Market Roundup
- RBNZ cuts OCR 25 bps to record low 2.25%, CPI to take longer to reach target, +1.1% Dec '16, GDP to March '17 +3.1%, TWI @70 Dec '16, further NZD fall appropriate, global growth outlook deteriorated, China cited, dairy weak too, 2 more rate cuts factored in, further cuts data dependent, may not be needed?
- China Feb CPI +1.6% m/m, +2.3% y/y, +1.1% and +1.9% forecast, food +7.3%.
- Japan Feb domestic CGPI -0.2% m/m, -3.4% y/y, 11th fall, -0.3%/-3.4% forecast.
- China Feb PPI -4.9% y/y, as forecast.
- IIF - Financial market dislocations growing - Singapore Business Times.
- Sources - BoJ to hold off rate cut amid unstable bond market - Reuters.
- Japan FinMin Aso - Japan no longer in state of deflation - Bloomberg.
- Japan public pension giant to boost transparency of investments -Nikkei.
- MoF flow data week-ended March 5- Japanese buy net Y252.4 bln foreign stocks, trln bonds, sell Y33.9 bln bills; foreign investors sell net Y138.5 bln Japanese stocks, Y86.3 bln bonds, buy trln bills.
- Japan Toyota to hike wages but seeks compromise, Y2000 vs Y3000 - Nikkei.
- Hedge funds back off bets on China devaluation - Reuters.
- ECB questions banks on Brexit preparations - Handelsblatt.
- UK Feb RICS house price bal +50, +51 forecast, Jan rev +48, rises to slow on tax.
- Canada manufacturers see expiring FX hedges lifting exports - Reuters.
- Moody's - Credit risk to NZ banks from lower dairy payouts - Reuters.
Economic Data Ahead
- (0200 ET/0700 GMT) Germany Jan trade balance, E19.6 bln surplus forecast; last E18.8 bln surplus.
- (0200 ET/0700 GMT) Sweden Feb unemployment, 4.2% forecast; last 4.3%.
- (0245 ET/0745 GMT) France Jan industrial output, +0.8% m/m forecast; last -1.6%.
- (0300 ET/0800 GMT) Spain Jan retail sales, +2.9% y/y forecast; last +2.2%.
- (0400 ET/0900 GMT) Norway Feb CPI, +0.4% m/m, +3.0% y/y forecast; last +0.6%, +3.0%.
- (0400 ET/0900 GMT) Norway Feb - core, +0.7% m/m, +3.1% y/y forecast; last -0.1%, +3.0%.
- (0400 ET/0900 GMT) Norway Feb PPI; last -10.7% y/y.
- (0830 ET/1330 GMT) United States w/e initial jobless claims, 275k forecast; last 278k.
- N/A OECD Greece Survey.
- N/A Italy E6 bln 12-mo BOT, Ireland E500 mln 6-mo treasury bill auctions.
- (0330 ET/0830 GMT) Buba Dombret speech at Paris conference.
- (0530 ET/1030 GMT) UK DMO GBP1 bln 0.125% 2036 index-linked Gilt auction.
- (0613 ET/1113 GMT) Buba Thiele speech at Tegernsee event.
- (0745 ET/1245 GMT) ECB policy announcement, unch 0.05% refi, 10 bp depo cut to -0.4% forecast.
- (0830 ET/1330 GMT) ECB Pres Draghi press conference.
- (1615 ET/2115 GMT) BoC Gov Poloz speaks at CIAR in Ottawa.
FX Beat
USD: The dollar gained 0.40 percent to 113.80 yen, benefiting from fading risk aversion after data showed inflation in China stronger than forecast. Against the basket of currencies, the dollar index was at 97.384, up by 0.22 percent.
EUR/USD: The euro trades 0.16 percent lower at 1.0974 in Asian trade on Thursday ahead of a European Central Bank meeting at which policymakers are expected to take further easing measures. According to Reuters survey published on Monday, the ECB is expected to cut the deposit rate by 10 basis points to -0.40 percent, announce more asset purchases and probably introduce tiered interest rates like the Bank of Japan in order to boost inflation. Later in the day, series of economic data from Eurozone economies will released, however, it will have less impact on the EUR, as markets will focus on the ECB meeting for further cues on the pair. The pair remains under pressure ahead of the much awaited ECB policy decision. Immediate support is seen at 1.0957 (Feb 24 Low), break below could drag the pair to 1.0940 (Mar 7 Low). Resistance is located at 1.1023 (20-DMA).
USD/JPY: The dollar rose 0.39 percent to 113.75 yen against the safe-haven Japanese currency as equity and commodity market gains improved risk appetite. The pair continues to rise, continuing its previous session's bullish trend. On Wednesday, the pair closed at 113.31, however, it had declined to a low of 112.28 amid growing concerns of global economy outlook. The pair has strengthened by higher than expected Chinese CPI data, which aided to calm Chinese economy slowdown fears and stimulated renewed optimism across the financial markets. Markets now await the ECB policy decision, which is expected to have major impact on the USD, which may influence USD/JPY.
