Dow Jones Newswires, 14 August 2017 02:34
Global Forex and Fixed Income Roundup: Market Talk
0634 GMT - Geopolitical risk premiums in 10-year German government bonds are unlikely to disappear any time soon, Commerzbank rates strategist Rainer Guntermann says. This should support the prices of German bonds, which have jumped in the past few days, bringing yields below 0.4%. Yields move inversely to bond prices. Yields below 0.4% look "stretched," but elevated risk sentiment should prevent a significant rebound, according to Mr. Guntermann. (email@example.com, @tasosvos)
0623 GMT - Danske Bank's recommendation of long positions in eurozone peripheral sovereign bonds--in those of Italy, Portugal and Spain--have been suffering recently due to the weak sentiment but the bank's analysts shrug off these concerns, seeing no immediate risk of military escalation. "Given that we do not see an outright military escalation we are not overly concerned about our periphery exposure," the bank's analysts say. They add that nuclear-armed North Korea is an issue for geopolitics, but "the answer is slightly different" from a European government bond perspective. (firstname.lastname@example.org; @EmeseBartha)
1013 GMT - India needs to hasten the pace of infrastructure development to strengthen economic growth, says the Federation of Indian Chambers of Commerce and Industry. The industry body believes doing so will significantly lower business costs and make the country's manufacturing sector more competitive. India's June industrial-production data out late Friday showed manufacturing-sector output, making up 78% of the country's total, fell 0.4%. (email@example.com)
0611 GMT - Danske Bank sees it possible for Fitch Ratings to revise upward the outlook on Greece's rating when it reviews it on August 18. "We see a chance of a change to a positive outlook, underlining the positive rating cycle for the periphery," Danske analysts say. Fitch currently rates Greece at CCC with a stable outlook, still deep in sub-investment grade territory. (firstname.lastname@example.org; @EmeseBartha)
0610 GMT - Japanese stocks were destined to fall today after belong closed Friday while other markets slumped and the yen rebounded. The Nikkei finished down 1% at 19537.10, its lowest finish since early May, even as the yen retreated some. Versus the dollar it fell to Y109.60 from Y109.06 when 2Q GDP data were released this morning. That print's strength sent both the currency and JGB yields lower; for 10-years then fell a half-basis point to 0.05%. (email@example.com; @SuryatapaB)
0425 GMT - Regional economic data today is helping reverse some of the yen's late-week gains. New Zealand's retail-sales figures were healthy while Japan GDP was stronger than expected. As private consumption is both locales is growing, "these are the things that sustain inflation trends," says Bart Wakabayashi, Tokyo branch manager of State Street. Meanwhile, a holiday weekend and slow summer activity could be exacerbating today's yen weakness, he adds. The yen doesn't act like most currencies, which generally rise when there's solid economic data. For the yen, it often declines on strong readings. The dollar is at session highs around Y109.60, versus Y109.07 before the Japan GDP data. firstname.lastname@example.org; @SuryatapaB
0559 GMT - Don't worry about the slight drop in Indian industrial production because it may have been transient, says Kotak Securities. That's because activity broadly slowed ahead of the midyear start of the GST, it notes. "We expect this adjustment to be shortlived and production should normalize within the next 2-3 months." Still, a recovery is expected to be gradual. "We believe [industrial-production] growth is near its trough," adds Kotak, "but recovery will be prolonged rather than V-shaped." (email@example.com)
0516 GMT - It's generally been a quiet day in Asian currency markets, and it could be a few days before the Aussie dollar moves notably. It did little in the wake of soft Chinese economic data today, and that may remain the case until Australia's employment report on Thursday. CBA is expecting the currency to rally afterward as it expects more strong jobs growth. At the same time, the bank says 2Q wage data on Wednesday should serve as a reminder there are headwinds to GDP growth and that the RBA is in no rush to normalize interest rates. (firstname.lastname@example.org; @JamesGlynnWSJ)
0504 GMT - While strong 2Q retail-sales data didn't move the New Zealand dollar much today, tomorrow's bimonthly dairy auction could give the currency a kick, notes CBA. The bank sees the milk results providing support for the kiwi. It's around US$0.7308, versus US$0.7285 late Friday in Asia. (email@example.com; @JamesGlynnWSJ)
MONDAY, AUGUST 14, 2017 TOP NEWS • Robust China economic growth shows signs of fading in July
China's strong economic growth showed visible signs of fading in July as lending costs rose and the gravity-defying property market cooled, though activity levels generally remained solid, propped up by a year-long construction spree. Factory output rose 6.4 percent in July from a year earlier, the slowest pace since January, according to data from the National Bureau of Statistics. Growth in property investment eased to 4.8 percent in July from a year earlier, versus 7.9 percent in June. Growth of private investment also ebbed to 6.9 percent in the first seven months of the year.
