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Tadhg Gaelach

Tadhg Gaelach

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MONDAY, JULY 10, 2017
TOP NEWS
Japan's May machinery orders unexpectedly fall, gov't downgrades outlook
Japan's core machinery orders unexpectedly tumbled in May on persistent weakness in the services sector, and the government downgraded the outlook for orders for the first time in eight months, raising doubts about the strength of the economic recovery. Core orders dropped 3.6 percent in May from the previous month, Cabinet Office data showed. It was the steepest month-on-month decline since August 2016, and sharply undershot the 1.7 percent increase expected by economists in a Reuters poll. In April, they declined 3.1 percent. Core orders from the services sector fell 5.1 percent. Orders from manufacturers rose 1.0 percent in May from the previous month, up for a fourth straight month.

German exports rise more than expected in May
German exports rose more strongly than expected in May, outpacing a solid increase in imports and widening the trade surplus of Europe's biggest economy, data showed. Seasonally adjusted exports climbed 1.4 percent - their fifth consecutive monthly increase - while imports were up 1.2 percent, data from the Federal Statistics Office showed. Both figures came in stronger than expected: A Reuters poll had pointed to exports edging up 0.3 percent and imports rising by 0.5 percent. The seasonally adjusted trade surplus edged up to 20.3 billion euros from a revised 19.7 billion euros in April. The May reading was in line with the Reuters consensus forecast of 20.3 billion euros. Germany's wider current account surplus rose to 17.3 billion euros after a revised 14.9 billion euros in April, unadjusted data showed.

China's June factory price inflation subdued on modest raw materials recovery
China's producer price inflation was unchanged in June and remained well off highs seen earlier this year, amid lingering oversupply issues in the steel sector and as signs of economic weakness weighed on the outlook for prices. The producer price index (PPI) rose 5.5 percent in June from a year earlier, the National Bureau of Statistics (NBS) said. This was in line with analyst forecasts and unchanged from the previous month. On a month-on-month basis, the PPI fell 0.2 percent in June. June consumer prices rose 1.5 percent from a year earlier the NBS said, with food prices continuing their declines albeit at a slower pace. Food prices fell at a slower 1.2 percent from the previous year, after sliding 1.6 percent in May and 3.5 percent in April.

U.S. job growth accelerates in June, wages continue to lag
U.S. job growth surged more than expected in June and employers increased hours for workers, signs of labor market strength that could keep the Federal Reserve on course for a third interest rate hike this year despite sluggish wage gains. Nonfarm payrolls jumped by 222,000 jobs last month, driven by hefty gains in healthcare, government, restaurants and professional and business services sectors, the Labor Department said on Friday. That was the second biggest payrolls increase this year and beat economists' expectations for a 179,000 rise. The economy also created 47,000 more jobs in April and May than previously reported. While the unemployment rate rose to 4.4 percent from a 16-year low of 4.3 percent in May, that was because more people were looking for work, a sign of confidence in the labor market.


Fed sees steady economy, only "moderate" financial vulnerabilities
The U.S. economy continues to churn out jobs and grow at a steady pace, with investment and consumer confidence both healthy and only moderate signs of risk in financial markets, the U.S. Federal Reserve said on Friday in its semiannual report to Congress. With stock markets near record levels, and interest rates and credit conditions still loose, the report gave detailed attention to whether the financial system and bond markets posed any particular threat to the country's eight-year economic expansion. The answer so far is no, said the Fed, noting that there is little evidence of a liquidity crunch in the corporate or other bond markets, and no evidence that rising asset values pose a problem. The structure of the corporate bond market is changing with new regulations, the Fed said, but by traditional measures shows only minimal strain in adapting.



GLOBAL ECONOMY
Inflation elusive, but central bankers getting twitchy

A significant pickup in inflation still remains tantalisingly out of reach in most developed economies -- aside from asset prices -- yet several central banks are leaning toward launching or stepping up efforts that could slow it down.



U.S. EMPLOYMENT


MORNING MEETING


BONDS, EQUITIES, OTHER ASSET MARKETS

• US Treasury 10s indicated 2.39%, 30yrs at 2.93%
• JGB 10s yield to 0.095%, 30ys JGBs 0.892%
• JGB 5s weaken ahead of tomorrow's 5yr auction
• 5yr yield rises to -0.035%, above the fixed-rate at which BoJ tried to buy in Nov
• BoJ skips fixed-rate JGB buy op
• At 149.80, futures off 1 tick on day, range 149.84/149.72
• Nikkei vaulted 20,000 to 20,070 opening high, last at 20,107 +0.9% intraday
• SSEC -0.2%, HSI +1.0%, KOSPI +0.4%, STI +0.5%, TWI +0.1%
• ASX +0.6% and NZX50 -0.2%
• Light crude +1% at USD44.60
• Dalian iron ore up 2.0% at writing, LME copper +0.3%

