7338 set earlier in August. Markets will continue to digest RBNZ Gov Wheeler's comments, ahead of U.S. economic data. Immediate resistance is located at 0.7350, break above targets 0.7400. On the lower side, support is seen at 0.7260 (Session low), break below could drag it near 0.7200.
Equities Recap
Asia shares edged up while oil prices declined, as investors awaited clues on whether the Federal Reserve will raise U.S. interest rates this year.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.3 percent in a subdued trade.
Tokyo's Nikkei declined 0.61 pct at 16,497.36, Australia's S&P/ASX 200 index gained 0.63 pct at 5,549.90 points and South Korea's KOSPI trades 0.3 percent up at 2,048.64 points.
Shanghai composite index added 0.2 percent at 3,090.73 points, while CSI300 index was trading 0.3 percent higher at 3,345.60 points.
Hong Kong’s Hang Seng was trading 0.3 percent lower at 22,925.63 points. Taiwan shares rose 0.6 pct at 9,030.93 points.
Commodities Recap
Crude oil prices declined over 1 percent, extending previous session losses, as markets wary on Goldman Sachs warning that Augusts’ price rally had been overdone and that a planed oil production freeze at current near-record levels would not help rein in an oversupplied market. International Brent crude oil was trading 1 percent lower at $48.64 per barrel at 0412 GMT, while U.S. West Texas Intermediate crude was at $46.65 per barrel, down 1.3 percent,
Gold extended losses, hovering towards a 2-week low hit in the previous session as the markets await for more clues from the U.S. Federal Reserve on whether it will hike rates this year. Spot gold edged down 0.1 percent to $1,336.72 an ounce at 0417 GMT. U.S. gold was flat at $1,342.70 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.5475 percent up by 0.008 bps, while 5-year was 0.007 bps higher at 1.1397 percent.
The Australian government bonds gained as crude oil futures snapped seven-session winning streak on expectations of higher output and a strengthening. The yield on the benchmark 10-year Treasury note fell 5-1/2 basis points to 1.907 percent and the yield on short-term 2-year also dipped nearly 4 basis points to 1.428 percent.
The New Zealand government bonds closed higher after the Reserve Bank of New Zealand Governor Graeme Wheeler said that current economic estimates further showed a need for 35 basis points of monetary easing. The yield on the benchmark 10-year bond fell 3 basis points to 2.275 percent and the yield on 7-year note also closed 1-½ basis points lower at 1.965 percent and the yield on short-term 2-year note slid 2 basis points to 1.790 percent.
Canadian government bond prices were higher across the maturity curve, with the 2-year bond up 3.5 Canadian cents to yield 0.555 percent and the benchmark 10-year rising 50 Canadian cents to yield 1.025 percent. The curve flattened as the spread between the 2-year and 10-year yields narrowed by 3.5 basis points to 47 basis points, indicating outperformance for longer-dated maturities.