Immediate resistance is located at 113.92 (Mar 7 High), while support is seen at 113.15 (Session Low).
AUD/USD: The Australian dollar eased to 0.7472 but well within reach of 0.7527, a level last touched in July. The release of the Chinese CPI and PPI data had less impact on the Aussie. Chinese February producer price index were in line with market consensus of -4.9% y/y against previous -5.3% y/y. The February consumer price index surpassed expectations of 1.1% m/m as it was at 1.6% m/m versus previous 0.5% m/m. Earlier in the session, the pair has made a high of 0.7486, before falling down to its current levels. The Aussie has gained 4.5 percent so far this month. On the downside, support is seen at 0.7458 (5-DMA), break below could take the pair to 0.7410 (Mar 8 Low). While on the upside, resistance is located at 0.7527 (Previous Session High).
NZD/USD: The New Zealand dollar declined more than a cent after the RBNZ's decision early on Wednesday surprised with an interest rate cut by 25 basis points to 2.25 percent, citing a material decline in a range of inflation expectation measures. The kiwi hit a 1-week low at 0.6619, after dropping from the overnight high of 0.6809. RBNZ Governor Graeme Wheeler referred China as a major risk to the bank's outlook for economic growth and inflation, reflecting global concerns over a slowdown in the Chinese economy. The pair currently trades around 0.6633, having touched session's low of 0.6619. Immediate support is located 0.6605 (Feb 18 Low), break below could drag the pair to further losses. Resistance is seen at 0.6666 (20-DMA).
USD/CNY: The yuan edged lower against the dollar on Thursday after the central bank set the midpoint rate at 6.5127 per dollar prior to market open, 0.03 percent weaker than the previous fix at 6.5106. The spot market opened at 6.5158 per dollar and was trading at 6.5156 at midday, easing 0.04 percent from the previous close. The offshore yuan was trading 0.06 percent lower than the onshore spot at 6.5193 per dollar. China's consumer inflation surpassed forecasts in February, accelerating at its fastest pace since July 2014, however, the data had no immediate effect on the currency.
Equities Recap
Asian stocks edged up on Thursday, encouraged by a rally in crude oil prices and expectations that the European Central Bank will ease policy later in the day, emulating policymakers elsewhere seeking to bolster their struggling economies.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.4 percent, however, volatile Shanghai stocks dropped 1.2 percent. Taiwan stocks nudged up 0.3 pct at 8,660.70 points.
Australia's S&P/ASX 200 index edged down 0.09 pct at 5,152.70 points, while Nikkei closed up 1.26 pct at 16,852.35, with Seoul shares climbed up 1.16 pct.
Commodities Recap
Gold was firm on Thursday below last week's 13-month high as Asian stocks and the dollar advanced on expectations of more stimulus from the ECB to boost economies in the eurozone. Spot gold was off 0.2 percent at $1,250 an ounce by 0134 GMT, pulling further away from a 13-month peak of $1,279.60 reached on March 4. U.S. gold for April delivery dropped 0.5 percent to $1,250.80.
Oil prices declined early on Thursday after U.S. crude hit 2016 highs the day before and Brent shot back over $40 per barrel, with analysts warning that larger gains would be unwarranted as a global glut continues to outweigh strong demand. Brent crude futures were at $40.88 per barrel at 0339 GMT, down 19 cents from their last close, while U.S. crude was down 8 cents at $38.21 per barrel.
Treasuries Recap
U.S. 10-Year Treasuries Yield stood at 1.8831 percent down by 0.009 bps.
Cash JGB prices turned weaker across the board, with the curve steepening sharply. The new 5s are now indicated at -0.145% to -0.14%, vs -0.142% for the average accepted yield. The current 5s are up 1.5bp at -0.155%, while the 10s are up 0.5bp at -0.015%. In the super-long zone, the 2s are up 5bp at 0.495%, their intraday high, while the new 30s are up 7bp at 0.785%, their intraday high.
Australian government bond futures were mixed, with the 3-year bond contract up 3 ticks at 98.060. The 10-year contract shed 1 tick to 97.4325, while the 20-year contract was half a tick lower at 96.9250. The spread between 10-year and 3-year government bonds bounced to 63 basis points, from a near 1-year low of 59 basis points touched on Wednesday.
New Zealand government bonds gained, sending yields 11 basis points lower at the long end of the curve.
Canadian government bond prices were lower across a steeper maturity curve. The benchmark 10-year was down 61 Canadian cents to yield 1.248 percent, while the 2-year price declined 7.5 Canadian cents to yield 0.532 percent. The Canada-U.S. 2-year bond spread was 1.8 basis points higher at -36.6 basis points, while the 10-year spread was 2.4 basis points higher at -62.8 basis points as Canadian government bonds underperformed.
