Market Roundup
- GBP/USD 0.5%, USD/JPY -0.6%, EUR/USD 0.28%
- Fed's Kaplan urges patience in raising rates, points to global risks
- Japan cabinet approves $130bn in fiscal steps as part of stimulus
- Fiscal measures: 7.5tn yen in spending by the national and regional governments
- Fiscal measures 6tn yen from the Fiscal Investment and Loan Program
- Japan Econ Min Ishihara: important for BOJ and government to cooperate on econ policy
- BOJ's Kuroda says policy review won't lead to weakening stimulus
- Japan Finmin Aso: exchanged views with BOJ's Kuroda on issuing more 40-year JGBs
- Japan’s Nidec snaps up another Emerson unit for $1.2bn
- Foreign holdings of Chinese bonds rise most in 2 years in June
- Euro zone Jun Producer Prices m/m 0.7% vs 0.6 previous, 0.4 expected
- Euro zone Jun Producer Prices y/y -3.1% vs -3.9 previous, -3.5 expected
- Switzerland Jun Retail Sales y/y -3.9% vs -1.6 previous
- Switzerland Jul Manufacturing PMI 50.1 vs 51.6 previous, 51.7 expected
- Polish FX loan plan to force banks to return excess fees
- Former BoE MPC member Barker opposed to UK rate cut this week - The Times
- UK PM May resurrects industrial policy as Britain prepares for Brexit
- UK Jul Markit/CIPS Cons PMI 45.9 vs 46 previous, 43.8 expected
- UK court to decide on Aug 22 if there will be two SABMiller shareholder votes
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department releases personal income figures for June, which is expected to rise 0.3 percent from 0.2 percent in May.
- (0830 ET/1230 GMT) The U.S. consumer spending likely increased 0.3 percent in June after surging 2.0 percent in May.
- (0830 ET/1230 GMT) The personal consumption expenditures (PCE) price index, excluding food and energy, is expected to have gained 0.1 percent in June, after increasing 0.2 percent in April. In the 12 months through May, the core PCE rose 1.6 percent after gaining by the same margin in April.
- (0930/1330) The RBC reports its Canadian Manufacturing Purchasing Managers' index for the month of July. The index stood at 51.8 in May.
- (1330 ET/1730 GMT) Autodata Corp releases U.S. auto sales figures for July. The seasonally adjusted annual sales pace for June was 16.66 million, down from 17 million vehicles a year earlier.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
- (1845 ET/2245 GMT) The Statistics New Zealand will release labor force participation rate for the second quarter. The rate was at 69 percent in the previous quarter.
- (1901 ET/2301 GMT) The British Retail Consortium (BRC) will report its Shop Price Index for the month of July. The index posted a decline of 2 percent in the previous month.
- (1930 ET/ 2330 GMT) The Australian Industry Group (AiG) releases its Performance of Services Index for the month of July. The index stood at 51.3 in month of May.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac, max $2.675bn.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.3 percent lower at 95.43, hovering towards an early low of 95.36, it’s lowest since July 5.
EUR/USD: The euro rose above the 1.1200 handle, underpinned by broad based dollar sell-off and better-than-expected producer price index figures. The European currency trades 0.3 percent higher at 1.1192, having touched sessions high of 1.1208. Eurozone's producer price index for the month of June came in at 0.7 percent, versus consensus of 0.4 percent and prior 0.6 percent. On yearly basis it stood at -3.1 percent against forecast of -3.5 percent and previous -3.8 percent. The major should break above 1.11850 (38.2% retracement of 1.16163 and 1.09115) and any break above will take the pair to next level till 1.1236 (38.2% retracement of 1.0463 and 1.1714)/1.12650 (50% retracement of 1.14213 and 1.09115)/1.1300. On the lower side, minor support is around 1.11550 (90 day EMA) and any break below targets 1.1100/1.0740 (200 DMA). It should close below 200 day MA for further weakness.
USD/JPY: The Japanese yen touched it’s highest in 3-weeks, after Japan's cabinet approved a package of spending including 13.5 trillion yen in new fiscal measures to revive the flagging economy. The dollar trades 0.6 percent lower at 101.76, having declined below 102 handle for the first time since early July. Markets now eye U.S. PCE and Personal Income/Spending data for further cues on the major. The short term trend is slightly weak as long as resistance 103 holds. The major resistance is around 103 and any break above confirms minor trend reversal, a jump till 103.83/104 is possible. On the lower side, minor support is around 101.50 and any break below 101.50 will drag the pair till 101/100.
GBP/USD: Sterling regained the 1.3200 handle, after a survey of Britain's construction industry posted a slightly better than expected results. Purchasing managers index in the construction sector came in at 45.9, surpassing forecast of 43.8, however it was the lowest reading since June 2009. Sterling trades 0.5 percent higher at 1.3242, hovering towards a high of 1.3301 touched last week. On the higher side, minor support is around 1.3169 (200 HMA) and break below targets 1.3100/1.3060/1.3000. Any break above 1.3300 will take the pair till 1.3480. Against the euro, the pound edged up 0.1 percent to 84.52 pence.
USD/CHF: The Swiss franc continues to rise, as the dollar weakened against its six major rivals. The greenback trades 0.2 percent lower at 0.9659, hovering towards a 1-month low of 0.9635. Data released earlier in the day showed that Switzerland's June Retail Sales declined -3.9 percent y/y versus -1.6 previous, while July Manufacturing PMI came in at 50.1 against prior 51.6 and consensus 51.7. On the lower side, major support is around 0.9630 and any indicative break below 0.9630 targets 0.9580/ 0.9500 in the short term. The major resistance is around 0.9750 and any break above targets 0.9800/ 0.9850.
