Asia Roundup: Yen gains as BoJ stimulus fails to meet expectations, Asian shares nears 1-year peak, Investors now eye U.S. GDP and PCE figures - Friday, July 29th, 2016

Market Roundup

• BoJ eases policy minimally, ups ETF annual buys to Y6 trln from Y3.3 trln,  Sato-Kiuchi dissents, does little else, base money target Y80 trln, depo rate -0.1%, Gov Kuroda instructs fresh assessments at next meeting, “live” too, CPI forecast cut, current FYI GDP forecast cut but FY ‘17/18 upped.
   
• Japan June industrial output +1.9% m/m, +0.7% eyed, +2.4% eyed for July (previous forecast +1.3%), August +2.3%.
   
• Japan June unemployment 3.1%, 3.2% eyed, lowest in almost 21 years, jobs applicants ratio 1.37, May 1.36, 1.37 eyed.
   
• Japan June core CPI -0.5% y/y, -0.4% eyed, biggest drop since March ’13, Tokyo July core -0.4%, as eyed.
   
• Japan June household spending -1.1% m/m, -2.2% y/y, +0.4% and -0.3% eyed.
   
• Japan June retail sales -1.4% y/y, -1.5% eyed.
   
• Japan PM Abe to reshuffle cabinet August 3 - Jiji.
   
• Reuters poll – Japan fund managers cut overall stock exposure in July to 36.6% (June 41.9%), up bonds to 51.1% (49.7%).
   
• Foreign CB US debt holdings -$8.042 bln to $3.220 trln July 27 week, Treasury holdings -$6.987 bln to $2.898 trln, agencies -$2.005 bln to $264.391 bln.
   
• NY Fed – Swaps with foreign CBs $180 mln, all with BoJ.
   
• Lipper – US-based funds post second week of outflows, stock funds $4.1 bln, EM funds attract record cash again.
   
• UK July GfK consumer confidence index -12, -8 eyed, June -1, biggest drop since 1990, economic outlook indicator lowest since April ’12.
   
• Australia June priv-sector credit +0.2% m/m, housing +0.5%, May +0.4%, +0.5%.
   
• New Zealand July ANZ biz confidence 16.0%, own activity 31.4%, June +20.2%, 35.1%.
   
• New Zealand  June new dwelling consents +16.3% m/m, +34.8% y/y.

Economic Data Ahead

• (0300 ET/0700 GMT) Switzerland Jul KoF indicator, 101.3 eyed; last 102.4.
   
• (0300 ET/0700 GMT) Spain Q2  GDP estimate, +0.7% q/q, +3.1% y/y eyed; last +0.8%, +3.4%.
   
• (0300 ET/0700 GMT) Spain Jul HICP – flash, -0.7% m/m, -0.8% y/y eyed; last +0.5%, -0.9%.
   
• (0300 ET/0700 GMT) Spain May current account balance; last E2.64 bln surplus.
   
• (0330 ET/0730 GMT) Sweden Q2  GDP, +0.7% q/q, +3.7% y/y eyed; last +0.5%, +4.2%.
   
• (0400 ET/0800 GMT) Norway Jul unemployment, 3.2% nsa eyed; last 2.9% nsa, 101.79k.
   
• (0400 ET/0800 GMT) Norway Jun retail sales ex-autos, -0.5% m/m eyed; last +1.7%.
   
• (0400 ET/0800 GMT) Norway Q2  industrial confidence index; last -7.0.
   
• (0400 ET/0800 GMT) Italy Jun unemployment, 11.4% eyed; last 11.5%.
   
• (0430 ET/0830 GMT) Great Britain Jun money supply M4; last +1.2%.
   
• (0430 ET/0830 GMT) Great Britain Jun mortgage approvals, 65.65k eyed; last 67.04k.
   
• (0430 ET/0830 GMT) Great Britain Jun mortgage lending, GBP2.6 bln eyed; last GBP2.82 bln.
   
• (0430 ET/0830 GMT) Great Britain Jun consumer credit,  GBP1.4 bln eyed; last GBP1.5  bln.
   
• (0500 ET/0900 GMT) Eurozone Q2  GDP – flash, +0.3% q/q, +1.5% y/y eyed; last +0.6%, +1.6%.
   
