- Stocks hit hard in Europe and ccys choppy.
- EUR/USD 1.1206 to 1.1155 then 1.1208 and back to 1.1164 levels.
- UK August PSNB GBP 11.305 bln m/m vs -2.069 bln previous, 8.65 expected.
- UK August PSNB Excluding Banks bln vs -1.29bln previous, 9.0 bln expected.
- UK August PSNCR -bln vs -3.029bln previous.
- UK Sept CBI manufacturing Order Book -7 vs -1 previous, 0.0 expected.
- Switzerland August Trade Balance +bln vs 3.741 bln.
- DAX off 3.0%, FTSE off 2.2%, Brent off 1.7%, Light Crude -2.6%.
- Swiss Gold exports to China/HK surge in August.
- ADB Lowers China Growth Estimate to 6.8% this Year, 6.7% in 2016.
- China's Xi says Economy is Still Operating within Proper Range.
- China's Xi says No Basis for Sustained Yuan Depreciation.
- China's Stock Regulator dep. Chairman sacked after Graft Probe.
- (0800 ET/1200 GMT) Brazil IPCA- 15 mid month CPI, previous 0.43%, consensus 0.38%.
- (0900 ET/1300 GMT) US HPI for July.
- (1000 ET/1400 GMT) US Richmond manufacturing Index for September.
- (1000 ET/1400 GMT) Euro zone Consumer Confidence Flash, previous -6.8%, consensus -7.00%.
- (1500 ET/1900 GMT) Argentina's Trade balance.
Key Events Ahead
- (1300 ET/1700 GMT) Federal Reserve Bank of Atlanta President Dennis Lockhart speaks on the economic outlook and monetary policy.
FX Recap
USD: The dollar was trading near its 2-week high against a basket of currencies after comments from U.S. Fed officials revived expectations that interest rates will still be raised later this year. Against a basket of six major currencies, the dollar edged up to 96.088, its strongest level since Sept. 10. Against the yen, it fell 0.4 pct to 120.115 yen.
EURUSD: Pair continues to navigate in the red territory moved by the risk appetite trends amidst absent key releases in both Euro land and the US economy. Pair is trading quietly below 1.12 handle today, after having suffered almost 1% loss in the previous session. The US dollar gained broadly overnight as Federal Reserve (Fed) officials indicated that a rate hike before the New Year was still possible. Moreover, as long as we have low economic growth in the euro area, interest rates will also stay low, European Central Bank Governing Council member Ewald Nowotny said on Monday. Ahead in the day the spot could be influenced by the sentiment in the stock markets and by reports on Euro zone economic sentiment and consumer confidence for September. It made intraday high at 1.1207 and low at 1.1155. Initial support is seen around at 1.1015 and resistance at 1.1560 levels. Option expiries are at 1.1200 (538M), 1.1220-25 (250M), 1.1250 (349M).
USDJPY: The greenback continues to pick up pace on Tuesday, now taking USD/JPY to test fresh session low around 119.70 levels. Japanese markets were spared losses, with three-consecutive bank holidays taking place from Monday through Wednesday. Absent activity in the Japanese markets until Thursday, the main highlights today will be US HPI as well as Richmond manufacturing index. Pair made intraday high at 120.59 and low at 119.70 levels. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.60 (200M), 120.50 (220M), 121.00 (240M).
GBPUSD: Sterling hit near one-month high against the euro, bolstered by expectations that the BoE will eventually follow the U.S. Fed in raising rates in contrast to likely action by the ECB. The euro was slightly lower on the day at 72.12 pence, having dropped to 71.97 pence earlier in the day, its lowest in a month. Against the dollar, sterling underperformed, and was down 0.2 pct at $1.5480. Sterling is supported below 1.5500 levels. It made intraday high at 1.5528 and low at $1.5436 levels. The greenback, in terms of the US Dollar Index, continues to extend its gains against its G10 peers at the beginning of the week. In the data space, UK's Public Sector Net Borrowing has widened to £11.30 billion, surpassing expectations at £8.65 billion. Across the pond, the Richmond Fed manufacturing index and the speech by Atlanta Fed D.Lockhart will be the main highlights. Initial support is seen at 1.5185 and resistance is seen around 1.5725 levels.
NZDUSD: Kiwi remains under pressure on the 0.63 handle and stalled its recovery mode after the recent fall to 0.6300 levels on Monday. The greenback showed solid strength against the New Zealand yesterday supported by hawkish comments from Fed officials Bullard and Lockhart. Pair is supported above $0.6300 levels. Pair is currently trading at 0.6313 levels. It made intraday high at 0.6331 and low at 0.6306 levels. Initial support is seen at 0.6195 and resistance at 0.6511 levels. Option expiries are at 0.6325 (403M), 0.6500 (557M).
AUDUSD: House-price inflation in Australia accelerated at a faster pace than expected last quarter, with record-low interest rates continuing to drive demand for property, particularly in the main centres. Australia's House Price Index (HPI) surged 4.7% in the April-June months, the fastest pace since the March-2010 quarter, and up from a 1.6% rise in the March quarter. Analysts expected the index to rise 2.5% last quarter. It made intraday high at 0.7157 and low at 0.7009 levels. Initial support is seen at 0.6908 and resistance at 0.7245 levels. Option expiries are at 0.7200 (812M), 0.7400 (854M).
Equities Recap
European shares dragged lower by miners on Tuesday as copper prices fell on worries over Chinese demand. The pan-European FTSEurofirst 300 stocks index fell 1.6 pct, the mining index dropped 3.8 pct after copper retreated 2.1 pct. Britain's FTSE 100 was flat, Germany's DAX rose 0.2 pct and France's CAC 40 fell 0.2 pct in early deals.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 pct. China's Shanghai Composite and the CSI300 index both were up about 0.9 pct. Japanese markets were closed for a holiday.
Commodities Recap
Crude oil prices dropped on Tuesday as traders booked profits after a 3-4 pct rally in the previous session, with weak economic growth denting the demand outlook in an amply supplied market. U.S. West Texas Intermediate (WTI) crude futures were at $46.07 per barrel at 0658 GMT, down 61 cents. Globally traded Brent futures were lower 44 cents at $48.48 per barrel.
Gold steadied below a near 3-week high, retaining overnight losses as Asian equities and the dollar edged higher and as investors worried over the possibility of a U.S. interest rate hike later this year. Spot gold was little changed at $1,133.01 an ounce by 0634 GMT, after a 0.5 percent drop on Monday.
Treasuries Recap
Expectations of a prolonged period of low ECB rates pushed down yields on low-risk euro zone debt. German 10-year Bunds were yielding 0.66 percent, down 2.3 basis points. Spanish, Italian and Portuguese yields were 2-3 bps lower at 1.98 percent, 1.78 percent and 2.56 percent, respectively.
The spread between 10-year U.S. Treasuries and their lower-yielding German counterpart has widened by almost 15 bps this month to just over 150 bps, reflecting the divergent monetary policy outlooks in the two regions.
UK Dec Gilts opened up as expected at 118.00 and rallied for most of the morning, but they are now off their 118.28 highs at 118.19 currently.10-year Gilts have mostly kept pace with other core European bonds, with the yield falling 3.25bp.
New Zealand government bonds eased, sending yields 3 bps higher along the curve. Australian government bond futures retreated, with the 3-year bond contract off 4 ticks at 98.080. The 10-year contract dropped 4.5 ticks to 97.2050.
