Asia Roundup: Kiwi slumps on PM John Key's surprise resignation, euro hits 21-month low after Italy's PM Renzi loses reform referendum, Asian shares trade in red - Monday, December 5th, 2016

Market Roundup

• CFTC IMM CTA data – Specs up USD net longs to highest since January, net short JPY for 1st time since late December ’15, EUR shorts roughly unchanged.
   
• Italy PM Renzi loses constitutional reform referendum, clear “no” win, PM to convene cabinet tomorrow and tender resignation to president – Reuters.
   
• Far-right concedes defeat in Austria presidential election, Van der Bellen affirmed president – ORF TV, Reuters.
   
• John Key to resign as New Zealand Prime Minister and National party leader, resignation effective next Monday
   
• NZ DepPM English considering leadership – Reuters.
   
• Japan MoF Asakawa – Market currently relatively stable but uncertainties abound post-US election, Italy vote, fully supports BoJ – Reuters.
   
• Fitch - Japan insurers to seek more M&A, bond purchases abroad.
   
• Japan Nov PMI services up to 51.8, highest since January, Oct 50.5.
   
• China Nov Caixin PMI services 53.1, highest since July ’15, Oct 52.4.
   
• PBOC advisor Sheng – China should use part of its foreign reserves to stabilize yuan expectations – 21st Century Business Herald.
   
• PBOC Fan – To boost equity funding with national investment standard
   
• US Pres Trump talks to Taiwan president by phone, China lodges protest
   
• Trump threatens retribution for any US companies that move jobs overseas, could face 35% tariff – Washington Post.
   
• NY Fed Dudley – Stands by Wall Street reforms, must complete work – Reuters.
   
• UK PM May’s Brexit plans face British supreme court test – Reuters.
   
• UK manufacturers see post-Brexit bounceback – EEF/BDO survey.
   
• Australia Q3 business inventories +0.5% q/q, +0.2% forecast.
   
• Australia Q3 company gross profits +1.0% q/q, +3% forecast, pre-tax +3.6%.
   
• Australia Nov VFACTS new vehicle sales +0.3% y/y, ’16-to-date +2.2%, record?
   
• Australia Nov overall job ads +1.7% m/m, +6.1% AR, Oct +1.0%, +5.2%.
   
• New Zealand Nov ANZ commodity price index +2.7% m/m, seventh straight rise, Oct +0.7%.
  ​

Economic Data Ahead

• (0230 ET/0730 GMT) Sweden Nov PMI services; last 57.6.
   
• (0300 ET/0800 GMT) Spain Oct industrial output, +0.7% y/y forecast; last +0.8%.
   
• (0315 ET/0815 GMT) Spain Nov PMI services,  55.4 forecast; last  54.6.
   
• (0330 ET/0830 GMT) Sweden Oct industrial output, -0.5% m/m forecast; last +6.8% m/m, +1.5% y/y.
   
• (0330 ET/0830 GMT) Sweden Oct mfg new orders; last -16.4% y/y.
   
• (0345 ET/0845 GMT) Italy Nov PMI services,  51.9 forecast; last  51.0.
   
• (0350 ET/0850 GMT) France Nov PMI services,  52.6 forecast; flash 52.6.
   
• (0350 ET/0850 GMT) France Nov PMI composite, 52.3 forecast; flash 52.3.
   
• (0355 ET/0855 GMT) Germany Nov PMI services,  55.0 forecast; flash 55.0.
• (0355 ET/0855 GMT) Germany Nov PMI composite, 54.9 forecast; flash 54.9.
   
• (0400 ET/0900 GMT) Eurozone Nov PMI services,  54.1 forecast; flash 54.1.
   
• (0400 ET/0900 GMT) Eurozone Nov PMI composite, 54.1 forecast; flash 54.1.
   
• (0430 ET/0930 GMT) Eurozone Dec Sentix index, 13.1 forecast; last 13.1.
   
• (0430 ET/0930 GMT) Great Britain Nov PMI services,  54.0 forecast; last  54.5.
   
• (0500 ET/1000 GMT) Norway Nov housing prices; last +12.0% y/y.
   
• (0500 ET/1000 GMT) Eurozone Oct retail sales, +0.8% m/m, +1.7% y/y forecast; last -0.2%, +1.1%.
   
• (0945 ET/1445 GMT) United States Nov Markit PMI services  – final; flash 54.7.
   
