Asia Roundup: Aussie slumps on weak Q3 GDP, euro steady as ECB policy meeting looms, overnight rise in U.S. yields boosts dollar – Wednesday, December 7th, 2016

Market Roundup

  • BoJ DepGov Iwata – Won’t hesitate to ease more if needed, BoJ approach of powerful ease via asset purchases and interest rates working, monetary base to keep expanding, yield curve control can be achieved only via massive JGB buys, no shift in emphasis, both quantity and interest rates important, economy to continue to expand moderately, inflation too after pause, wages must rise – Reuters.
  • Japan business mood brightens as JPY weakens, Dec Reuters Tankan Mfg index +16, highest since Aug ’15, Nov +14, non-Mfg index +19, highest since May, Nov +15, Mfg index forecast at +10 in March, non-Mfg +20.
  • Japan Nov foreign reserves off to Y1.219 trln, end-Oct Y1.243 trln.
  • Japan Softbank’s Son to invest $50 bln in the US after meeting with Pres-elect Trump, to help in creating jobs – Nikkei, WSJ, Reuters.
  • Australia Q3 GDP -0.5% q/q, +1.8% y/y, +0.3%/+2.5% forecast, Q2 rev +0.6% q/q consumption +0.3% q/q, CAPEX -2.7%, chain price index +1.2%, economy slams into reverse, first q/q contraction since ’11, largest since Q4 ‘08.
  • Australia Nov AI/HIA PCI +0.7 point to 46.6.
  • New Zealand Nov job ads +2.9% m/m, best pace in almost two years, +18% y/y.
  • New Zealand Fonterra GDT dairy price index +3.5%, volumes drop again.

Economic Data Ahead

  • (0200 ET/0700 GMT) Germany Oct industrial output, +0.8% m/m forecast; last -1.8%.
  • (0200 ET/0700 GMT) Norway Q3  current account balance; last NOK40.31 bln surplus.
  • (0200 ET/0700 GMT) Norway Oct manufacturing output, +0.4% m/m forecast; last +2.2%.
  • (0245 ET/0745 GMT) France Oct current account balance; last E3.4 bln deficit.
  • (0245 ET/0745 GMT) France Oct trade balance; last E4.77 bln deficit.
  • (0330 ET/0830 GMT) Great Britain Nov Halifax house price index, +0.2% m/m forecast; last +1.4%.
  • (0400 ET/0900 GMT) Italy Q3  unemployment, 11.6% forecast; last 11.5%.
  • (0430 ET/0930 GMT) Great Britain Oct ind production, +0.2% m/m, +0.5% y/y forecast; last -0.4%, +0.3%.
  • (0430 ET/0930 GMT) Great Britain Oct mfg production, +0.2% m/m, +0.8% y/y forecast; last +0.6%, +0.2%.
  • (1000 ET/1500 GMT) United States Oct JOLTS job openings, 5.5 mln forecast; last 5.49 mln.
  • (1500 ET/2000 GMT) United States Oct consumer credit, $19.0 bln forecast; last $19.29 bln.

Key Events Ahead

  • N/A   Economist conference in London, various attendees.
  • N/A   Norway NOK3 bln 2% 2023 NST475 bond auction, Sweden t-bill auction.
  • (0200 ET/0700 GMT) Riksbank DepGov Jansson speaks in Stockholm.
  • (0430 ET/0930 GMT) Spain E4-5 bln 6 and 12-month treasury bill auctions.
  • (0500 ET/1000 GMT) Greece E1 and 1.25 bln 13 and 26-week treasury bill auctions.
  • (0530 ET/1030 GMT) Germany E3 bln 2018 Schatz auction.
  • (0530 ET/1030 GMT) UK DMO GBP2.25 bln 1.5% 2047 Gilt auction.
  • (1000 ET/1500 GMT) BoC policy announcement, no change in 0.5% overnight rate forecast.
  • (1600 ET/2100 GMT) RBNZ Gov Wheeler speaks in Wellington.

FX Beat

DXY: The dollar stood firm versus the euro as investors cautiously awaited Thursday's European Central Bank policy meeting outcome. The greenback against a basket of currencies trades 0.3 percent up at 100.48, hovering away from a low of 99.85 hit on Tuesday, its lowest since Nov. 15. FxWirePro's Hourly Dollar Strength Index stood at -2.95 (Neutral) by 0500 GMT.

EUR/USD: The euro traded between a narrow range, as investors paused for the outcome of Thursday's European Central Bank policy meeting, where it is expected to extend its bond beyond next March. Moreover, political uncertainty in Italy will continue to weigh on the major. The European currency trades 0.04 percent up at 1.0720, having hit a 21-month low of 1.0504 on Monday. Investors will eye German and Italian bond yields and news flow related to the Italian banking sector, ahead of the U.S. JOLTS Job Opening and consumer credit figures. FxWirePro's Hourly Euro Strength Index stood at 112.12 (Highly Bullish) by 0400 GMT. Immediate resistance is located at 1.0759 (Nov 16 High), a break above targets 1.0800. On the downside, support is seen at 1.0651 (10-DMA), a break below could drag it till 1.0600.

USD/JPY: The dollar edged up, extending gains for the third straight day, following a modest rise in the U.S. bond yields. Markets ignored U.S. trade balance data released on Tuesday, which showed trade deficit rose 17.8 percent to $42.6 billion, the largest increase since March 2015. The major trades 0.15 percent up at 114.14, within the distance from this week's high of 114.77 touched on Monday. FxWirePro's Hourly Yen Strength Index stood at -88.61 (Slightly Bearish) by 0400 GMT. Investors will continue to track movements in the treasury yields, amid a lack of relevant macro-fundamental drivers from the U.S. data docket. Immediate resistance is located at 114.54, a break above targets 115.00/ 115.30. On the downside, support is seen at 113.32 (9-EMA), a break below could take it lower 113.00.