• Japan Q2 GDP blows past expectations on robust domestic demand
Japan's economy grew in the second quarter at the fastest pace in more than two years as consumer spending and capital expenditure both rose at the fastest in more than three years, highlighting stronger domestic demand. GDP expanded an annualised 4.0 percent in April-June, government data showed, more than the median estimate for 2.5 percent annualised growth and the biggest increase since January-March 2015. Compared to the previous quarter, the economy expanded 1.0 percent. Private consumption rose 0.9 percent from the previous quarter, more than the median estimate of 0.5 percent growth.
•UK employers see measly pay growth ahead, companies turn gloomy
British employers expect to raise pay only minimally over the next 12 months despite hiring more staff, a survey showed, suggesting the Bank of England is unlikely to come under much pressure to raise interest rates from their record low. While private-sector employers expect to raise pay by an average 2 percent, the median pay rise was dragged down by public-sector employers and charities which plan to offer pay rises of 1 percent and 1.4 percent respectively. • New Zealand retail sales rise in Q2, boosted by international sports events
New Zealand retail sales volumes jumped 2 percent in the second quarter, beating expectations and boosted by high-profile international sporting events attracting a flood of tourists to the country. The quarterly seasonally adjusted rise put sales volumes 5.4 percent higher on the year, Statistics New Zealand data showed. Economists had been forecasting quarterly seasonally adjusted retail sales volumes growth of 0.7 percent, expecting results to moderate after the robust 1.5 percent lift in the first quarter.
MORNING MEETING JGBS TRADE IN TIGHT RANGE, T-BILLS SOLID
BONDS, EQUITIES, OTHER ASSET MARKETS
• US Treasury 10s indicated 2.207%, JGB 10s 0.052%, Bund 10s 0.387%
• US-Japan-Germany respective 2s indicated 1.300%, -0.113%, -0.720%
• JGB futures remain in narrow 150.44/150.50 range
• The range was created in the first 13 min of trading
• At 150.49, futures up 9 ticks on day
• T-bills firm, indicating there was some buying during Tokyo holidays
• 3mo yields fall to -0.125% from -0.116% last week
• Nikkei gaps down at open, up some from 19,486 early low to 19,595
• At 19,594, index still of 134 points or 0.7% on day as NoKorea simmers
• AXJ mostly up - SSEC 0.4%, HSI 1.2%, KOSPI 0.7%, STI 0.8%, ASX 0.6%
• NZX50 also up 0.5% but TWI outlier, off 0.4%
• Dalian iron ore -3.3%, Tokyo rubber -1.7%
• JPY complex in bounce but soggy US yields, simmering NoKorea issue cap
• USD/JPY up from 108.94 to 109.45, Japanese importer bargain-hunting
• Good demand into Tokyo fix, after, offers from @109.50, trail up
• Japanese bids in place from around 109.00, trail down
• Option expiries - 109.00 USD415 mln, 110.00 1.2 bln, 110.40-63 911 mln
• EUR/JPY 128.68 to 129.41, 127.79 55-DMA, 129.72 daily tenkan-kijun cap
• GBP/JPY 141.71 to 142.45 and NZD/JPY 79.69 to 80.09, back in Ichi cloud
• AUD/JPY 86.07 to 86.60, capped at descending 100-HMA at 86.59
• EUR/USD opened Asia at 1.1820 after soft US CPI sent US S/T yields lower
• After trading at 1.1815 the EUR/USD drifted higher on EUR/JPY demand
• The EUR/JPY rose 129.41 from the NY Friday close at 129.07
• EUR/USD traded to 1.1834 before sellers returned to cap the price action
• Heading into the afternoon session the EUR/USD was trading around 1.1825
• EUR/USD supported by fading expectations of another Fed hike before year-end
• Support at ascending 21-day MA (1.1721) which has held since June 27
• A break below that reading would suggest a short-term top is in place