• (0945 ET/1445 GMT) United States Nov Markit PMI composite – final; flash 54.9.
   
• (1000 ET/1500 GMT) United States Nov ISM PMI non-manufacturinig, 55.4 forecast; last 54.8.
   
• (1000 ET/1500 GMT) United States Nov employment trends index; last 129.0.
  ​

Key Events Ahead

• (0330 ET/0830 GMT) Brussels EcoFin meeting.


• (0540 ET/1040 GMT) Netherlands E1-2 bln 3 and 6-month DTC auctions.
   
• (0700 ET/1200 GMT) Riksbank
  executive board meeting.
   
• (0830 ET/1330 GMT) NY Fed Dudley speaks in New York.


• (0850 ET/1350 GMT) France E3.2-3.6/1.3-1.7/1.2-1.6 bln 3/6/12-month BTF note auctions.
   
• (0925 ET/1425 GMT) Chicago Fed Evans speaks in Chicago.


• (1100 ET/1600 GMT) ESRB Koenig Brussels parliamentary testimony.


• (1200 ET/1700 GMT) BoE Gov Carney speech in Liverpool.


• (1405 ET/1905 GMT) St Louis Fed Bullard presentation at Phoenix economic forecast luncheon.
   

FX Beat

DXY: The dollar rose to a more than 1-1/2 year high versus the euro after Italian Prime Minister Matteo Renzi announced his resignation following a defeat on constitutional reform. The greenback against a basket of currencies trades 0.7 percent up at 101.36, hovering away from a low of 100.62 hit on Friday. FxWirePro's Hourly Dollar Strength Index stood at -143.79 (Highly Bearish) by 0500 GMT.

EUR/USD: The euro slumped to a near 2-year low after Italian Prime Minister Matteo Renzi said he would resign following defeat on constitutional reform, which could destabilize Italy's unstable banking system. Markets wary that Renzi's resignation could lead to an early election next year, while instability in the economy would reignite a financial crisis and hurt Italy's fragile banking sector. The European currency trades 1.09 percent lower at 1.0542, having touched a 21-month low of 1.0504 earlier in the session. Investors will continue to digest the Italian referendum-related news, ahead of PMI reports, Sentix investor confidence, and retail sales data from the Eurozone. Markets are expected to ignore economic data as traders focus remains on the Renzi resignation-led uncertainties. FxWirePro's Hourly Euro Strength Index stood at 53.03 (Bullish) by 0400 GMT. Immediate resistance is located at 1.0666, a break above targets 1.0701 (21-DMA). On the downside, support is seen at 1.0500, a break below could drag it till 1.0450.

USD/JPY: The dollar gained as the market continued to cheer better-than-expected U.S. nonfarm payroll data, which added 178,000 jobs in November, as compared to an increase of 142,000 jobs in October. The major initially declined below the 113.00 handle as fresh weakness seen in the U.S. treasury yields and Italian referendum-led massive sell-off renewed bout of risk aversion in the market.  The pair trades 0.05 percent up at 113.54, recovering from an intra-day low of 112.86. FxWirePro's Hourly Yen Strength Index stood at -109.78 (Highly Bearish) by 0400 GMT. Investors now await U.S services PMI from both Markit and ISM, Labor Market Conditions Index and speeches from Federal Reserve officials’ for further cues on the likelihood of this month's U.S. interest rate hike. Immediate resistance is located at 114.54, a break above targets 115.00/ 115.30. On the downside, support is seen at 112.35 (Nov 24 Low), a break below could take it lower 112.00.

GBP/USD: Sterling declined after rising to a near 2-month high last week as investors remained cautious ahead of the UK Supreme Court hearings on government’s appeal against the high court ruling on Brexit. The major initially fell to an intra-day low of 1.2624, however, recovered thereafter as price action in the EUR/GBP cross following Italy's referendum outcome supported the British currency. Sterling trades 0.2 percent down at 1.2693, after rising to a high of 1.2736 in the previous session, its highest since Oct. 6. FxWirePro's Hourly Sterling Strength Index stood at 131.55 (Highly Bullish) by 0400 GMT. Markets continue to track price action in the EUR/GBP cross, ahead of the UK services PMI report, which is likely to show the pace of expansion slightly slowed in November. Immediate resistance is located at 1.2750, a break above could take it near 1.2800. On the downside, support is seen at 1.2601 (5-DMA), a break below targets 1.2500. Against the euro, the pound trades up at 83.15 pence, having hit a high of 83.05 pence earlier in the day, it’s strongest since Jul. 22.

