Market Roundup
- USD/JPY -0.2%, EUR/USD +0.1%, GBP/USD +0.33%
- DXY -0.15%, DAX +0.7%, Brent -1.05%, Iron +2.6%
- Biggest one-day decline in 3mths for China 10-yr futures- 0.38%
- 3-week high for cable at 1.3210: Short squeeze continues
- Switzerland Jul Trade Surplus CHF2.93 bln vs rvsd 3.510 bln
- Germany Aug Flash Mfg PMI 53.6 vs 53.8 previous, 53.5 expected
- Eurozone Aug Flash Mfg PMI 51.8 vs 52.00 previous, 52.00 expected
- Germany Aug Flash Service PMI 53.3 vs 54.4 previous, 54.4 expected
- Eurozone Aug Service PMI 53.1 vs 52.9 previous, 52.8 expected
- UK Aug CBI Trends/Orders -5.0 vs -4.0 previous, -9.0 expected
- UK CBI Mfg Export Order Bal. -6 in Aug vs -22 Jul: Best since Aug 2014
- Bank of Japan’s rush into stocks raises fears of market distortions
- Nikkei commentary – Normalizing Japan: Abe’s unfinished agenda
- RBNZ Gov Wheeler – Current policy track expects 35 bp in rate cuts
- Wheeler – flexible infl. targeting appropriate TWI FX rate already high
- Wheeler - more cuts but at slower pace
- James Saft: EM markets may enjoy secular stagnation
- IIF – Emerging markets portfolio allocations highest since Aug
Economic Data Preview
- (0900 ET/1300 GMT) The Conference Board China releases its Leading Indicator for the month of July. The index stood at 0.5 percent in the prior month.
- (0900 ET/1300 GMT) Mexico's retail sales seasonally adjusted are likely to have declined 0.2 percent from May.
- (0945 ET/1345 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of August. The index is likely to edged down to 52.7, after posting a final reading of 52.9 in the previous month.
- (1000 ET/1400 GMT) The U.S. Commerce Department is expected to report that new home sales probably decreased 2.0 percent in July to a 580,000-unit pace.
- (1000 ET/1400 GMT) The European Commission release Eurozone's preliminary Consumer Confidence reading for the month of August. The index is expected to slump 7.6 percent after posting a drop of 7.9 in the prior month.
- (1400 ET/1800 GMT) Brazil will publish its current account data for the month of July.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
- (1845 ET/2245 GMT) The Statistics New Zealand releases its trade balance data for the month of July. The economy posted an annual trade deficit of $3.31 billion in June.
Key Events Ahead
- (1430 ET/1830 GMT) FedTrade ops 30-yr Ginnie Mae max $1.325 bln.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent lower at 94.28, hovering towards a low of a 7-week low of 94.08 touched last week.
EUR/USD: The euro extended gains after Eurozone's preliminary Markit PMI composite for the month of August edged up to 53.3, surpassing consensus and previous 53.2. Eurozone's flash manufacturing PMI declined to 51.8, while flash service increased to 53.1. The major trades 0.2 percent higher at 1.1342, hovering towards an 8-week high of 1.1366 touched last week. Investors remain cautious ahead of the Fed chair Yellen's address at the Jackson Hole symposium later this week, which would provide insights on the central bank's monetary policy outlook for 2016. The major resistance is around 1.1370 and any minor bullishness only above that level. On the lower side major support is around 1.12684 (23.6% retracement of 109554 and 1.13663) and any break below targets 1.1220 (100 D MA)/1.1750.
USD/JPY: The Japanese yen gained, dragging the dollar below the 100 handle, largely on the back of fresh selling interest in the greenback against its major peers. The dollar trades 0.3 percent lower at 100.05, attempting to sustain above the 100 level. The short term trend is slightly bearish as long as resistance100.90 (daily Tenken-Sen) holds. The major resistance is around 100.90 and any break above confirms minor trend reversal, a jump till 102/102.65/103.80is possible. On the lower side, major support is around 99.50 and any break below 99.50 will drag the pair till 98.
GBP/USD: Sterling hit a 3-week high above the 1.3200 handle as speculators reduced bets against it after data suggested Britain's economy was holding up following the Brexit vote. The major trades 0.4 percent higher at 1.3180, after rising as high as 1.3209, it’s highest since Aug. 4. Data released by Confederation of British Industry showed that Industrial Trends came in better-than-expected at -5 in August, against projections of -9, which extended support to the pound. Any break above 1.3185 confirms minor trend reversal, a minor weakness can be seen only below 1.3100, while the minor support is around 1.3120. Overall weakness is only below 1.3000 level. Against the euro, the pound trades 0.2 percent up at 85.99 pence, having hit 85.91 pence, its strongest in 11 days.
USD/CHF: The Swiss franc edged up as the greenback weakened across the broad. The dollar trades lower at 0.9619, having touched a low of 0.9593 earlier in the session. On the lower side, major support is around 0.9520 and any violation below will drag the pair down till 0.9500/ 0.94450. The minor support is around 0.9580, while resistance is around 0.9650 and any break above targets 0.9680/0.9730/0.9770. The major should close above 0.9845 (200 DMA) for further bullishness.
