Dow Jones Newswires, 10 August 2017 03:50
Global Forex and Fixed Income Roundup: Market Talk
0750 GMT - Wary investors keep sterling down ahead of industrial production, manufacturing output and trade data in the U.K. A WSJ consensus forecasts a 0.2% fall in industrial production and a 0.1% decrease in manufacturing month-on-month. "Defensive mood prevails ahead of manufacturing production and foreign trade data," says Societe Generale. The U.K's trade deficit is expected to be at GBP11 billion, according to a WSJ poll. Societe Generale says if data come in weak, GBP/USD may fall to between $1.2950 and $1.2929. GBP/USD trades down 0.38% at $1.2955, according to Tradeweb. (firstname.lastname@example.org; @OlgaCotaga)
0749 GMT - Might India's industrial production show a decline for June in Friday's release? DBS thinks so, and it blames broader caution ahead of July 1's GST start. May output growth was 1.7% from a year earlier, but in June "firms were cutting back on inventories, putting new orders on hold" and discounting existing supplies, the bank notes. Such a reading would follow infrastructure output growth for June slowing sharply to 0.4% from May's 4%. Infrastructure output contributes 40% to industrial production. (email@example.com)
0743 GMT [Dow Jones] The September Gilt futures contract, currently trading at 127.36, remains on the upside, supported by the 50-period moving average at 127.14 on a 30-min chart. Moreover, the intraday RSI stands within its buying area between 50 and 70 and confirms the bullish bias. A first target to the upside is therefore set at the strong horizontal resistance and previous overlap at 127.65 and a second one is set at the horizontal resistance at 127.85. A third target is set at 128.10 in extension. Only a break below the horizontal support and overlap at 127.10 would turn the intraday outlook to bearish with a first alternative target set at August 8 bottom at 126.81 and a second one set at the horizontal support at 126.49 in extension. (firstname.lastname@example.org)
0739 GMT [Dow Jones] Currently trading at $1.2964, the British pound has broken below a rising trend line in place since August 8 and stands below the 50-period moving average at $1.3000 on a 30-min chart. Moreover, the intraday RSI stands within its selling area between 50 and 30, which confirms the bearish bias. Therefore, a first target is set at the horizontal resistance and August 8 bottom at $1.2950. A break below this threshold would open the way to further weakness towards July 20 low at $1.2930 and $1.2910 in extension. Only a rebound above the horizontal resistance at $1.3025 would turn the intraday outlook to bullish with a first alternative target set at the horizontal resistance at $1.3055 and a second one set at the previous overlap at $1.3105. (email@example.com)
0711 GMT - The WSJ Dollar Index is back near its best level of the week, perhaps on hopes of more upbeat data. Jumping on Friday after the jobs data, on tap later Thursday is PPI. While not as important as tomorrow's CPI report, the market "may consider rising producer prices to constitute a first sign of rising consumer prices," says Commerzbank. Also on tap today are comments from New York Fed chief Dudley, who's expected to continue backing further rate hikes. "Even if Dudley would not provide any news...the last few days have demonstrated that the market is desperate for" dollar-positive news, the bank adds. The WSJ index is up 0.1%. (firstname.lastname@example.org)
0648 GMT - Ahead of a 3-day weekend, Japan stocks were little changed as early gains were erased by midday and traded sideways from there. After skidding yesterday, the Nikkei finished down 8.97 points at 19729.74, a fresh 2 1/2-month low. But some stocks got a nice earnings boost today: cosmetics maker Shiseido surged 14% while Sumitomo Realty & Development gained 2.4%. Aside from potential geopolitical flare-ups, monetary policy will be a key for local investors as the Fed's Jackson Hole gathering nears. Money markets were also quiet Thursday, with 10-year JGB yields unchanged at 0.055% and the dollar trading at Y109.98, versus Y110.05 in late-Wednesday New York action. (email@example.com)
0643 GMT - India's direct-tax revenue was 19% higher than a year earlier at INR1.9 trillion ($30 billion) for the first 1/3 of this FY, government data show. It's a fresh sign of rising compliance that is helping shore up government coffers. India's rising revenue is also thanks partly to November's demonetization, which has helped expand the formal economy by dredging up hidden cash and forcing more people out from operating in the economic shadows. July's implementation of the goods-and-services tax, which further makes it hard to evade taxes, is also expected to help grow revenue. (firstname.lastname@example.org)
0628 GMT German government bonds look set to shed some of their large Wednesday gains, as investors' response to the U.S-North Korean tensions looks more like a "classical risk-off move" than the start of a trend, Commerzbank rates strategist Christoph Rieger says. Yields on 10-year German bonds rise by 1 basis point to 0.43% in early Thursday trading, having tumbled from highs of 0.48% Wednesday, according to Tradeweb. Yields move inversely to bond prices.(email@example.com, @tasosvos)
THURSDAY, AUGUST 10, 2017 TOP NEWS • Japan's June core machinery orders unexpectedly fall
Japan's core machinery orders unexpectedly fell for a third consecutive month in June, underscoring companies' reluctance to boost spending and conflicting with recent signs that the economic recovery is gathering momentum. Core orders suffered a second straight quarter of declines in April-June, the first instance of consecutive quarterly falls since 2012. Core orders decreased 1.9 percent in June from the previous month, confounding a median market forecast for a 3.7 percent increase, Cabinet Office data showed.