Currency Summaries
JPY
• USD/JPY opened 113.90 after strong gain following Friday's US jobs report
• After trading at 113.98 the USD/JPY moved higher on Japanese flows
• Tokyo bought AUD/JPY, EUR/JPY and USD/JPY in modest amounts during the morning
• The USD/JPY traded just above Friday's 114.18 high to 114.21
• Heading into the afternoon the USD/JPY was trading around 114.1
• Resistance is found at the triple top formed between 114.30/40 in early May
• Fibo resistance comes in at the 61.8 of the 118.60/108.13 move at 114.60
• Support now at former resistance around 113.70
• USD/JPY trending higher due to higher US yields and carry trade demand

EUR
• EUR/USD opened Asia at 1.1397 and eased to 1.1390 in early trading
• Cautious comments from ECB members on the weekend induced light selling
• The impact was short-lived and the EUR/USD traded back above 1.1400
• Light EUR/JPY buying out of Tokyo helped to underpin the EUR/USD
• It traded to 1.1409 and was around 1.1400 heading into the afternoon
• Large option strikes around 1.1400 helped to hem in the price action
• Stiff resistance has formed at 1.1440/45 after multiple fails at that level
• The EUR/USD needs to break above 1.1450 to energize S/T trend higher
• IMM data shows EUR/USD longs building to more than 75 K contracts
• A failure to break 1.1450 soon could see longs start to pare back

GBP
• Traded 1.2873/1.2900 range thus far in Asia, last at 1.2891
• Modest gains on Friday's 1.2889 close
• Mkt awaiting labour market report due Weds
• Tech price gap down to 1.2794 28 June low once through 1.2867 Fri base
• Topside stops eyed 1.3050+
• EUR/GBP quiet again in Asia, 0.8840/0.8851

Market Briefs
• Japan May core machinery orders, -3.6% m/m, 0.6% y/y, vs f'cast +1.7% +7.7%
• Japan May unadjusted CA bal, +1653.9 bln yen, vs f'cast +1796.3 bln yen -MoF
• Kuroda repeats BOJ's resolve to maintain ultra-loose policy
• Japan PM Abe to reshuffle cabinet as support plunges to lowest since 2012
• China June PPI +5.5% y/y vs f'cast +5.5%, last +5.5%
• China June CPI +1.5% y/y, -0.2% m/m vs f'cast 1.5%, -0.2%, last +1.5%, -0.1%
• Trump backtracks on cyber unit with Russia after harsh criticism

Looking Ahead - Economic Data (GMT)
• 06:00 DE Trade Bal, EUR, SA, 20.3 bln eyed, last 19.8 bln
• 06:00 NO Jun CPI, 0.2% m/m, 1.7% y/y eyed, last 0.2%, 2.1%
• 06:00 NO Jun Core inflation, 0.3% m/m, 1.4% y/y eyed, last 0.3%, 1.6%
• 08:30 EZ Jul Sentix Index, 28.4 eyed, last 28.4

Looking Ahead - Events, Auctions, Other Releases (GMT)
• 07:00 Romania cbank to release minutes of its July 3 rate-setting meeting.
• N/A ECB's Benoit Ceure and Daniele Nouy participate in Eurogroup meeting in Brussels
• N/A The Croatian cbank and the IMF hold a conf. on economic convergence (to July 11).
See North American Open for a detailed listing of US/NorAm releases, events.

Week Ahead-US CPI, Yellen, BOC meeting
In the US, Fed Chair Yellen testifies to the House Services Committee on Wednesday and first tier data starts on Thursday with PPI and weekly jobless claims. The US calendar heats up on Friday when CPI will be released along with Retail Sales, IP and Univ of Mich consumer sentiment. The Bank of Canada meets on Wednesday with the market expecting a 25 BP rate hike to 0.75%. For the Euro Zone, the Sentix index will be released on Monday followed on Wednesday by IP. German inflation data will be released on Thursday and EZ trade data will be out on Friday. The key UK data next week will be employment out on Wednesday. Following PPI and CPI on Monday, China trade data is released on Thursday with new yuan loan data due by Friday.