• Resistance at Aug 2 high at 1.1910 and break would accelerate trend higher
• EZ IP out later today, but focus will be on DE/US yield spread
• Cable steady in tight 1.3000-22 range in Asia, spike low Friday 1.2939
• Resistance above from flat daily Ichi kijun line at 1.3040
• Bidding interest eyed still from around 1.2950
• Option expiries today - 1.2930 GBP497 mln, 1.2950 332 mln
• EUR/GBP quiet, Asia 0.9085-92, bias still up, high Friday 0.9119
• Japan EconMin Motegi - No need for new stimulus steps now -Reuters
• Japan Q2 GDP +1.0% q/q, +4.0% annualised, +0.6% and +2.5% eyed
• Robust domestic demand, consumption +0.9% q/q, CAPEX +2.4%, housing +1.5%
• GDP growth best since Q1 '15, consumption and CAPEX since Q1 '14
• China Jul retail sales, +10.4% vs +11.0% and f’cast of +10.8%
• Jul Industrial output, +6.4% vs +7.6% and f’cast +7.2%
• Jan-Jul urban investment, +8.3% vs +8.6% and f'cast +8.6%
• UK employers see measly pay growth ahead, companies turn gloomy
• New Zealand retail sales rise in Q2, boosted by international sports events
• NZ service activity falls to 56.0 in July -BNZ survey
• Speculators' net short dollar positions rise to most since Jan. 2013 -CFTC
Looking Ahead - Economic Data (GMT)
• 09:00 EU Jun Industrial Production, -0.50% m/m, 2.80% y/y eyed; last 1.30%, 4.0%
Looking Ahead - Events, Auctions, Other Releases (GMT)
• 09:30 DE E2.0 bln for 6-month auction See North American Open for a detailed listing of US/NorAm releases, events.
Week Ahead-US retail sales, EZ IP & GDP, UK inflation
The US has a fairly full calendar after a clear slate today. Retail sales, NY Fed manufacturing, business inventories and Treasury TIC data are due Tues, building permits and housing starts Weds, weekly jobless claims, Philly Fed and IP Thurs, and finally Uni of Michigan consumer sentiment Fri. It's a big week for EZ data ahead of the Jackson Hole symposium from Aug 26 and the ECB meeting Sept 7. EZ IP will be released Mon, followed by German GDP Tues and EZ GDP Weds. EZ trade and key inflation data are due Thurs and EZ current account Fri. UK data this week will help shape BOE expectations with CPI, PPI & RPI due Tues, employment data Weds, and retail sales Thurs. Japan’s Q2 GDP this morning outperformed expectations and Q1 was revised up to +0.4% q/q from +0.3%. Japanese trade data for July is due Thurs. China’s July retail sales and industrial output were well below forecasts for a mild moderation from June, while Jan-July urban investment slowed unexpectedly. Chinese house prices are due on Fri and July lending data during the week. The Australian calendar features the wage price index Weds and employment data Thurs.
Week Ahead-Geopolitics, central banks and trade
Geopolitics and central bank expectations will again compete for the market's attention this week. Wall St price action Friday suggested investors are refusing to panic over rising tension between the US and N.Korea and instead positioned for a less aggressive Fed following benign US inflation data. Recent history shows geopolitical considerations tend to fade unless they intensify or the threat of actual war becomes imminent. If the tensions do fade, central bank expectations will again be the main driver of markets. The RBA minutes are due Tues, but are unlikely to provide any new information following the more expanded Aug 1 meeting statement, the SOMP on Aug 4 and last week's RBA testimony. The FOMC minutes on Weds and ECB minutes Thurs should be of more interest. Trade relations will also be in focus, with the US, Canada & Mexico due to hold talks on NAFTA and US President Trump expected to call for a probe of Chinese trade practices today.
