Market Roundup
- Manufacturing falters as global demand weakens
- Negative rates force Nomura to end short-term investment fund – Nikkei
- Tokyo commodity bourse teams up with Chinese futures brokerage – Nikkei
- Vice CB Governor: China's yuan relatively stable despite recent swings
- Eurozone Aug Markit Mfg Final PMI 51.7 vs 51.8 previous 51.8 expected
- German Aug Markit/BME Mfg PMI 53.6 vs 53.6 previous 53.6 expected
- Swiss Jul Retail Sales YY -2.2% vs -3.9 previous
- Swiss Aug Manufacturing PMI 51 vs 50.1 previous 50.5 expected
- UK Aug Markit/CIPS Mfg PMI 53.3 vs 48.2 previous 49 expected
Economic Data Ahead
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased by 4,000 to a seasonally adjusted 265,000 for the week ending Aug 27, while continuing claims for the week ending Aug 19 is expected to stay unchanged to 2.145 m.
- (0830 ET/1230 GMT) The U.S. Labor Department will release labor costs report for the second quarter. The indicator is expected to nudge up 2.1 percent after posting a gain of 2.0 percent in the previous quarter.
- (0830 ET/1230 GMT) The U.S. Labor Department is likely to report that non-farm productivity edged lower 0.6 percent in the second quarter, from a decline of 0.5 percent in the previous quarter.
- (0930 ET/1330 GMT) The RBC will release Canada's Manufacturing PMI for the Month of August. The indicator stood at 51.9 in the prior month.
- (0945 ET/1345 GMT) Financial firm Markit is expected to show that U.S. Manufacturing PMI remained unchanged at 52.1 in the month of August.
- (1000 ET/1400 GMT) The Institute for Supply Management is likely to report that U.S. manufacturing index was little changed to 52.0 in August from a reading of 52.6 in July.
- (1000 ET/1400 GMT) The Commerce Department is likely to report that construction spending for July rebounded 0.5 percent after posting a 0.6 percent decline in June.
- (1030 ET/1430 GMT) The Energy Information Administration (EIA) reports its Natural Gas Storage for the week ending August 26.
- N/A Autodata Corp releases U.S. auto sales figures for August. Vehicles sales are likely to decline to an annualized rate of 17.25 million units in August from 17.88 million in July.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac, max $2.050bn.
- (1225 ET/1625 GMT) Federal Reserve Bank of Cleveland President Loretta Mester speaks on "Community Development," before the 2016 Kentucky Summit on Philanthropy, hosted by theKentucky Philanthropy Initiative in Lexington.
- (1300 ET/1700 GMT) Federal Reserve Bank of New York co-sponsors webcast on findings from the Bank's Survey of Consumer Expectations including Americans' views on inflation, job prospects and earnings growth, and expectations about future spending and access to credit.
FX Beat
DXY: The dollar index, against a basket of currencies trades up at 96.03, having touched a 3-week high of 96.26, in the previous session.:
EUR/USD: The euro declined, reversing some of its previous session gains after data showed Eurozone's manufacturing activity weakening in the month of August. Markit manufacturing purchasing managers index (PMI) edged down to 51.7, against consensus and previous 51.8, softening the bid tone around the major. The European currency trades lower at 1.1151, having touched an early low of 1.1127. The pair is facing strong support at 1.1110 (200- day MA) and any violation below confirms minor weakness, a decline till 1.1045/1.1000 is possible. On the higher side, any break above 1.11660 will take it to next immediate resistance at 1.12150 (100- day MA)/1.1260. It must close above 100-day MA for further bullishness.
USD/JPY: The greenback hit fresh 1-month high against the yen, recovering from an intra-day low of 103.05. The major maintained its bid tone amid rising prospects of Fed interest rate hike as early as September and increasing expectations of further monetary easing by BoJ. The dollar trades 0.2 percent higher at 103.62, ahead of U.S. unemployment claims and ISM data. The short term trend is slightly bullish as long as support 101.80 holds. The pair is trading above major resistance at 103.25, hence a jump till 103.80/104.55 is possible. On the lower side major support is around 101.80 (9- day EMA) and any break below 101.80 will drag it till 100.55/100.
