Asia Roundup: Antipodeans rally on mixed Chinese trade figures, dollar hits 2-1/2-year low against euro after ECB meeting, Asian shares gain – Friday, September 8th, 2017

Market Roundup

  • Japan Q2 GDP rev +0.6% q/q, +2.5% AR, +0.7%/+2.9% eyed, prelim +1.0%/+4.0%
  • Despite GDP revision, Q3 exports-output healthy, GDP growth to continue
  • Japan Jul c/a surplus Y2.32 trln, Y2.06 trln eyed, Jun surplus Y934.6 bln
  • Japan CAPEX revised down large to +0.5% from prelim +2.4%, +0.5% eyed
  • Aug flow data – Japanese buy net Y745.3 bln for-bonds, Y1.058 trln stocks
  • Foreigners sell Y1.08trln Japan stocks, buy Y2.33trln JGBs, Y2.5trln bills
  • Japan Aug bank loans +3.2% y/y to Y515.8 trln, July +3.3%, steady rise continues
  • China Aug Exports y/y, 5.5% vs forecast 6.0%, last 7.2%
  • China Aug Imports y/y, 13.3% vs forecast 10.0%, last 11%
  • China Aug Trade balance (USD), 41.99 bln vs forecast 48.60 bln, revised 46.73 bln
  • Australia Jul Housing finance, 2.9% vs forecast 1.0%, revised 1.2 last 0.5%
  • Trump:'Sad day' for North Korea if U.S. takes military action
  • BCC – UK economy treading water ahead of Brexit – Reuters
  • May's government pushes Brexit bill to avoid 'chaotic' departure
  • Germany's Ifo head warns of return of euro crisis -newspaper
  • Trump embraces Democrats again on debt ceiling and immigration
  • Dudley stands by Fed rate hikes, still sees U.S. inflation rebound
  • Reform of Australian benchmark interest rate progressing – RBA
  • Investors pull $1.1 bln from stock funds, add $6.8 bln in money funds -Lipper
  • Foreign CB US debt holdings +$20.7 bln to $3.4 tln Aug 30 week
  • Treasuries $20.6 bln to $3.0 tln, agencies -93 mln to $264.1 bln

Economic Data Ahead

  • (0245 ET/0645 GMT) France Jul Industrial output m/m, 0.6% eyed, last -1.1%
  • (0430 ET/0830 GMT) Great Britain Jul Construction output vol, -0.2% m/m, 0.2% y/y eyed, last -0.1%, 0.9%
  • (0430 ET/0830 GMT) Great Britain Jul Industrial output, 0.2% m/m, 0.4% y/y eyed, last 0.5%, 0.3%
  • (0430 ET/0830 GMT) Great Britain Jul Manufacturing output, 0.3% m/m, 1.7% y/y eyed, last 0%, 0.6%
  • (0430 ET/0830 GMT) Great Britain Jul Goods Trade balance (GBP), -11.95 bln eyed, last -12.72 bln

Key Events Ahead

  • (0400 ET/0800 GMT) Bank of Finland Governor Liikanen speaks in Finnish parliament
  • (0605 ET/1005 GMT) Great Britain Stg2.0/2.0/2.0 bln for 1/3/6 months auction

FX Beat

DXY: The dollar slumped to multi month lows versus its major peers as the damages to the U.S. economy from the storms and dovish Fed speeches continued to dampen dollar bulls' sentiments. The greenback against a basket of currencies traded 0.5 percent down at 91.08, having touched a low of 91.01 earlier, its lowest since Jan 2015. FxWirePro's Hourly Dollar Strength Index stood at -85.41 (Slightly Bearish) by 0500 GMT.

EUR/USD: The euro rallied to a 2-1/2-year high as a policy meeting by the European Central Bank gave bulls reasons for short-term optimism. On Thursday, the ECB President Mario Draghi's stated that bulk of decision on tapering the central bank's massive stimulus program would be made in October. The European currency traded 0.4 percent up at 1.2067, having touched a high of 1.2089 earlier, its highest since Dec. 2014. FxWirePro's Hourly Euro Strength Index stood at 32.32 (Neutral) by 0400 GMT. Investors’ attention will remain on series of data from the Eurozone economies, ahead of U.S. wholesale inventories and consumer credit change. Immediate resistance is located at 1.2100, a break above targets 1.2150. On the downside, support is seen at 1.2033 (78.6% retracement 1.1823 and 1.2089), a break below could drag it near 1.1989 (61.8% retracement 1.1823 and 1.2089).

USD/JPY: The dollar slumped to a 10-month low below the 108.00 handle as persistent greenback selling bias and weaker market sentiment underpinned the Japanese Yen's safe-haven appeal. The major was trading 0.6 percent down at 107.78, having hit an early low of 107.71, its lowest since Nov. 2016. FxWirePro's Hourly Yen Strength Index stood at -24.59 (Neutral) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. wholesale inventories, consumer credit change and FOMC member Harker speech for further momentum. Immediate resistance is located at 108.35 (78.6% retracement of 110.67 and 107.71), a break above targets 108.85 (61.8% retracement of 110.67 and 107.71). On the downside, support is seen at 107.71 (Session Low), a break below could take it near 107.50.