Dow Jones Newswires, 15 August 2017 03:08
Global Forex and Fixed Income Roundup: Market Talk
0708 GMT - While investors' concerns around North Korea's nuclear threatening eased on Monday, the issue is not yet off the table and to some extent it may continue affecting markets. "The North Korean crisis is likely to keep markets in suspense again today," says Daniel Lenz, analyst at DZ Bank. It is a public holiday in both South and North Korea and "observers expect Pyongyang to avail of the festivities to issue new rhetorical barbs," Mr. Lenz says. Despite Monday's more relaxed market sentiment around North Korea, "a sustained easing of the situation cannot be identified yet," Mr. Lenz says. Should any negative news emerge, bunds should be in demand again, he adds. (firstname.lastname@example.org; @EmeseBartha)
0704 GMT - K+S's second-quarter earnings give bond investors several reasons to bet on wider spreads, according to UniCredit. Results were weaker than expected, 2017 guidance was for "another transitional year" and the 2020 Ebitda target was scrapped. But at least a rating downgrade is not a risk for K+S bonds, which already offer a spread pick-up compared with stronger peers with a similar BB+ rating, analyst Christian Aust says. Asset swap spreads on K+S bonds are broadly stable in early Tuesday trade, according to Tradeweb. (email@example.com, @tasosvos)
0653 GMT - The European Central Bank's reinvestments of maturing bonds it had bought under its public sector purchase program (PSPP) "will become more important", says Kim Liu, senior fixed income strategist at ABN Amro. These reinvestments, so far modest, should help the ECB exit its stimulus without creating a taper tantrum, he adds. "Although the ECB's reinvestment policy is surrounded by mystery, we calculate that the PSPP reinvestments could reach up to EUR640 billion during the next three years," Mr. Liu calculates, adding that Germany is likely to receive the largest reinvestment influx from a relative and absolute perspective. (firstname.lastname@example.org; @EmeseBartha)
0643 GMT - Big rig firm Transocean (RIG) has reached a $1.2 billion stock-and convertible-debt deal to buy Norway's Songa Offshore (SONG.OS), whose shares have plunged 95% the past 5 years. RIG has slumped 43% alone in 2017. Still, the deal price tag is 40% above yesterday's close and a level Songa last traded at 17 months ago at NOK47.50. RIG will add 4 "Cat-D" harsh environment, semisubmersible drilling rigs on long-term contracts with Statoil (STO); Songa has 3 other semisubmersibles. RIG also sees annual synergies at $40 million. (email@example.com; @kevinkingsbury)
0642 GMT - U.K. inflation may be expected to rise further but concerns on economic growth, given the potential of a bad Brexit deal, put pressure on gilt yields and breakeven rates, according to Societe Generale strategists. Investors in the gilt market are seemingly pricing in the Bank of England's reluctance to tighten monetary policy if growth is subdued. Breakeven rates are the difference between the yields of conventional and inflation-linked bonds and act as a market-based gauge of inflation expectations. (firstname.lastname@example.org, @tasosvos)
0640 GMT - Yields on 10-year German government bonds look set to rise further Tuesday, as "no news is good news" for risk sentiment, Commerzbank rates strategist Christoph Rieger says. Bund yields rose Monday as easing tensions between U.S. and North Korea gave investors fewer reasons to hold this haven asset. Still, a further rise in yields--as bund prices drop--should be limited, as the scarcity of German paper should attract buyers before long. Yields rose 2.4 basis points to 0.43% early Tuesday, according to Tradeweb. (email@example.com, @tasosvos)
0638 GMT - The FTSE 100 index of U.K. stocks looks poised to open 18 points higher at 7372 Tuesday, according to CMC Markets, extending Monday's bounce. U.K. producer and consumer price data, which could affect sterling and therefore U.K.-listed equities, are due 0830 GMT. A WSJ poll points to a 2.7% year-on-year increase for the consumer prices index. "A rise would be at odds with the recent softening in recent PPI number…but in line with the Bank of England's forecasts which suggest we could see 3% before year end," CMC analyst Michael Hewson says. (firstname.lastname@example.org, @tasosvos)