GBP/USD: Sterling rose above the 1.3200 handle against the dollar, largely on the back of better-than-expected British manufacturing purchasing managers index, which recorded its sharpest rebound in August. The Markit/CIPS Purchasing Managers' Index (PMI) rose to a 10-month high of 53.3 in August, surpassing consensus of 49.0 and recovering from the 3-year low of 48.3 hit in July following Brexit shock vote. Sterling trades 0.8 percent higher at 1.3243, after rising as high as 1.3265. Further bullishness can be seen only above 1.3260 level. Any break above 1.3260 will take the pair till 1.3310 (23.6% retracement of 1.50186 and 1.27893)/1.3350 (55- day EMA). On the lower side, major support stands at 1.3160 (4H Tenkan-Sen) and any break below targets 1.3120 (9- day EMA)/1.3050, while minor support is around 1.3200. Against the euro, the pound gained 1 percent to hit 1-month high of 84.03 pence and was trading around 84.16 pence, up 0.8 percent for the day.
USD/CHF: The Swiss franc extended losses, hitting fresh 1-month low as investors await Friday's U.S. non-farm jobs report, which could provide further clues on near-term U.S. interest rate expectations. The greenback trades 0.1 percent higher at 0.9844, having touched a high of 0.9874, it’s highest since July 28. Data released earlier showed that Switzerland’s retails sales rebounded to -2.2 in August after slumping 3.5 percent in the previous month. Meanwhile, SVME Manufacturing Purchasing Managers Index (PMI) rose to 51.0 against consensus of 50.5 and previous 50.1. Any break above 200- day MA will take the pair to next level till 0.9900/0.9960. On the lower side, any break below 0.9740 will drag the pair it till 0.9690 (daily Tenkan-Sen)/0.9630. The minor support is around 0.97720 (23.6% retracement of 0.95371 and 0.98470). The short-term weakness can be seen only below 0.9630.
AUD/USD: The Australian dollar extended gains, pulling away from a 1-month low of 0.7490 hit in the previous session. The major strengthened following release of upbeat Chinese manufacturing PMI data, which rose to 50.4 in August versus estimate of 49.9, recording its highest reading since October 2014. However, Australia's downbeat retail sales and Capex data limited the upside in the pair. The Aussie trades 0.3 percent higher at 0.7540, attempting to extend gains above the 0.7550 level. On the higher side, any break above 0.755 (55-day EMA) will take the pair till 0.7575/0.7625 (21- day MA) is possible. The pair’s major support is around 0.7500 and break below will drag the pair till 0.7480/0.7420.
NZD/USD: The New Zealand dollar gained, supported by strong business confidence and slightly better terms of trade index data. However, the major consolidated between a narrow range as investors were reluctant to take positions ahead of U.S. employment report due tomorrow. The Kiwi trades 0.2 percent up at 0.7263, hovering further away from a 2-week low of 0.7204 struck on Tuesday. Immediate resistance is located at 0.7290, break above could take it over 0.7300. On the downside, support is seen at 0.7200, break below target 0.7164.
Equities Recap
European shares gained, helping world shares to halt its longest losing streak of the year, while investors await Friday's highly influential U.S. non-farm payroll data.
MSCI's All- World index ended six days of losses, its longest since the start of January, while MSCI's broadest index of Asia-Pacific shares outside Japan ended down 0.2 percent.
The pan-European STOXX 600 index added 0.9 percent at 346.55 points, while the FTSEurofirst 300 index edged up 0.8 percent at 1,363.12 points.
Britain's FTSE 100 trades 0.1 percent up at 6,787.28 points, while mid-cap FTSE 250 climbed 0.8 percent at 17,876.55 points.
Germany's DAX rose 0.6 percent at 10,654.92 points; France's CAC 40 trades 1.1 percent higher at 4,485.74 points.