• U.S. productivity rises in Q2, keeps labor costs in check
U.S. productivity grew more than expected in the second quarter as hours worked rose at their fastest pace in 1-1/2 years, leading to a modest increase in labor costs that could keep inflation muted in the near term. The Labor Department said that nonfarm productivity, which measures hourly output per worker, rose at a 0.9 percent annualized rate in the April-June period. First-quarter productivity was revised to show it edging up at a 0.1 percent pace instead of being unchanged as previously reported.
• UK house price growth weakest in over 4 years – RICS
British house prices rose at their slowest rate in over four years last month, while the number of sales slowed due to a limited supply of property and continued political uncertainty, a property industry body said. The RICS said its monthly house price balance dropped to +1 in July from +7 in June, its lowest since March 2013 and below all forecasts in a Reuters poll of economists. The outlook for prices over the next 12 months was also the weakest since just after last year's vote to leave the European Union, RICS added, though outright price falls seemed unlikely at a national level.
• POLL- Japan PM should focus on regulatory reforms, say economists
Japan's Prime Minister Shinzo Abe ought to prioritize regulatory reforms, according to economists in a monthly Reuters poll whose forecasts show they remain pessimistic on prospects for the pace of inflation to pick up in coming years. In the poll, Japan's economy is forecast to expand by 1.4 percent in this fiscal year, which ends in March 2018, and just 1.1 percent next. Core inflation is seen averaging 0.6 percent this year and 0.8 percent next, well short of the Bank of Japan's 2 percent target.
ANALYSIS Investors eye tracking differences, liquidity as bond ETFs balloon
Focus has sharpened on how exchange-traded bond funds react to market shocks after recent wobbles showed some performing out of line with the assets they are designed to mirror.Although bond ETFs largely behaved as expected, some didn't when European Central Bank chief Mario Draghi triggered a bond sell off by hinting the ECB's bond-buying stimulus scheme may soon be scaled back.
HIGH YIELD, EM BOND ETF ASSETS BOOM
JGBS STEADY AMID JITTERY ON N.KOREA THREATS
BONDS, EQUITIES, OTHER ASSET MARKETS
• US Treasury 10s soggy, indicated 2.245%, JGB 10s 0.056%, Bund 10s 0.433%
• US-Japan-Germany respective 2s indicated 1.337%, -0.104%, -0.691%
• JGBs steady amid jittery on N Korea threats
• Weak BoJ op results weigh on 2s, 5s, but long-ends steady
• At 150.40, JGB futures up 6 ticks on day, range 150.40/150.32
• Tokyo still jittery on NoKorea threats, from 19.829 early to 19,685
• Spike low yesterday 19,660, at 19,689 currently, index off 48 points, 0.25%
• AXJ mostly in red - SSEC 1%, HSI 1.6%, KOSPI 1%, ASX 0.1% and TWI 1.3%
• Some outliers - STI +0.2% and NZX50 at par on day
• Dalian iron ore up @1%, Tokyo-Shanghai rubber futures off
Currency Summaries JPY
• USD/JPY in limbo, Asia 109.90-110.18, nearby option expiries tether market
• 110.00-05 USD800 mln, more above too at 111.00 - USD855 mln
• Tomorrow 109.00 USD1.3 bln, 109.75 660 mln, 110.00 874 mln, 110.75-86 1 bln
• Jitters still regarding NoKorea, helping to cap USD/JPY, JPY crosses
• Japanese leave orders over long Tokyo weekend, bids especially from @109.50
• Offers in evidence from 110.15-20, look to trail up
• EUR/JPY 129.09-53, top limited, risk-off, 55-HMA 129.58, daily kijun 129.70
• GBP/JPY 142.82-143.32, on hold sub-143.35-93 daily Ichi cloud, 100-DMA 142.98
• AUD/JPY up to 87.09 before fall back to 86.54, 55-DMA 86.39, low yest 86.29
• NZD/JPY from 81.00 to 80.27 on RBNZ call for lower NZD, 80.23 low yesterday
• EUR/USD opened 1.1758 after recovering from 1.1688 low in choppy US session
• EUR/USD moved higher in early Asia as N Korea concerns faded as a factor
• The EUR/USD traded to 1.1770 before the mood in Asia darkened again
• EUR/JPY selling picked up as Asian equities and currencies sold off
• EUR/JPY fell from session high at 129.53 to 129.10
• EUR/USD eased to 1.1738 where it was trading into the afternoon
• EUR vulnerable when risk aversion rises due to EUR/CHF and EUR/JPY selling