Chart Focus-EUR/JPY nears pivotal 200-week MA
The strong rally in EUR/JPY is fast approaching the 200 week moving average located at 130.71 this week. Breaks of the MA on previous occasions have produced sizable and sustained trending moves. For instance, an upside break of the MA in 2013 resulted in a rally of approximately 29% lasting nearly 2 years while a break to the downside in 2016 yielded a decline of approximately 16% over a 4-month period. Chart: http://reut.rs/2u72KDf . A weekly close above the average will initially target a move to 134.32, the 61.8% Fibo of the 2014-2016 decline, with the ultimate potential for a retracement to the 76.4% Fibo at 140.23. Last Friday's close above the 50% retracement at 129.55 has greatly strengthened the technically positive picture with the cross now attempting to gain a foothold above the psychologically important level of 130.00. Once attained, a successful attempt at the 200 week MA at 130.70 is highly likely.


 
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Tadhg Gaelach

Tadhg Gaelach

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Dow Jones Newswires, 11 July 2017 03:45
Global Forex and Fixed Income Roundup: Market Talk


0745 GMT - Arkema's more relaxed approach to debt leverage shouldn't hurt its credit ratings or rating outlooks, as it is offset by accelerated growth targets and its commitment to an investment-grade rating, UniCredit analyst Christian Aust says. The French chemicals group is targeting a net debt-to-Ebitda ratio of under two times as of its 2017 Capital Markets Day versus its 2015 Capital Markets Day target of around 1.5 times. Arkema carries ratings of Baa2 and BBB at Moody's and S&P, respectively. ([email protected], @tasosvos)

0745 GMT - Growth of China's exports likely edged up to 9.0% on year in June, compared with an 8.7% increase in May, as external demand will continue to be an important support for the world's second largest economy, according to a poll of 13 economists by The Wall Street Journal. China's import growth likely slowed slightly to 12.4% in June, down from a 14.8% in May, mainly due to softer commodity prices, according to the poll. China's trade surplus may have widened to $44.2 billion in June from $40.81 billion reported in May. The customs bureau is set to release the trade data on Thursday. (g[email protected])

0740 GMT - The latest data by Japan's Ministry of Finance confirmed that Japanese investors returned to French government bonds after Emmanuel Macron's election as president, but Italian bonds could be next to suffer. After all, the Japanese sold JPY176.1 billion of Italian government bonds in May amid broad-based buying of European debt. This shows that "Japanese investors are very sensitive to political risks," ABN Amro fixed income strategist Kim Liu says. Italy must hold general elections by May 2018. ([email protected], @tasosvos)

0726 GMT - Bad shipping loans-exposed lender HSH Nordbank is selling EUR500 million of three-year public sector loan-backed covered bonds Tuesday in one of its last debt offerings as a public entity. The bank must be privatized by end-February 2018 or be unwound, a condition set by the European Commission when it approved of state aid on the bank. ([email protected], @tasosvos)

0720 GMT - The U.K.'s Debt Management Office is expected to go ahead on Tuesday with a syndicated tap of the 0.125% November 2056 index-linked gilt and Societe Generale believes demand will be sufficient for a large order book. As most of this year's duration has been delivered through the supply of conventional gilts rather than via linkers, this leaves pension schemes short of inflation protection, they say. The U.K. DMO's 2017-2018 financing remit includes five syndicated offerings, including three for index-linked gilts. ([email protected]; @EmeseBartha)

0712 GMT - The 15-year benchmark bond that KfW is planning to issue looks attractive when one compares the German development bank's yield curve to that of the European Investment Bank, ING strategists say. Long KfW bonds are at historically cheap z-spread levels versus EIB and interpolation between existing KfW bonds with similar maturities leads to a fair value of 16 bps below mid-swaps, ING adds. KfW has the same AAA rating as the German sovereign. ([email protected], @tasosvos)

0704 GMT - Yields on German government bonds jumped up last Thursday when they finally crossed the key 0.5% level after several unsuccessful attempts. Now U.S. Treasurys could be up next, as a break above the 2.4% level would be a "bearish signal," according to Natixis Asset Management. Yields on 10-year Treasurys currently trade at 2.38%. Fed Chair Janet Yellen could give U.S. bonds this push above 2.4% when she delivers her semiannual monetary policy report to Congress Wednesday and Thursday. Unlike bunds' 0.5% level, 2.4% is not the top of Treasurys' post-November range, as they surpassed 2.6% shortly after President Trump's election and in March. Bond yields rise as prices fall. ([email protected], @tasosvos)
0656 GMT - The Dutch State Treasury Agency's tap of the January 2047-dated DSL on Tuesday is "not very significant" for direction given the low volume on offer, say Mizuho rates strategists, although it concludes a string of 30-year bond supply by core issuers started last week. The DSTA offers EUR750 million to EUR1.25 billion in the 2047 DSL tap, with an allotment of around EUR1 billion eyed by Mizuho. This auction comes after the French Treasury Agency's tap of the May 2048 OAT at auction last Thursday and the European Financial Stability Facility's syndicated launch of a new July 2048-dated bond. Next week will also see 30-year supply from a core eurozone sovereign, with Germany lining up for a EUR1 billion tap of the August 2046 Bund. ([email protected]; @EmeseBartha)