• (0500 ET/0900 GMT) Eurozone  Jul inflation/ex-f/e –flash, +0.1% y/y, +0.8% eyed; last +0.1%, +0.8%.
   
• (0500 ET/0900 GMT) Eurozone  Jun unemployment, 10.1% eyed; last 10.1%.
   
• (0500 ET/0900 GMT) Italy Jul CPI  – flash, -0.2% y/y eyed; last +0.1% m/m, -0.4% y/y.
   
• (0500 ET/0900 GMT) Italy Jul HICP – flash, -1.9% m/m, -0.2% y/y eyed; last +0.2%, -0.2%.
   
• (0600 ET/1000 GMT) Italy Jun PPI; last +0.5% m/m, -3.7% y/y.
   
• (0830 ET/1230 GMT) United States Q2  GDP – advance, +2.6% AR eyed; last +1.1%.
   
• (0830 ET/1230 GMT) United States Q2  GDP deflator, +1.8% AR eyed; last +0.4%.
   
• (0830 ET/1230 GMT) United States Q2  PCE prices/core, +2.0%, +1.7% q/q eyed; last +0.2%, +2.0%.
   
• (0830 ET/1230 GMT) United States Q2  employment cost index, +0.6% q/q eyed; last +0.6%.   
   
• (0945 ET/1345 GMT) United States Jul Chicago PMI, 54.0 eyed; last 56.8.
   
• (1000 ET/1400 GMT) United States Jul U.Mich sentiment index – final, 90.5 eyed; flash 89.5.
•  

Key Events Ahead

• N/A   Beijing T20 Summit (till July 30).
   
• N/A   ECB ’16 bank stress test results.
   
• (0400 ET/0800 GMT) Norges Bank daily currency operations, previous NOK900 mln sales/day.
   
• (0600 ET/1000 GMT) UK DMO GBP0.5/2.5/3.0 bln 1/3/6-month treasury bill auctions.
   
• (0930 ET/1330 GMT) SF Fed Williams speaks at Cambridge, MA roundtable.
   
• (1300 ET/1700 GMT) Dallas Fed Kaplan in Albuquerque, NM panel discussion.
   

FX Beat

DXY: The dollar index, against a basket of currencies trades 0.2 percent lower at 96.44, after going as low as 96.22, a level last seen since July 15.

EUR/USD: The euro extended gains, as the dollar weakened across the broad. On Thursday, the major rose as high as 1.1119 following upbeat Eurozone's sentiment indices, however, it closed below the 1.1100 handle, as investors expect Fed to ease later in the year on continuation of improvements in the U.S economy. On Thursday, European Central Bank Executive Board Member Benoit Coeure stated that sub-zero ECB interest rates were holding safely above a detrimental level, however, the bloc remains at risk of declining into a trap of low rates. The European currency trades 0.1 percent higher at 1.1090, hovering below the 1.1100 handle. Investors now await series of economic data from the Eurozone, ahead of GDP figures from both the continents. Immediate resistance is located at 1.1126, break above targets 1.1148/1.1164. On the lower side, support is seen at 1.1055 (20-DMA), break below could drag it till 1.1029.

USD/JPY: The greenback slumped more than 2 percent after the Bank of Japan's stimulus failed to meet market expectations. The BoJ expanded monetary stimulus through a marginal increase in purchases of exchange-traded funds, expanding the total holdings at an annual pace of 6 trillion yen, up from the current 3.3 trillion yen. But it maintained its base money target at 80 trillion yen and left interest rate unchanged at -0.1. The dollar trades 0.2 percent lower at 103.09 yen, after going as low as 102.71. Markets will continue to digest headlines from the BoJ, ahead of U.S GDP and PCE data, which could provide insights on the strength of the U.S economy. Immediate support is seen at 102.44, break below could drag it lower 102 handle. On the higher side resistance is located at 105.89, break above targets 106.40/107.02.

GBP/USD: Sterling edged up, but struggles to sustain gains above the 1.3200 handle. The major attempted a minor recovery on the back of broad based US dollar weakness and a rebound in the oil prices. Markets continue to remain bearish as Bank of England is expected to cut rates and provide an unspecified package of measures in its upcoming monetary policy meeting. Sterling trades 0.1 percent higher at 1.3182, having touched an early high of 1.3217. Market will closely watch Britain's consumer credit and mortgage approval data, ahead of next week’s BoE policy meeting. Immediate support is located at 1.3117 (Previous Session low), break below could drag it lower 1.3100 level. On the higher side, resistance is seen at 1.3274, break above targets 1.3300.

