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Asia Roundup: Aussie rebounds as government accelerates tax cuts, dollar index at 1-week trough amid renewed geopolitical concerns, Asian shares trade in red – Thursday, October 11th, 2018

Market Roundup

  • Trump calls stock sell-off 'a correction,' says Federal Reserve is 'crazy'
     
  • Asia shares shattered by Wall St rout, China's yuan under fire
     
  • IMF Lagarde urges China to keep moving toward flexible yuan system
     
  • China taps brakes on outbound investment, betrays capital flow fears
     
  • World Bank's Kim sees 'clear' economic slowdown if trade war escalates
     
  • China should prepare 'more powerful' steps to support economy – state media
     
  • EU's Barnier says Brexit deal may be “within reach” next week, demands Irish checks
     
  • UK surveyors see weakest house price outlook since Brexit vote-RICS
     
  • Australian interest rates need to be expansionary -RBA
     
  • Australian government accelerates tax cuts to sweeten souring polls
     
  • BOJ's Sakurai warns trade protectionism could cut Japan growth estimate
     
  • Japan Sep Corp Goods Price MM, 0.3%, 0.2% f’cast, 0.0% prev
     
  • Japan Sep Corp Goods Price YY, 3.0%, 2.9% f’cast, 3.0% prev
     

Economic Data Ahead

  • (0245 ET/0645 GMT) France Sep CPI (EU Norm) Final -0.2% m/m, 2.5% y/y f’cast; 0.5%, 2.5% prev

Key Events Ahead

  • (0300 ET/0700 GMT) Riksbank’s Skingsley reports on the economic situation and current monetary policy at Profit & Loss Scandinavian conference in Brunkebergstorg, Sweden.
     
  • (0645 ET/1045 GMT) BoE's Vlieghe speaks on 'Global and domestic challenges for UK monetary policy' at the National Bank of Belgium in Brussels.

FX Beat

DXY: The dollar index plunged to a 1-1/2 week low after U.S. President Donald Trump described Wednesday's stock market sell-off as a correction. The greenback against a basket of currencies trades 0.1 percent down at 95.33, having touched a low of 95.18 earlier, its lowest since October 1. FxWirePro's Hourly Dollar Strength Index stood at -15.61 (Neutral) by 0500 GMT.

EUR/USD: The euro surged to a 1-week peak after the head of the Eurozone bailout fund ESM Klaus Regling stated that there is no immediate danger of Italy losing market access or being downgraded below investment grade as the Italian economy has underlying strengths. The European currency traded 0.4 percent up at 1.1556, having touched a low of 1.1432 on Tuesday, its lowest since August 20. FxWirePro's Hourly Euro Strength Index stood at -42.78 (Neutral) by 0500 GMT. Investors’ attention will remain on the ECB's monetary policy meeting accounts, ahead of the U.S. consumer price index and unemployment benefit claims. Immediate resistance is located at 1.1593 (October 3 High), a break above targets 1.1624 (October 1 High). On the downside, support is seen at 1.1450, a break below could drag it till 1.1415.

USD/JPY: The dollar slumped to a 3-week low below the 112.00 handle as the greenback eased following a pullback in the U.S. Treasury yields, with the 10-year off at 3.15 percent from a 7-year top of 3.26 percent touched earlier in the week. The major was trading 0.2 percent down at 112.12, having hit a low of 111.97, its lowest since September 18. FxWirePro's Hourly Yen Strength Index stood at 129.73 (Highly Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. consumer price index and unemployment benefit claims. Immediate resistance is located at 112.58(September 20 High), a break above targets 112.98 (September 25 High). On the downside, support is seen at 111.75 (September 14 Low), a break below could take it lower 111.35 (September 5 Low).