0640 GMT - The 2.75% January 2047 DSL, the longest-dated Dutch government bond to be auctioned on Tuesday, still looks "fairly expensive" by historical standards despite cheapening in asset swap terms since mid-June, say ING rates strategists. The concession against the German equivalent 2.50% August 2046 Bund also still looks "mild" by historical standards, they add. Looking forward, a further 30-year Dutch bond auction is fairly unlikely by year-end, while Germany has several 30-year bund auctions to come, with the tap of the 2046 Bund scheduled for next week and the launch of a new August 2048 Bund for September. ([email protected]; @EmeseBartha)

0634 GMT - South Korean President Moon Jae-in has renewed his call for opposition lawmakers to approve $10 billion of supplemental spending as soon as possible. It's not totally uncommon for parliament to wait months before passing extra-budget bills, but officials fear the intended stimulus effect of the proposed package could be reduced if the process takes too long. At today's cabinet meeting, Moon said it's "deplorable" the opposition-led parliament is still sitting on the bill--which was submitted a month ago--in political strife. Moon's governing party has a plurality, but not a majority, with 120 seats in the 300-member parliament. ([email protected]; @kwanwoo)

0627 GMT - Amid continued weakness in the yen, Japan stocks finished just off session highs in logging solid gains amid similar gains elsewhere in Asia. The Nikkei rose 0.6% to 20195.48 amid further gains in exporters; electronics firms Epson and Sony rose 3.7% and 2.8%, respectively. That as the dollar has gotten to Y114.40, which helped spur a selloff in longer-dated Japanese debt. The benchmark 10-year JGB yield is up a half-basis point at 0.095%. ([email protected]; @SuryatapaB)

0617 GMT - Investors shouldn't get too confident after 10-year German government bonds' gains Monday, as the overall dynamic hasn't changed and the market is just trying to find a new equilibrium after the latest sell-off, Commerzbank rates strategist Christoph Rieger says. Instead, he expects traders to sell during bouts of strength. Bund yields trade at 0.55%, down from Monday highs of over 0.58% but still well above levels of just 0.24% before European Central Bank President Mario Draghi's speech in late June, which was seen as a hint toward tapering.([email protected], @tasosvos)

(END) Dow Jones Newswires
 
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TUESDAY, JULY 11, 2017
TOP NEWS
Fed's Williams still sees rate hike, asset unwinding this year
A top U.S. central banker said he still expected one more rise in interest rates from the Federal Reserve this year and for it to start unwinding its massive balance sheet in the next few months. Answering audience questions at an economics event in Sydney, San Francisco Federal Reserve Bank President John Williams said he believed a recent softening in U.S. inflation was transitory and that inflation would pick up to around 2 percent over the coming year. Williams emphasised that if inflation did not accelerate as expected, that would argue for a much slower pace of rate rises than currently projected.

UK shoppers spend more on essentials as inflation rises
British households spent more money on food and other essentials last month but held back on less urgent purchases as they faced rising prices, two sets of industry figures showed. Payments company Barclaycard said year-on-year consumer spending growth slowed to a 15-month low of 2.5 percent in June from 2.8 percent in May, as spending on household goods and entertainment slowed. The British Retail Consortium said its measure of retail spending growth rose to 2.0 percent last month from 0.2 percent in May, above its average of 1.4 percent in the past six months.

U.S households see spending up, job prospects improving -NY Fed survey
Consumers expect to boost spending in the months ahead and voiced confidence they are more likely to find a job and less likely to lose one in a strong labor market, the New York Federal Reserve reported Monday in its latest monthly survey of consumer expectations. Nearly 35 percent of the 1,300 heads of household included in the June poll said they were better off economically than a year ago, a record in the four years the survey has been conducted. Respondents also showed broad faith in the strength of the labor market, with a slight dip to 13.5 percent from 13.6 percent in the perceived probability of losing a job in the next year, and a jump to 59.2 percent from 56.7 percent in the probability of finding employment.

Investors brace for ECB to roil European bond markets: Sentix
Investors expect euro zone bonds to be pummeled in the coming months as the European Central Bank starts turning off the money taps after years of unprecedented largesse, a Sentix poll showed on Monday. With years of massive debt purchases and negative ECB interest rates apparently coming to an end, the monthly survey showed investors were more pessimistic than ever before about the impact of central bank policy on the European bond market. "For a few months now, it has been clear to investors that the ECB must leave its expansive course," Sentix, a research institute that specialises in market sentiment and behavioural finance, said in a statement. "This expectation has intensified for investors over the past few weeks." Sentix's Central Bank Policy index fell to -26 in July, the lowest level since the gauge was launched in 2005, from -11.5 in June, the survey of 1,022 investors showed.