GBP/USD: Sterling extended losses following a 2-month high touched on Tuesday after the British government asked parliament to honour its schedule for leaving the European Union. However, the major trimmed losses, as the pound bears were seen taking a breather ahead the UK manufacturing production report.  Sterling trades 0.1 percent down at 1.2661, after rising to a high of 1.2774 in the previous session, its highest since Oct. 6. FxWirePro's Hourly Sterling Strength Index stood at -121.87 (Highly Bearish) by 0400 GMT. Markets attention now remains on the UK Halifax house price data, manufacturing, and production report, ahead of the U.S. JOLTS Job openings data. Immediate resistance is located at 1.2750, a break above could take it till 1.2800. On the downside, support is seen at 1.2607 (9-EMA), a break below targets 1.2550. Against the euro, the pound trades 0.2 percent lower at 84.67 pence, having hit a high of 83.04 pence on Monday, it’s strongest since Jul. 22.

AUD/USD: The Australian dollar slumped after data showed the economy shrank for the first time since 2011, as businesses, consumers and government cut back on spending. Australia's gross domestic product fell 0.5 percent in the third quarter versus forecasts of a 0.3 percent gain, while it rose 1.8 percent compared to the same quarter last year, which raised the spectre of a possible recession following 25 years of growth. The Aussie trades 0.4 percent lower at 0.7428, having touched an intra-day low of 0.7416 and pulling closer to a 5-month trough of 0.7370 touched in November. FxWirePro's Hourly Aussie Strength Index stood at -118.30 (Highly Bearish) by 0500 GMT. The major will continue to digest Australian Q3 GDP report, ahead of the U.S. economic data. Immediate support is seen at 0.7400, a break below could drag it near 0.7370/ 0.7310. On the upside, resistance is located at 0.7500, a break above targets 0.7550.

NZD/USD: The New Zealand dollar recovered after declining to an early low of 0.7102, supported by another rise in dairy prices at a global auction overnight. The Global Dairy Price Index climbed 3.5 percent, with an average selling price of $3,622 per tonne in December's first auction, however, the rise was slower than last month's 4.5 percent with volumes slipping 6 percent. Moreover, the recovery appears to be fragile as negative oil prices weighed on market sentiment. The Kiwi trades flat at 0.7120, having touched a 6-day high of 0.7160 in the previous session. FxWirePro's Hourly Kiwi Strength Index was at 1.76 (Neutral) by 0500 GMT. Investors will continue to track overall markets sentiment, ahead of the U.S. macro-fundamental drivers. Immediate resistance is located at 0.7150, a break above could take it near 0.7200. On the downside, support is seen at 0.7069 (Dec 5-Low), a break below could drag it till 0.7030/ 0.7000.

Equities Recap

Asian shares edged higher as markets cautiously awaited the upcoming policy meeting of the European Central Bank due on Thursday after a referendum defeat triggered political turmoil in Italy.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.25 percent, while the MSCI's broadest gauge of the world's stock markets rose 3.4 percent from its November low, its highest level in almost two months.

Tokyo's Nikkei advanced 0.61 percent at 18,472.06 points, Australia's S&P/ASX 200 index gained 0.87 percent at 5,476.00 points and South Korea's KOSPI was trading 0.05 percent down at 1,988.80 points.

Shanghai composite index rose 0.3 percent to 3,208.88 points, while CSI300 index was trading 0.13 percent higher at 3,463.86 points.

Hong Kong’s Hang Seng was trading 0.3 percent up at 22,747.94 points. Taiwan shares added 0.1 percent at 9,263.89 points.

Commodities Recap

Crude oil prices declined, extending losses for the third consecutive session, as persistent doubts over a planned crude production cut led by OPEC and Russia weighed on the market.  International benchmark Brent crude was 0.65 percent down at $53.57 per barrel by 0356 GMT, retreating from a 16-month high of $55.30 hit on Monday. U.S. West Texas Intermediate crude fell 0.7 percent at $50.54 a barrel, after rising as high as $52.39 earlier in the week, its highest since mid- July.

Gold prices consolidated between narrow ranges, ahead of an expected U.S. Federal Reserve rate hike next week, while markets awaited for fresh clues on the European Central Bank's asset purchase program. Spot gold was down 0.02 percent at $1,169.09 an ounce by 0406 GMT, having ended the previous session nearly flat. U.S. gold futures were little changed at $1,170.30.

Treasuries Recap

The 10-year U.S treasury yield stood at 2.3943 percent, while 5-year yield was up by 0.003 bps at 1.8440 percent.

The Australian government bonds gained after recent data showed that the country’s third-quarter gross domestic product (GDP) declined for the first time since global financial crises.

The yield on the benchmark 10-year Treasury note fell more than 1 basis points to 2.80 percent, the yield on 15-year note dipped 2 basis points to 3.26 percent and the yield on short-term 2-year slid 4 basis points to 1.83 percent.

The New Zealand government bonds closed modestly higher, despite global dairy prices rising to its highest level since June 2014 at the overnight Global Dairy Trade (GDT) auction as demand remained upbeat. The yield on the benchmark 10-year bond closed 1 basis point lower at 3.24 percent, the yield on 7-year note ended down nearly 1 basis point to 2.82 percent and the yield on short-term 2-year note fell 1 basis point to 2.17 percent.

Canadian government bond prices were mixed across a steeper yield curve, with the 2-year price up 4 Canadian cents to yield 0.721 percent and the benchmark 10-year slipping 5 Canadian cents to yield 1.634 percent. Last week, the 10-year yield touched its highest in more than one year at 1.712 percent.

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