GBP/USD: Sterling rallied to a 3-week peak above the 1.3200 handle after European Union Brexit negotiator Michel Barnier signalled progress on a deal with Britain over its withdrawal from the bloc, ahead of a summit of the bloc's 28 national leaders next week. The major traded 0.3 percent up at 1.3224, having hit a high of 1.3244 earlier; it’s highest since September 21. FxWirePro's Hourly Sterling Strength Index stood at 79.10 (Slightly Bullish) 0500 GMT. Investors’ attention will remain on the BoE credit conditions survey, Governor Carney and MPC member Vlieghe's speech, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3276 (September 21 High), a break above could take it near 1.3300. On the downside, support is seen at 1.3111 (5-DMA), a break below targets 1.3062 (September 24 Low). Against the euro, the pound was trading 0.1 down at 87.40 pence, having hit a high of 87.23 on Wednesday, it’s highest since June 21.

AUD/USD: The Australian dollar rebounded after the country's Prime Minister Scott Morrison stated that his government will bring forward proposed tax cuts for small businesses by five years, ahead of an election next year. The Aussie trades 0.3 percent up at 0.7074, having hit a high of 0.7130 on Wednesday; it’s highest since October 3. FxWirePro's Hourly Aussie Strength Index stood at -123.91 (Highly Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7042 (October 2 Low), a break below targets 0.7005. On the upside, resistance is located at 0.7129 (10-DMA), a break above could take it near 7182 (September 12 High).

NZD/USD: The New Zealand dollar gained as the U.S. dollar was hampered following a pullback in Treasury yields. The Kiwi trades 0.4 percent up at 0.6473, having touched a low of 0.6424 on Monday, its lowest level since February 2016. FxWirePro's Hourly Kiwi Strength Index was at -19.04 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6519 (October 4 High), a break above could take it near 0.6566. On the downside, support is seen at 0.6400, a break below could drag it below 6381 (Jan. 15 Low).

Equities Recap

Asian shares declined after Wall Street suffered its worst in eight months, triggering risk-averse sentiment across the global markets.

MSCI's broadest index of Asia-Pacific shares outside Japan plummeted 3.9 percent to its lowest since March 2017.

Tokyo's Nikkei slumped 3.9 percent to 22,577.22 points, Australia's S&P/ASX 200 index plunged 2.7 percent to 5,883.80 points and South Korea's KOSPI tumbled 4.01 percent to 2,140.98 points.

Shanghai composite index fell 5.01 percent to 2,591.94 points, while CSI300 index traded 4.4 percent declined at 3,135.02 points.

Hong Kong’s Hang Seng traded 3.8 percent lower at 25,189.02 points. Taiwan shares shed 6.3 percent to 9,806.11 points.

Commodities Recap

Crude oil prices slumped by more than 1 percent to a 2-week low after an industry report showed U.S. crude inventories rose more than expected. International benchmark Brent crude was trading 1.01 percent down at $81.61 per barrel by 0517 GMT, having hit a low of $81.33 earlier, its lowest since September 28. U.S. West Texas Intermediate was trading 0.9 percent down at $71.94 a barrel, after falling as low as $71.83, its lowest since September 27.

Gold prices declined, reversing some of its previous session gains, as robust U.S. data potentially bolstered the chances of multiple U.S. interest rate hikes over the next year. Spot gold was down 0.1 percent at $1,193.24 an ounce at 0520 GMT, having hit a low of $1183.42 on Monday, its lowest since September 28. U.S. gold futures were up 0.2 percent at $1,195.70 an ounce.

Treasuries Recap

The Japanese government bonds surged during late Asian session as investors flocked into safe-haven assets tracking United States Treasuries after President Donald Trump threatened to slap additional tariffs on an additional USD267 billion of Chinese imports if the latter decides to retaliate back sharply. The yield on the benchmark 10-year JGB note, which moves inversely to its price, suffered nearly 1-1/2 basis points to 0.141 percent, the yield on the long-term 30-year note slumped 2 basis points to 0.923 percent and the yield on short-term 2-year traded tad lower at -0.118 percent.

The Australian government bonds gained across the curve during Asian session after global stocks slide to 3-month low, with the S&P500 stock index tumbling over 3 percent to its biggest one-day fall since February. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell over 3 basis points to 2.730 percent, the yield on the long-term 30-year bond also plunged 3 basis points to 3.207 percent and the yield on short-term 2-year down 1-1/2 basis points to 2.028 percent.


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