ESM urges Greece to ready market borrowing strategy
Greece should develop a strategy for its return to market borrowing and raise private finance before its euro zone bailout programme ends in a year's time, the head of the European Stability Mechanism said on Monday. Klaus Regling told reporters "Greece will not need that much borrowing from the markets in the future" once bailout funding via the ESM ends in August 2018. It would be required only to replace maturing debt, given Athens' predicted fiscal surpluses. Noting that Greece had, with the exception of two bonds in 2014, been absent from the markets since the onset of the euro zone debt crisis in 2009, Regling said: "Therefore it's important for Greece to develop a strategy to go back."


COLUMN
UK recession, unusually, to punish gilts and pension funds: James Saft
Not only are the chances of a UK recession rising, it may be the rare recession in which bond owners get badly beaten up. Coming at a time of critical underfunding among UK pension funds, who have been among the biggest buyers of otherwise poor-value gilts, a bond-punishing recession would further undermine Britain’s retirement system.



EZ INFLATION AND ECB MONETARY POLICY


MORNING MEETING


BONDS, EQUITIES, OTHER ASSET MARKETS

• US Treasury 10s indicated 2.379%, JGB 10s 0.096%, Bund 10s 0.544%
• US-Japan-Germany respective 2s indicated 1.389%, -0.102%, -0.607%
• Yield curve steepens, aided by good 5yr auction
• ¥2.2trn 5yr auction stops at -0.033%; BTC 4.85, tail 0.2bp, last 4.71/0.2bp
• Swap curve initially flattens, likely due to deal-related receiving
• Swap curve then turns steeper on heavier long-end cash
• Nikkei more buoyant still this week, today 20,070 to 20,179
• At 20,167, index up 86 points or 0.4% on day
• AXJ mixed - SSEC -0.2%, STI -0.5% and ASX -0.1%
• HSI +1.1%, KOSPI +0.3%, TWI +1.0%, NZX50 +0.4% and Sensex +0.2%
• Dalian iron ore futures +1.8%

Currency Summaries
JPY
• USD/JPY on hold at recent highs, JPY crosses bid, bias up for all
• USD/JPY range 114.02-27, bids from @114.00, trail down, offers pre-114.40
• Series of highs May 9-11 ahead of 114.40, stops above, above 115.00 too
• 115.00 key level, good optionality/barriers, expiries today USD1.8 bln
• Japanese exporters good sellers on recent upticks, importers buying dips
• Decent summer carry demand too on hawkish central bank expectations abroad
• EUR/JPY 129.96-130.20, trend high yesterday 130.40, 130.70 200-WMA
• Break above 200-WMA bullish despite overbought conditions, specs eyeing 132.45
• Series of daily highs February 8-January 29, '16 130.90-132.45
• GBP/JPY 146.78-147.13, consolidating ahead of triple highs @148.00 May 9-11
• AUD/JPY 86.70 to 86.97 fresh trend high, push through 87 eyed, towards 87.50
• NZD/JPY 82.98 to 82.58 on broad NZD long liquidation, CAD/JPY 88.43-63, quiet

EUR
• EUR/USD opened at 1.1398 after an extremely quiet US session
• Market needs a catalyst to knock the EUR/USD away from 1.1400 option strikes
• There wasn't any in Asia and the EUR/USD traded in a 1.1392/1.1400 range
• Support & bids lie ahead of 1.1375, but a break warns of shifting momentum
• Stiff resistance formed ahead of 1.1450 after several fails to break
• Market is long and 1.1450 needs to beak soon to keep the longs interested
• Consolidation may continue ahead of Wednesday when Yellen speaks and BOC meets

GBP
• Cable sideways in Asia, range 1.2874-82, little action, few flows
• Pair on hold around 55-DMA at 1.2876
• Some option expirations nearby today - 1.4930 GBP405 mln
• EUR/GBP quiet also, Asia 0.8846-50

Market Briefs
• Australian business conditions climbed to its highest since early 2008
• NAB's index of business conditions rose 4 points to +15 in June
• Survey's measure of business confidence added 1 point to +9
• Japan June money supply M2 +3.9% y/y, M3 +3.3%, broadest liquidity +3.1%
• Japan sitting on postal shares until price climbs -Nikkei
• UK recession, unusually, to punish Gilts, pension funds [nL1N1JY1VY]
• British banks' optimism slumps on Brexit uncertainty
• S.Korea says North doesn't have ICBM re-entry technology
• Fed's Williams still sees rate hike, asset unwinding this yr
• Trump Jr. was told of Russian effort to help father's campaign -NY Times