0610 GMT - As the yen fell some 0.7% versus the euro and dollar by the afternoon, Japanese stocks maintained their early strength right through the close to reverse yesterday's decline. The Nikkei rose 1.1% to 19753.31 as the dollar made a run at Y110.50 amid North Korea pulling back its threat to fire missiles at Guam. That also allowed JGB prices to edge lower; that pushed 20- and 30-year yields up a half-basis point to 0.56% and 0.845%, respectively. (email@example.com; @SuryatapaB)
0603 GMT - Modest gains for the Australian dollar today following the release of this month's RBA meeting minutes. CBA says the implication is the central bank appears to be growing less comfortable with keeping interest rates low for too long. Up tomorrow is the 2Q wage report, a potential near-term headwind to the Aussie dollar's recent strength. (firstname.lastname@example.org; @JamesGlynnWSJ)
0539 GMT - Tuesday could pass without incident from North Korea as it celebrates its Liberation Day, an event that investors were paying close attention to as tension ratcheted up between the US and Pyongyang. Although Asian stocks bounced back further today as tensions subsided, "the lingering air of caution is likely to keep investors on guard," says Lukman Otunuga, research analyst at trading firm FXTM. (email@example.com; @SuryatapaB)
TUESDAY, AUGUST 15, 2017 TOP NEWS • U.S. wages seen growing faster than headline data suggest
U.S. wages are on the rise at a pace that is probably faster than the topline data suggest, according to a leading labor economist at the U.S. central bank. Officials at the Federal Reserve and other economists have publicly puzzled over sluggish wage growth despite a 16-year low unemployment rate. Some observers have speculated that the lack of faster pay rises may be holding down inflation and keeping Americans from benefiting as much as they should from a moderately expanding economy and some Fed policymakers have said that slow-growing wages make them wary about pressing on too quickly with interest-rate hikes.
• Schaeuble: ECB to quit ultra-loose monetary policy in foreseeable future
German Finance Minister Wolfgang Schaeuble said that the ECB's ultra-loose monetary policy would come to an end in the foreseeable future, but interest rates would remain low. Regarding the end of the period of low interest rates, Schaeuble said: "There are signs that it is gradually getting better". Speaking at an campaign rally ahead of a Sept. 24 election, the veteran conservative said: "No one seriously disputes that interest rates are rather too low for the strength of the German economy and the exchange rate of the euro, which is rising now."
• Dudley tells skeptical markets he sees Fed rate hike –AP
One of the Federal Reserve's most influential members expects to raise interest rates once more this year, and to soon begin shedding some of the Fed's bond holdings, according to comments that pushed back on doubts in financial markets. In an interview with the Associated Press, New York Fed President William Dudley, a close ally of Fed Chair Janet Yellen, also praised the Trump administration for not "politicizing" the U.S. central bank's decisions as some members of Congress have done in recent years.
• Australia's central bank stays upbeat, flags risks in household debt
Australia's central bank was confident of a pick-up in inflation and jobs when it left interest rates at record lows this month, foreshadowing a couple of years of "above potential" growth in the economy. Yet household debt at all time highs and a strong local dollar were key risks to that rosy outlook, minutes of the Reserve Bank of Australia's (RBA) August policy meeting showed. "Members regarded conditions in the housing market and household balance sheets as continuing to warrant careful monitoring," the minutes showed. • Canada suggests it could quit NAFTA talks over dispute mechanism
Canada laid down a tough line ahead of talks on modernizing NAFTA, suggesting it could walk away if the United States pushed to remove a key dispute-settlement mechanism in the trade deal. Foreign Minister Chrystia Freeland, giving the most substantive outline yet of Canada's goals, said she was "very optimistic" the negotiations would be a success. North American Free Trade Agreement members Canada, Mexico and the United States hold their first session in Washington on Wednesday.
MORNING MEETING JGB FUTURES SOLID ON SHORT-COVERING
BONDS, EQUITIES, OTHER ASSET MARKETS
• US Treasury 10s indicated 2.244%, JGB 10s 0.048%, Bund 10s 0.423%.