• EZ current account surplus should limit losses if risk aversion spikes
• Support @ 21-day MA @ 1.1682 and break targets 38.2 of 1.1119/1.1910 at 1.1608
• Resistance at 10-day MA at 1.1793 and break eases downward pressure
• Cable quiet in Asia, range 1.2994-1.3015, support @1.2950, 1.2951 55-DMA
• Topside seen capped at flat daily Ichi kijun at 1.3040, high yesterday 1.3030
• EUR/GBP on hold too, Asia 0.9032-40, quiet, few if any flows
• Underlying support around 0.9000, now flat daily Ichi tenkan at 0.9004
• N.Korea details Guam missile plan, calls Trump's warning a 'load of nonsense'
• RBNZ less dovish on rates than expected, favours lower NZ$
• UK house price growth weakest in over 4 years - RICS, +1 vs 7
• JP June core machinery orders -1.9% m/m, -5.2% y/y, +3.7%, -1.0% eyed
• Q2 '17 core -4.7% q/q, biggest drop since Q2 '16, Q3 eyed at +7.0% however
• JP July domestic corp goods prices +0.3% m/m, +2.6% y/y, +0.2%, +2.4% eyed
• MoF flow data wk-ended Aug 5 - Japanese buy more for-bonds, net Y1.6242 trln
• Also net Y160.8 bln foreign stocks, Y149.9 bln bills in latest week
• Foreigners buy net Y598.3bln JGBs Y81.9bln Japan bills, sell Y37.7bln stocks
Looking Ahead - Economic Data (GMT)
• 06:00 NO Jul Consumer Price Index, 1.40% y/y eyed, last 1.90%
• 06:00 NO Jul Core Inflation, 0.30% m/m eyed, last 0.50%
• 06:00 NO Jul Core Inflation, 1.20% eyed, last 1.60%
• 06:45 FR Jun Industrial Output, -0.50% eyed, last 1.90%
• 08:30 GB Jun Manufacturing Output, 0.00% m/m, 0.60% y/y eyed, last -0.20%, 0.40%
• 08:30 GB Jun Goods Trade Balance, -11.00 bln eyed, last -11.86 bln
• 08:30 GB Jun Industrial Output, 0.10% m/m, -0.10% y/y eyed; last -0.10%, -0.20%
Looking Ahead - Events, Auctions, Other Releases (GMT)
• 14:00 Fed's William Dudley to speak at in New York See North American Open for a detailed listing of US/NorAm releases, events.
NZD-RBNZ Governor keeping it real
RBNZ Gov Wheeler's final policy meeting turned out to be a low-key affair with the measured MPS commentary mirrored at his press conference. He passed on the opportunity to escalate rhetoric around the exchange rate with the statement only tweaking the messaging from "A lower NZD would help rebalance the growth outlook towards the tradables sector" previously, to "A lower NZD is needed to increase tradables inflation and help deliver more balanced growth." That's a mere statement of fact in terms of macro cause and effect and echoes last month's speeches by Asst Gov McDermott and Dep Gov Bascand. Like RBA Gov Lowe in the Aug 1 OCR statement and Asst Gov Kent yesterday, the RBNZ sees the recent rise in the exchange rate as a story of USD weakness. The reality for antipodean central bankers is that there is ultimately nothing any of them can do about it.
FX market shows its hand for when risk party ends
The escalating US-North Korea tensions provoked a strong reaction in FX markets Weds, with the CHF benefitting most, followed by the JPY & USD. The EUR fell hard vs the CHF & JPY despite the EZ's large current account surplus. The AUD also came under pressure - hardly surprising as AUD/JPY has long been the FX market's fear gauge. If recent history is a reliable guide, investors will charge back into risk assets as long as the tensions on the Korean peninsula don't escalate. But yesterday's moves could be viewed as a dress rehearsal for when volatility inevitably returns. A growing number of market watchers are increasingly uncomfortable with the persistently low VIX and the huge amount of leveraged positions relying on it remaining near all-time lows. A sustained rise above 13 in the VIX could result in 'risk parity' funds being forced to unwind large long equity positions and force straight short VIX positions to unravel. There is potential for a "selling begets selling" spiral across all risk assets and now we have a decent idea which currencies will benefit and which ones will falter.
Great point a chara - the extreme Left Populists and extreme Right Populists are are really one and the same - Populists! It's the Leftie Liberals and the Right Liberals that are pushing what the people don't want - mass immigration, demographic rape, population replacement.