Looking Ahead - Economic Data (GMT)
• 08:00 IT May Industrial Output, 0.5% m/m, 2.2% y/y eyed; last -0.4%, 1.4%

Looking Ahead - Events, Auctions, Other Releases (GMT)
• 10:00 BOE's Andy Haldane will speak at BOE
• 11:00 BOE's Broadbent speaks in Aberdeen
• 13:00 ECB's Coeure speaks at the FX Contact Group meeting in Frankfurt
• 14:00 EU's Elke Konig speaks to EU lawmakers in European Parliament
• N/A EU Economic and Financial Affairs Council meeting in Brussels
• N/A ECB's Constancio to participate in ECOFIN meeting in Brussels
• 08:00 NL 30Y E1.0 bln auction
See North American Open for a detailed listing of US/NorAm releases, events.
 
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Dow Jones Symphony - Home
Dow Jones Newswires, 12 July 2017 03:34
Global Forex and Fixed Income Roundup: Market Talk


0734 GMT - An enforced Greek debt restructuring the way it happened with the so-called private sector involvement, or PSI, in 2012 would run counter to the goal of re-establishing Greece's access to capital markets, Moody's says in a note. Therefore, a new PSI is unlikely to be an option when official creditors consider further debt relief measures. Greece is currently looking to test the markets with its first bond issue since 2014, which could come as early as this month. ([email protected], @tasosvos)

0720 GMT - Standard Bank sees for plausible outcome at this point for the Brexit talks, and 1 which right now is far more likely than the others to occur. At 10% probability each are the UK forcing the EU's hand or choosing to walk away with no deal. Meanwhile, the chance of the UK doing a U-turn and opting to stay in the EU is put at 20% chance of happening by the bank. "The favorite is the EU 'win' scenario whereby the UK government, weakened by the recent election, seeks to keep open-trade links at all costs," adds Standard Bank. It puts of that happening at 50%. Meanwhile, no deal would easily be the worst outcome for sterling, the bank adds. ([email protected]; @Ese_Journo)

0709 GMT - The relatively expensive valuations of Com Hem bonds on the secondary market and the telecom's distribution of a large part of cash flow to shareholders instead of retaining it prevent Swedbank from raising its bond recommendation to overweight from marketweight. Nevertheless, analyst Michael Johansson expects Com Hem to keep debt-to-Ebitda sustainably below four times the deliver strong free operating cash flow. Both are necessary conditions for a potential upgrade to BB+ at S&P. ([email protected], @tasosvos)

0708 GMT - Last week's sell-off in German bunds has pushed yields above 0.50%, levels not seen for about 18 months, which is likely to boost demand for a new series of 10-year bunds at its launch via an auction Wednesday. Citi rates strategists consider the fair value on the new August 2027 Bund at a yield spread of 7 bps over the current 10-year benchmark February 2027, Bund which is in line with the current grey market levels. Citi strategists add that 10-year bunds look historically cheap versus OLOs, the Belgian government bonds. The German Finance Agency launches a 0.50% August 2027 Bund with an initial volume of EUR5 billion. ([email protected]; @EmeseBartha)

0708 GMT - Long-dated U.K. government bonds look set to outperform shorter gilts in the coming weeks, closing the gap between 10 and 30-year yields, RBC Capital Markets says. Coupon payments in July mainly come from long-dated gilts, therefore reinvestments should focus on long bonds. There is also limited long-dated supply, with just one 30-year auction scheduled until September 19. Meanwhile, the recent rise in long yields improves pension funds' funding ratios and could encourage some bond-buying to lock-in long-term rates, RBC adds. ([email protected], @tasosvos)

0703 GMT - Singapore's 2Q GDP is projected to have risen 1.1% from 1Q on a seasonally adjusted and annualized basis, according to the median estimate of 6 analysts polled by WSJ. That amid gains in the electronics and services sectors. GDP fell 1.3% sequentially in 1Q. From a year earlier, 2Q's GDP is seen having climbed 2.8%, versus 1Q's 2.7%. The data are due Friday. ([email protected])

0654 GMT - The key event in European government bond markets is Germany's launch of a new series of the 10-year bund at an auction on Wednesday, which comes after bund yields jumped well above 0.5% last week to reach their highest since early 2016. "The launch of the August 2027 Bund will be in focus as decent pick-up versus the February 2027 Bund and bund curve limit spill-overs into secondary valuations," says Michael Leister, rates strategist at Commerzbank. Grey markets indicate the new bund at a yield of 0.61%, currently around 7 basis points above the predecessor February 2027 Bund. ([email protected] ; @EmeseBartha)