AUD/USD; The Australian dollar retreated from session's lows and now trades 0.5 percent higher at 0.7576. The Aussie declined as low as 0.7480 after RBA lowered its benchmark interest-rates by 25 bps to a record low of 1.5 percent. The major managed to bounce-off strongly from session’s lows, as the rate cut decision was widely expected by the markets. On the higher side, any break above 0.7625 will take the pair to next level till 0.7680/0.7725. The major support is around 0.7480 and break below will drag the pair till 0.7420/0.7380.
NZD/USD: The New Zealand dollar regained the 0.7200 handle, as oil price rebounded from recent lows amid broad based U.S. dollar weakness. The Kiwi trades 0.4 percent higher at 0.7210, hovering towards a high of 0.7226 touched earlier in the session. Markets now await U.S. economic data and Global Dairy Trade price auction for further cues on the major. Immediate resistance is located at 0.7250, break above could take it till 0.7294. On the lower side, support is seen at 0.7136 (20-DMA), break below targets 0.7100.00.
Equities Recap
European shares declined to a 2-week low, weighed down by bank shares, as Europe-wide stress tests on 51 European lenders raised doubts on the health of the sector.
Europe's STOXX 600 banking index slumped 3.4 percent, weighed down by a 3 percent fall to 3-week lows in bank stocks.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent, after the S&P 500 ended Monday 0.1 percent lower.
The pan-European STOXX 600 index declined 1.0 percent, while the FTSEurofirst 300 index shed 0.6 percent to 1,339.15 points.
Germany's DAX declined 1.3 pct, France's CAC 40 shed 1.4 pct, Britain's FTSE 100 was down 0.5 pct, while mid-cap FTSE 250 index lost 0.3 pct.
Tokyo's Nikkei declined 1.47 pct at 16,391.45, Australia's S&P/ASX 200 index lost 0.73 pct at 5,546.80 points and South Korea's KOSPI shed 0.5 pct at 2,019.03 points.
Shanghai composite index gained 0.6 pct at 2,971.28 points and CSI300 index added 0.4 pct at 3,189.05 points. Hong Kong's Hang Seng index stood at 22,129.14 points.
Commodities Recap
Crude oil prices edged up after slumping below the $42 per barrel earlier in the session, however, investors continue to wary over excess fuel production. International Brent crude oil was trading 0.7 percent higher at $42.52 per barrel by 1007 GMT, having touched an early low of $41.96. U.S. West Texas Intermediate crude was also 0.7 percent up at $40.38 a barrel after declining below $40 for the first time since April the previous session.
Gold rose to a 3-week high, reversing its early losses as the dollar weakened against the yen after Japanese cabinet approved stimulus. Spot gold trades 0.5 percent up at $1,359.70 an ounce at 1010 GMT, having touched $1360.68, a level last seen on July 11. U.S. gold was mostly unchanged at $1,358.8 an ounce.
Treasuries Recap
The US Treasuries gains stalled, largely rebuffing weaker than expected US economic data. The yield on the benchmark 10-year Treasury note rose 6 basis points to 1.552 percent, the yield on 5-year note jumped 4-1/2 basis points at 1.099 percent and the yield on short-term 2-year note climbed 2 basis points to 0.699 percent.
The UK gilts plunged after data showed that the country’s construction PMI increased higher than expected in July. The yield on the benchmark 10-year gilts rose 6 basis points to 0.788 percent, the yield on super-long 40-year bond also jumped 5 basis points to 1.485 percent and the yield on short-term 2-year bonds bounced 4-1/2 basis points to 0.205 percent.
The German bunds slumped after the Japanese Prime Minister Shinzo Abe confirmed stimulus package of 28 trillion yen. The yield on the benchmark 10-year bond rose 3 basis points to -0.064 percent, the yield on long-term 30-year note jumped 4 basis points to 0.401 percent and the yield on short-term 3-year note bounced 1 basis point to -0.636 percent.
The Japanese government bonds slumped as demand for the 10-year JGBs fell at an auction held today after the Bank of Japan disappointed investors by keeping its key policy rate unchanged along with no additional bonds buying programme. The benchmark 10-year bond yield rose 9 basis points to -0.042 percent, the yield on 5-year note also jumped 9 basis points to -0.133 percent, the yield on super long 30-year note bounced 3 basis points to 0.334 percent and the short-term 2-year JGB yield climbed 8 basis points to -0.153 percent.
The New Zealand government bonds plunged after the RBNZ in its latest survey mentioned that the country’s inflation will expand 1.65 percent in two-year span of time. The yield on the benchmark 10-year bond rose 1-1/2 basis points to 2.180 percent, the yield on 7-year note also jumped 1-1/2 basis points to 1.935 percent and the yield on short-term 2-year note ended 2-1/2 basis points higher at 1.820 percent.
The Australian government bonds continued to rally after the Reserve Bank of Australia lowered its key interest rate by 25 basis points for the first time in last three months to a new record low of 1.50 percent. The yield on the benchmark 10-year Treasury note fell 8 basis points to 1.824 percent and the yield on short-term 2-year note dipped 10 basis points to 1.436 percent.