AUD/USD: The Australian dollar edged up after dropping to an early low of 0.7412, as better-than-expected Caixin China services PMI and upbeat ANZ jobs advertisement report kept the bid the bid tone around the major intact, amid Italian referendum-led risk-aversion. Moreover, data released by TDS showed that the Australia’s inflation gauge rose by 0.1 percent in November, leaving the annual rate unchanged at 1.5 percent. The Aussie trades up at 0.7454, hovering just above the 0.7450 handle. FxWirePro's Hourly Aussie Strength Index stood at 51.97 (Bullish) by 0500 GMT. The major will be driven by overall market sentiment, ahead of series of U.S. economic data and Fed officials' speeches due later in the day. Immediate support is seen at 0.7400, a break below could drag it near 0.7360/ 0.7310. On the upside, resistance is located at 0.7488 (21-DMA), a break above targets 0.7550.

NZD/USD: The New Zealand dollar skidded nearly 1 percent after Prime Minister John Key announced his unexpected resignation and Italian referendum triggered a fresh bout of risk-off market sentiment, which drove investors to towards safe-haven assets. Markets seem to have ignored upbeat Chinese services PMI and NZ treasury’s upbeat assessment of the economy.  The Kiwi trades 0.4 percent down at 0.7108, having declined to an early low of 0.7069. FxWirePro's Hourly Kiwi Strength Index was at 113.58 (Highly Bullish) by 0500 GMT. Investors will continue to track board based markets sentiment, ahead of the U.S. macro-fundamental drivers and FOMC members’ speeches. Immediate resistance is located at 0.7150, a break above could take it near 0.7200. On the downside, support is seen at 0.7066 (Nov 29-Low), a break below could drag it till 0.7010/ 0.7000.

Equities Recap

Asian shares declined as Italian PM Matteo Renzi statement to resign following defeat on constitutional reform and New Zealand's PM John Key unexpectedly announcement of his resignation triggered risk-off market sentiment.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 percent.

Tokyo's Nikkei fell 0.93 percent at 18,254.01 points, Australia's S&P/ASX 200 index lost 0.71 percent at 5,405.60 points and South Korea's KOSPI was trading 0.23 percent down at 1,966.03 points.

Shanghai composite index slumped 1.43 percent to 3,197.44 points, while CSI300 index was trading 1.9 percent lower at 3,462.62 points.

Hong Kong’s Hang Seng was trading 0.64 percent down at 22,420.54 points. Taiwan shares shed 0.3 percent at 9,160.66 points.

Commodities Recap

Crude oil prices declined by nearly 1 percent as a higher U.S. rig count raised concerns that action plan between producer cartel OPEC and Russia might not be as huge as initially anticipated. International benchmark Brent crude was 0.8 percent down at $53.97 per barrel by 0401 GMT, retreating from a 16-month high of $54.50 hit on Thursday. U.S. West Texas Intermediate crude fell 0.9 percent at $51.19 a barrel, after rising as high as $51.77 last week, its highest since Oct. 20.

Gold prices edged lower, reversing early session gains as rising U.S. job numbers strengthened the expectations of imminent interest rate hike by the Federal Reserve. Spot gold was down 0.1 percent at $1,175.15 an ounce by 0407 GMT, retreating from an early high of $1,187.82, while U.S. gold futures settled up 0.7 percent at $1,177.80 per ounce.

Treasuries Recap

The 10-year U.S treasury yield stood at 2.3435 percent lower by 0.047 bps, while 5-year yield was down by 0.036 bps at 1.7928 percent.

The Australian government bonds gained as investors moved to safe-haven buying after the Italians voted against a constitutional reform during Sunday’s referendum, resulting in the resignation of Prime Minister Matteo Renzi. The yield on the benchmark 10-year Treasury note fell 6 basis points to 2.80 percent, the yield on 15-year note dipped 1-1/2 basis points to 3.26 percent and the yield on short-term 2-year slid 3-1/2 basis points to 1.86 percent.

The New Zealand government bonds closed higher Monday after Prime Minister John Key unexpectedly announced his resignation after being eight years in power. The yield on the benchmark 10-year bond closed 5 basis points lower at 3.23 percent, the yield on 7-year note also ended nearly 4 basis points lower to 2.82 percent and the yield on short-term 2-year note slid 3-1/2 basis points to 2.18 percent.