0642 GMT - The U.K's debt-to-GDP ratio looks set to rise to 91.9% by 2018 from 89.3% last year, bringing the country closer to France than higher-rated sovereigns, Moody's says in a note. But a lot will depend on the type of new trade relationship eventually agreed with the EU during Brexit negotiations, Moody's says. The debt-to-GDP ratio of Aa2-rated France stood at 97% in 2016, while that of Aaa-rated Germany was at 68%, based on Allianz-compiled data. ([email protected], @tasosvos)

0642 GMT - Japanese stocks maintained moderate declines throughout the session amid an uptick in the yen, with the Nikkei finishing down 0.5% at 20098.38. That undid barely 1/3 of the index's gains the prior 2 session, which came amid yen weakness. But the currency rebounded some Wednesday, with the dollar falling to Y113.56 from an overnight high of Y114.49. Meanwhile, bonds were steady as the 10-year JGB yield remained at 0.09%. The Nikkei appears stuck in a 500-point range around 20000, but that's still an improvement from the range-bound action around 19500 earlier this year. ([email protected])

0627 GMT - There is a perception among some that Australian consumers are gloomy and not spending. While folks aren't overly positive, according to sentiment surveys, they are opening their wallets. Central-bank data show 706 million purchases were made in May with credit or debit cards--topped only by December at 708 million. Craig James, chief economist at Commsec, estimates those May purchases equaled nearly A$51 billion ($39 billion) in sales. ([email protected]; @JamesGlynnWSJ)

0623 GMT - Federal Reserve Chair Janet Yellen's testimony to Congress should drive activity in 10-year German government bonds Wednesday, especially as it comes during European trading hours, Commerzbank says. The opening statement is due 1230 GMT, while the Chair will start speaking at 1400 GMT. Rates strategists at ING say the focus will be on the timing of balance sheet reduction and further comments regarding valuations of asset prices. Bund yields are quoted at 0.54% in early Wednesday trading, according to Tradeweb. ([email protected], @tasosvos)

0556 GMT - Since the break below US$0.70 in late 2015 and early 2016, the Aussie dollar has only briefly been able to get through US$0.77. But the gains seen since early June is putting pressure again on that level, says NAB. Meanwhile, the US$0.7750-0.7835 range remains a firm obstacle, it adds. The Aussie is at US$0.7655. ([email protected]; Twitter @JamesGlynnWSJ)

(END) Dow Jones Newswires
 
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WEDNESDAY, JULY 12, 2017
TOP NEWS
Muted inflation, wages keep Fed policymakers cautious
A day ahead of Federal Reserve Chair Janet Yellen's testimony to Congress on the state of the U.S. economy, two of her colleagues cited low wage growth and muted inflation as reasons for caution on further interest rate increases. Fed Governor Lael Brainard supported the June rate rise and on Tuesday embraced the plan to reduce the balance sheet "soon," but suggested her support for any future rate increases will depend in part on how inflation shapes up. At a separate event on Tuesday, Minneapolis Federal Reserve Bank President Neel Kashkari said he finds it hard to believe that the U.S. economy is in danger of overheating when wage growth is so low.

Trump seen replacing Yellen at Fed with NEC's Cohn -Politico
President Donald Trump is increasingly unlikely to nominate Federal Reserve Chair Janet Yellen next year for a second term, and National Economic Council Director Gary Cohn is the leading candidate to succeed her, Politico reported on Tuesday, citing four people close to the process. Politico said sources in the White House, the Treasury Department and on Capitol Hill said that if Cohn decides he wants the job, he is likely to get it. "It's Gary's if he wants it, and I think he wants it," Politico quoted one Republican whom it said was close to the selection process as saying. In response to a query from Reuters, White House spokeswoman Natalie Strom said: “Gary is focused on his responsibilities at the NEC.”

BoE's Broadbent silent on rates, sends pound sliding
Bank of England Deputy Governor Ben Broadbent kept mum on his views about interest rates on Tuesday, prompting financial markets to assume he sees no pressing need to change. Broadbent's speech in Aberdeen to the Scottish Council for Development and Industry had been keenly watched as a chance to hear the views of a rate-setter who has not commented publicly since the Monetary Policy Committee came unexpectedly close to raising interest rates for the first time in a decade last month. But Tuesday's comments shed little light. Instead, he spoke on how a reduction in trade between Britain and the European Union would harm both economies and causes prices to rise.

U.S. wholesale inventories post largest gain in five months
U.S. wholesale inventories increased more than previously estimated in May as automobile stocks rose amid declining sales, but inventory investment still likely weighed on economic growth in the second quarter. The Commerce Department said on Tuesday wholesale inventories climbed 0.4 percent. That was the biggest gain since December 2016 and followed a 0.4 percent decline in April. The department reported last month that wholesale inventories increased 0.3 percent in May. The Atlanta Federal Reserve lowered it second-quarter GDP forecast by one-tenth of a percentage point to a 2.6 percent annualized rate after the wholesale inventory data.