• US-Japan-Germany respective 2s indicated 1.332%, -0.113%, -0.712%.
• JGB futures solid on some short-covering
• Despite risk-on, no sellers emerge, shorts give up
• In cash, belly of the curve steady; 20s to 40s heavy
• At 150.56, futures up 6 ticks on day, range 150.47/150.56
• Nikkei gaps up at open, from 19,656 early low to 19,824.
• At 19,778, index up 239 points or 1.2% on day.
• AXJ mostly up too - SSEC 0.6%, HSI 0.4%m, KOSPI 0.6%, TWI 0.7%
• ASX and NZX50 up too, 0.7% each, STI outlier, off 0.4%.
• Dalian iron ore -0.8%, Tokyo and Shanghai rubber up @2% on day.
Currency Summaries JPY
• "Safe-havens" sold with Asia again risk-on, as NoKorea threat wanes
• US Treasury yields back towards levels seen in Asia Friday, 10s @2.244%
• Nikkei up large, +252 pts or 1.3% at 19,789 as of close of AM trading
• USD/JPY from 109.61 early through offers @110.00 to 110.24, holding bid
• Recent JPY longs in cover mode, good Gotobi demand from Japanese importers
• Option expiries more supportive - 110.00-15 USD445 mln, 108.90-109 640 mln
• EUR/JPY 129.09 to 129.92, capped pre-130 for now but bias up
• Resistance at flat daily Ichi tenkan-kijun pierced, at 129.68/72 today
• GBP/JPY 141.99 to 142.94, capped ahead of 143, 143.08 ascending 100-DMA
• AUD/JPY 86.03 to 86.77, good Tokyo buys, descending daily Ichi tenkan 86.84
• NZD/JPY 79.83 to 80.55, daily tenkan 80.68, CAD/JPY 86.12 to 86.64
• Asia risk-on again on reports NoKorea backs off Guam missile-attack threat
• Crosses stand to gain more on risk-on sentiment after recent losses
• EUR/USD opened 0.32% lower after hawkish Dudley comments sent US yields higher
• It traded down to 1.1768 from 1.1779 in early Asia before Tokyo arrived
• Report that Kim Jong-un would wait and see before taking action supported risk
• JPY sold off across the board and EUR/JPY buying gave the EUR/USD a base
• EUR/USD traded up to 1.1792 before settling around 1.1780
• All of the action in Asia was in the JPY and JPY-crosses
• EUR/USD support at 21-day MA at 1.1733 and break would suggest top in place
• Resistance formed ahead of 1.1850 and break would reignite trend higher
• German GDP out today and key to EUR/USD moves will be US/DE yield spread
• Cable quiet in Asia again, focus elsewhere, range 1.2954-68.
• On hold just above flat, 55-DMA at 1.2953, bidding interest sub-1.2950.
• Offers eyed from ahead of 1.3000, above.
• EUR/GBP on hold too, Asia 0.9087-90, more quote than range.
• Large, E509 mln option expiries at 0.9100 strike to help cap.
• Australia's central bank stays upbeat, flags risks in household debt
• China says it will defend interests if U.S. harms trade ties
• Japan's Aso: Q2 GDP mainly driven by brisk housing investment
• Dudley tells skeptical markets he sees Fed rate hike -AP
• Britain asks for interim customs deal with EU, new trade deals post-Brexit
• N.Korea's Kim holds off on Guam missile plan; Seoul says will prevent war
Looking Ahead - Economic Data (GMT)
• 06:00 DE Q2 GDP SA, 0.7% eyed, last 0.6%
• 06:00 DE Q2 GDP NSA, 1.9% eyed, last 1.7%
• 08:30 GB Jul CPI, 0.0% m/m, 2.7% y/y eyed;0.0%, 2.60%
• 08:30 GB Jul RPI, 0.1% m/m, 3.5% y/y eyed; 0.2%, 3.50%
• 08:30 GB Jul Core CPI, 0.0% m/m, 2.5% y/y eyed: 0.0%, 2.40%
Looking Ahead - Events, Auctions, Other Releases (GMT)
• N/A Germany's Schauble speaks in Berlin. See North American Open for a detailed listing of US/NorAm releases, events.