GBP/USD: Sterling advanced to a 5-week high above 1.3100 handle as the greenback continued to ease amid dovish Fed talk and calculating the damages to the U.S. economy from the storms. The major traded 0.3 percent up at 1.3146, having hit a high of 1.3150 earlier, its highest since August 8. FxWirePro's Hourly Sterling Strength Index stood at -29.09 (Neutral) by 0400 GMT. Investors’ focus will remain on UK consumer inflation expectations, trade balance, industrial and manufacturing production figures, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3164 (August 4 High), a break above could take it near 1.3220. On the downside, support is seen at 1.3072 (78.6% retracement of 1.2773 and 1.3150), a break below targets 1.3010 (5-DMA). Against the euro, the pound was trading 0.3 percent down at 91.97 pence, having hit an over 2-week high of 91.17 pence in the previous session.

AUD/USD: The Australian dollar climbed to multi-month highs after data showed domestic home loans rose by more than expected in the month of July. Moreover, the ongoing weakness in the greenback on fading expectations over another Fed rate hike action by the end of this year, further provided an additional boost to the major.  The Aussie trades 0.8 percent up at 0.8109, having hit a high of 0.8119 earlier, it’s strongest since May 2015. FxWirePro's Hourly Aussie Strength Index stood at 45.97 (Neutral) by 0500 GMT.  Investors will continue to digest the domestic upbeat data, ahead of U.S. economic releases. Immediate support is seen at 0.8068 (78.6% retracement of 0.7871 and 0.8119), a break below targets 0.7989 (5-DMA). On the upside, resistance is located at 0.8119 (Session High), a break above could take it near 0.8150.

NZD/USD: The New Zealand dollar rose by 1 percent to hit an over 2-week high amid a broad based greenback sell-off and mixed Chinese trade balance data. China's headline surplus figure missed estimates, however, upbeat imports data supported the bid tone surrounding the major. The Kiwi trades 1.3 percent up at 0.7325, having touched a high of 0.7337 earlier, its highest level since Aug. 21. FxWirePro's Hourly Kiwi Strength Index was at 61.41 (Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7367 (August 10 High), a break above could take it near 0.7400. On the downside, support is seen at 0.7196 (5-DMA), a break below could drag it till 0.7131 (August 31 Low).

Equities Recap

Asian shares nudged up as investors remained cautious on another U.S. storm, while the greenback tumbled after European Central Bank President Mario Draghi suggested the central bank may begin tapering its massive stimulus programme this October.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.1 percent, but was still down 0.2 percent for the week.

Tokyo's Nikkei declined 0.7 percent to 19,260.79 points, Australia's S&P/ASX 200 index fell 0.4 percent to 5,667.50 points and South Korea's KOSPI eased 0.2 percent to 2,342.74 points.

Shanghai composite index rose 0.04 percent to 3,366.42 points, while CSI300 index was trading 0.04 percent down at 3,828.85 points.

Hong Kong’s Hang Seng was trading 0.4 percent higher at 27,637.97 points. Taiwan shares added 0.7 percent to 10,609.95 points.

Commodities Recap

Crude oil prices rose, extending previous session gains as U.S. crude production was hit harder by Hurricane Harvey than expected, with even bigger storm Irma heading towards Florida. International benchmark Brent crude was trading 0.4 percent up at $54.72 per barrel by 0427 GMT, having hit a high of $54.76 earlier, its strongest since Apr. 19. U.S. West Texas Intermediate was trading 0.2 percent up at $49.19 a barrel, after rising as high as $49.39 on Wednesday, its highest since Aug. 14.

Gold prices rallied to a fresh one-year high as the dollar slumped to a 2-1/2 year low on the back of weaker-than-expected U.S. jobs data and rising geopolitical tensions. Spot gold rose 0.4 percent to $1,353.31 per ounce by 0435 GMT, after touching its highest level since September 2016 at $1,353.83 earlier. U.S. gold futures for December delivery were up 0.3 percent at $1,354.40.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.031 percent lower by 0.031 bps, while 5-year yield was 0.026 bps down at 1.615 percent.

The Japanese government bonds jumped on the last trading day of the week after the country’s final reading of the gross domestic product (GDP) for the second quarter of this year disappointed markets, missing both consensus estimates and down from the preliminary reading. The yield on the benchmark 10-year Treasury note plunged 1-1/2 basis points to 0.001 percent, the yield on long-term 30-year slumped 2 basis points to 0.81 percent and the yield on short-term 2-year traded 1/2 basis points lower at -0.16 percent.

The Australian bonds jumped during early Asian trading, tracing its U.S. counterpart after yields rose on Thursday as weak U.S. jobless claims data and worries about the impact of hurricanes Irma and Harvey on the world’s largest economy boosted investors’ demand for safe-haven government debt. The yield on the benchmark 10-year Treasury note slumped 7 basis points to 2.59 percent, the yield on 15-year note plunged 6-1/2 basis points to 2.88 percent and the yield on short-term 2-year traded nearly 3 basis points lower at 1.86 percent.

The New Zealand bonds ended mixed as investors poured into safe-haven assets, following rising tensions over the natural health of the global economy and as the riskier assets remain heavily prone to any economic fluctuations, largely owing to natural disturbances. At the time of closing, the yield on the benchmark 10-year Treasury note slumped 2-1/2 basis points to 2.79 percent, the yield on 7-year note slipped 1 basis point to 2.65 percent while the yield on short-term 2-year ended 2 basis points higher at 2.00 percent.

The Canadian government bond prices were mixed across a flatter yield curve, with the two-year down 4.5 Canadian cents to yield 1.475 percent and the 10-year rising 6 Canadian cents to yield 1.939 percent. The gap between the 2-year yield and its U.S. counterpart widened by 6.8 basis points to a spread of 20.1 basis points, its widest since January 2015, while the 5-year spread turned positive for the first time since October 2014.

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