AUD/USD: The Australian dollar continues to rise, despite Australia posting downbeat macro data. It extended gains above 0.7500 handle, largely on the back of continued weakness in the greenback against its major peers and a rebound in oil prices. Australia's ANZ business confidence for the month of June declined to 16.0 versus previous 20.2, while Activity outlook for July dropped to 31.4 percent against prior 35.1 percent. Moreover, second quarter producer price index edged down to 0.1 percent q/q and private sector credit in May came in at 0.2 m/m percent versus prior 0.4 percent. The Aussie trades 0.4 percent up at 0.7530, having touched an intra-day high of 0.7549. Markets will track broad based market sentiment, ahead of U.S. CPI and PCE figures. Immediate resistance is located at 0.7565 (Jul-27 High), break above targets 0.7580/0.7600. On the downside, support is seen at 0.7486, break below could drag it till 0.7462/0.7442. 

NZD/USD: The New Zealand dollar trimmed gains after rising above the 0.7100 handle. The major rose as high as 0.7129, touching a 2-week high amid ongoing U.S. dollar weakness. However, it slipped after New Zealand's M3 money supply for June came in at 5.9 percent y/y, against previous 7.3 percent. The Kiwi trades 0.2 percent higher at 0.7085, hovering just below 0.7100 level. The movement in the major will be driven by broad market sentiment ahead of series of economic data from the U.S. Immediate support is seen at 0.7045 (10-DMA), break below could take it till 0.7015. On the higher side, resistance is located at 0.7150, break above targets 0.7200.  

Equities Recap

Asian shares slumped after touching a near 1-year peak, as the Bank of Japan's fresh stimulus measures disappointed markets.

MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.3 percent after hitting the highest level since Aug. 11, however, it was on track for gains of 1 percent for the week, and 5.5 percent for the month.

Tokyo's Nikkei gained 0.56 pct at 16,569.27, Australia's S&P/ASX 200 index edged up 0.10 pct at 5,562.30 points and Seoul shares ended down 0.09 pct.

Shanghai composite index trades 0.3 percent down at 2,984.41 points, while CSI300 index trades 0.3 percent lower at 3,210.27 points.

Hong Kong’s Hang Seng was trading 0.9 percent lower at 21,972.52 points. Taiwan shares declined 1.0 pct at 8,984.41 points.

Commodities Recap

Oil prices slightly edged up, but remained around 3-month lows as slowing economic growth threatened to worsen ongoing oversupply of crude and refined products. International Brent crude oil was trading 1.3 percent up at $43.20 at 0407 GMT, while U.S. West Texas Intermediate crude declined to $40.88, hitting a fresh low of $40.86 per barrel, its lowest since mid-April.

Gold rose, retreating from early low, as the dollar and equities slumped after the Bank of Japan's announcement to expand monetary stimulus. Spot gold was up 0.3 percent at $1,340.09 an ounce at 0414 GMT, after rising to a 2-week peak of $1,345.43 on Thursday. U.S. gold futures for August delivery settled up 0.4 percent at $1,332.30.

Treasuries Recap

The 10-year U.S treasury yield stood at 1.5438 percent up by 0.033 bps, while 5-year was 0.029 bps higher at 1.1234 percent.

The benchmark 10-year JGB yield rose 8 basis points to 1-month high after BoJ policy decision, while JGB 10-year futures was down 0.75 point.

Australian government bond futures fell amid a global bond sell-off when the BOJ resisted calls to buy more JGBs. The 3-year bond contract lost early gains to be flat at 98.58. The 10-year contract dipped 2 ticks to 98.1050, though cash yields earlier touched record lows at 1.84 percent.

New Zealand government bonds gained, sending yields 1.5 basis points lower at the short end and 4 basis points lower at the long end.

Canadian government bond prices were lower at the short end of the maturity curve and higher further out, with the 2-year price down 1.5 Canadian cent to yield 0.586 percent and the benchmark 10-year rising 7 Canadian cents to yield 1.069 percent.The Canada-U.S. 2-year bond spread narrowed to -12.5 basis points, while the 10-year spread was -43.7 basis points.