Tokyo's Nikkei rose 0.23 pct at 16,926.84 points, Australia's S&P/ASX 200 index declined 0.31 pct at 5,416.20 points and South Korea's KOSPI shed 0.09 percent at 2,032.72 points.
Shanghai composite index fell 0.7 pct at 3,063.31 points, while CSI300 index slumped 0.8 pct at 3,301.58 points. Hong Kong's Hang Seng index added 0.8 pct at 23,162.34 points.
Commodities Recap
Crude oil prices declined, hitting near 3-week lows, after industry reports showed an unexpected build in U.S. crude and distillate stocks last week, weighing on the prices. International Brent crude oil fell 0.5 percent to $46.75 a barrel by 1032 GMT, having touched a low of $46.62, its lowest since August 12. U.S. West Texas Intermediate crude was 0.4 percent down at $44.61 a barrel, after falling 3.6 percent in the previous session.
Gold edged down, hovering towards over 2-months low, with investors waiting for U.S. non-farm payroll data due on Friday for hints on the timing of Federal Reserve interest rate hike. Spot gold had slipped 0.2 percent to $1,306.14 per ounce by 1041 GMT, having touched its lowest since June 24 at $1,304.14 an ounce on Wednesday. U.S. gold futures were down 0.1 percent at $1,310.10.
Treasuries Recap
The US Treasuries saw downward pressure across the curve as August ADP employment estimate came in roughly around market expectations. The yield on the benchmark 10-year Treasury note rose 3 basis points to 1.599 percent, the yield on 5-year note climbed 2-1/2 basis points to 1.207 percent and the yield on short-term 2-year note bounced 1-1/2 basis points to 0.809 percent.
The UK gilts plunged after recent data showed that manufacturing PMI rebounded higher than expected in August. The yield on the benchmark 10-year gilts rose 5 basis points to 0.692 percent, the super-long 40-year bond yield climbed 4 basis points to 1.173 percent and the yield on 5-year bond bounced more than 1 basis point to 0.228 percent.
The Spanish government bonds yields touched three months high after the Prime Minister Mariano Rajoy lost a confidence vote late on Wednesday. This has increased the possibilities of a third election in 2016. The 10-year Spanish/German spread widening by 4 basis points yesterday to a 3-week-high of 108 basis points. The yield on the benchmark 10-year bond rose 3 basis points to 1.045 percent, the yield on long-term 30-year note bounced 5 basis points to 2.132 percent and the yield on short-term 2-year bond climbed 1/2 basis point to -0.164 percent.
The German bunds traded significantly lower as global bond markets retreated from previous gains. Also, firm equities drove-out investors from safe-haven buying. The yield on the benchmark 10-year bond rose 1-1/2 basis points to -0.044 percent, the yield on long-term 30-year note bounced 3 basis points to 0.487 percent and the yield on short-term 3-year bond climbed 1 basis point to -0.633 percent.
The Japanese government bonds plunged as investors moved away from safe-haven buying after Japanese stocks edged up to three-month closing highs. The benchmark 10-year bond yield rose more than 1-1/2 basis points to -0.051 percent, the super-long 30-year JGB yield climbed 2 basis points to 0.447 percent, the 5-year JGB yield also bounced 2 basis points to -0.157 percent and the short-term 2-year JGB yield increased 1 basis point to -0.183 percent.
The New Zealand government bonds closed modestly lower after showed that the Chinese official manufacturing PMI expanded at its fastest pace in two years. The yield on the benchmark 10-year bond rose 2-1/2 basis points to 2.265 percent and the yield on 7-year note ended 2-1/2 basis points higher at 1.970 percent and the yield on short-term 2-year note also bounced 3 basis points to 1.840 percent.
The Australian government bonds slumped as investors witnessed a mixed bag of economic results, but there were adequate signs of development in business investment to keep traders away from safe-haven buying. The yield on the benchmark 10-year Treasury note rose more than 1 basis point to 1.903 percent and the yield on short-term 2-year bounced 2 basis points to 1.471 percent.