AUD/USD: The Australian dollar recovered from 2-week lows, however, the upside was capped by lower oil-price and prevalent cautious tone in markets. The Aussie trades 0.4 percent up at 0.7645, having touched a high of 0.7654 earlier in the session. On the higher side, any break above 0.7760 will take the pair till 0.7800/0.7840. The major support is around 0.7575 and break below will drag the pair till 0.7535/ 0.7480.
NZD/USD: The New Zealand dollar rose to a 2-week high of 0.7340 largely on the back of hawkish comments from RBNZ Governor Wheeler. However, gains were limited as oil prices declined below the $49 a barrel, halting its August rally. The Kiwi trades 0.8 percent higher at 0.7327, pulling away from a low of 0.7209 touched in the previous session. Investors focus will remain on U.S macro economics updates due later in the day ahead of New Zealand's trade balance figures. Immediate resistance is located at 0.7350, break above targets 0.7400. On the lower side, support is seen at 0.7260 (Session low), break below could drag it near 0.7200.
Equities Recap
World shares rose, while European shares traded higher, led by mining and banking stocks following upbeat data that showed gradual improvement in the region's economy.
The pan-European STOXX 600 index advanced 0.9 percent at 343.39 points, while the FTSEurofirst 300 index added 0.8 percent at 1,350.36 points.
Britain's FTSE 100 trades 0.5 percent up at 6,865.56 points, while mid-cap FTSE 250 index climbed 0.6 pct at 17,990.11 points.
Germany's DAX gained 1.0 percent at 10,597.75 points; France's CAC 40 trades 0.8 percent higher 4,426.85 points.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.3 percent in subdued trade overnight.
Tokyo's Nikkei declined 0.61 pct at 16,497.36, Australia's S&P/ASX 200 index gained 0.63 pct at 5,549.90 points and South Korea's KOSPI added 0.4 percent down at 2,049.93 points.
Shanghai composite index and CSI300 index rose 0.2 pct at 3,089.71 points and 3,341.83 points, respectively. Hong Kong's Hang Seng index ended flat at 22,998.93 points.
Commodities Recap
Crude oil declined below $49 a barrel, reversing some of Augusts' strong rally, as signs of increasing supply outweighed expectations that producing nations will agree measures to support prices. International Brent crude oil was down 1 percent at $48.67 a barrel at 1010 GMT, having rallied 20 percent from the beginning of the month till Aug. 19. U.S. crude was down 62 cents at $46.79 a barrel.
Gold edged up, pulling away from a 2-week low touched in the previous session as the investors wait for more clues from the Federal Reserve later this week on interest rate hikes this year. Spot gold was nearly flat at $1,338.89 an ounce at 1015 GMT, having hit a 2-week low of $1,331.67 Monday. U.S. gold was unchanged at $1,343 an ounce.
Treasuries Recap
The US Treasuries saw downward pressure across the curve during a relatively quiet Monday session light on significant economic data. The yield on the benchmark 10-year Treasury note rose 2-1/2 basis points to 1.565 percent, the yield on 5-year note climbed 2 basis points to 1.153 percent and the yield on short-term 2-year note also bounced 1 basis point at 0.754 percent.
The UK gilts saw sharp selling alongside a solid rebound in equities during a relatively quiet session. The yield on the benchmark 10-year gilts rose 2-1/2 basis points to 0.584 percent, the super-long 40-year bond yield jumped 1 basis point to 1.190 percent and the yield on short-long 2-year bond climbed 2 basis points to 0.145 percent.
The Eurozone periphery bonds plunged after recent purchasing managers index data showed that union’s economic recovery gained speed in August despite the UK’s decision to leave the European Union. The French 10-year bond yield jumped nearly 2 basis points to 0.156 percent, Irish 10-year bonds yield rose 3-1/2 basis points to 0.433 percent, Italian sovereign bond inched 4 basis points higher to 1.155 percent, Portuguese equivalents ticked 7 basis points higher to 3.118 percent, Netherlands 10-year bonds yield bounced 1-1/2 basis points to 0.039 percent, Spanish 10-year bonds yield climbed 2-1/2 basis points to 0.965 percent.
The German bunds traded lower after data showed mixed PMIs for the country and Eurozone. The yield on the benchmark 10-year bond rose 1 basis point to -0.078 percent, the yield on long-term 30-year note also jumped 1 basis point to 0.419 percent and the yield on short-term 3-year bond bounced ½ basis point to -0.634 percent.
The Japanese government bonds gained as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil. The benchmark 10-year bond yield fell nearly 2 basis points to -0.086 percent, the super-long 30-year JGB yield dipped 3 basis points to 0.331 percent and the short-term 2-year JGB yield slid 1/2 basis point to -0.200 percent.
The New Zealand government bonds closed higher after the Reserve Bank of New Zealand Governor Graeme Wheeler said that current economic estimates further showed a need for 35 basis points of monetary easing. The yield on the benchmark 10-year bond fell 3 basis points to 2.275 percent and the yield on 7-year note also closed 1-½ basis points lower at 1.965 percent and the yield on short-term 2-year note slid 2 basis points to 1.790 percent.
The Australian government bonds gained as crude oil futures snapped seven-session winning streak on expectations of higher output and a strengthening dollar. The yield on the benchmark 10-year Treasury note fell 5-1/2 basis points to 1.907 percent and the yield on short-term 2-year also dipped nearly 4 basis points to 1.428 percent.