France targets GDP growth of 1.7 pct in 2018
The French government forecasts GDP growth of 1.6 percent this year and 1.7 percent in 2018, France's new Prime Minister Edouard Philippe said in an interview published on Tuesday. In his first economic policy interview since his appointment by centrist president Emmanuel Macron in May, Philippe told Les Echos daily the public deficit would amount to 2.7 percent of GDP next year thanks to savings of at least 20 billion euros. France already forecasts a deficit below 3 percent of GDP this year, from 3.4 percent in 2016. If the country met this objective, it would honour the EU-agreed 3 percent limit for the first time since 2007.



U.S. WHOLESALE INVENTORIES


MORNING MEETING


BONDS, EQUITIES, OTHER ASSET MARKETS


• US Treasury 10s indicated 3.356%, JGB 10s 0.089%, Bund 10s 0.543%
• US-Japan-Germany respective 2s indicated 1.369%, -0.106%, -0.612%
• JGBs rally as USD/JPY in retracement mode
• Latest JPX data shows foreigners built up shorts, potential to rally
• Futures, 30s solid, while 20s less so ahead of tomorrow's 20yr auction
• At 149.88, JGB futures up 10 ticks on day, range 149.79/149.92
• Swap curve initially bull-steepens on lower Libor fixings, then 5s lead
• See JPN GOVTS CLOSE for details
• Nikkei gaps down at open, off with USD/JPY, range 20,105-153
• At 20,114, index off 81 points or 0.4% on day
• AXJ mostly off too, HSI and TWI outliers, +0.8% and +0.2%
• SSEC -0.2%, KOSPI sub-par, STI -0.4%, ASX -0.7%, NZX50 -0.4%
• Dalian iron ore +0.9%, Tokyo/Shanghai rubber up too, Tokyo +3% at open

Currency Summaries
JPY
• JPY pairs in retracement after recent losses, USD/JPY 113.97 to 113.43
• Some USD/JPY stops tripped on break sub-113.50 but bids trail down
• 200-HMA 113.34, now flat daily Ichi tenkan below at 113.11
• Pair in retracement mode after push to 114.49 o/n, 100-HMA break bearish?
• Total USD1.3 bln+ option expiries between 113.00-114.00 today
• EUR/JPY off too from 130.76 high o/n, Asia 130.67 to 130.21
• Higher EZ-Bund yields supportive, ascending hourly Ichi cloud 129.83-130.10
• GBP/JPY 146.44 to 145.66 on renewed Brexit concerns, lower Gilt yields
• AUD/JPY 87.04 to 86.79, NZD/JPY 82.35 to 81.99, CAD/JPY 88.24 to 87.88
• CAD/JPY move down ahead of possible BoC rate hike tonight, market too long?
• BoJ up 3-year JGB buys to Y330 bln from Y300 bln previous, 5-yr target @zero?

EUR
• EUR/USD opened at 1.1468 after pushing through key resistance around 1.1445
• Combination of Trump Jr. revelations and dovish Fed comments behind the move
• EUR/USD maintained bid tone through Asian morning as USD/JPY led USD lower
• EUR/USD traded up to 1.1484 before settling back to 1.1475 into the afternoon
• Break above 1.1450 reenergized S/T trend higher with fresh longs established
• There isn’t any technical resistance of note until May 30 high at 1.1616
• Trend higher strong as long as 10-day MA 1(1.1410 today) holds on dips
• Key event today will be Yellen testimony on Capitol Hill
• Special attention will be paid to her comments on inflation

GBP
• Cable in consolidation mode after push down overnight, Asia 1.2842-65
• Lower Gilt yields and renewed concerns over Brexit this year cited
• GBP/USD back in 1.2706-1.2889 daily Ichi cloud, below 1.2876 55-DMA
• Tech support towards 1.2809 daily Ichi kijun
• EUR/GBP up marginally to fresh trend high, Asia 0.8920 to 0.8938
• Cross highest since 0.9025 on November 9, '16 on higher EZ/Bund yields

Market Briefs
• Japan June domestic CGPI unch m/m, +2.1% y/y, May +0.2% and +2.1%
• Fearing leaks, Japan to set new rules on foreign investment -Nikkei
• Japan retailers' profit growth slows to 0.6% in March-May -Nikkei
• Rival's desire to leave cabinet may mean challenge for Japan's Abe -media
• Trump Jr. emails suggest he welcomed Russian help against Clinton
• Trump seen replacing Yellen at Fed with NEC's Cohn: Politico
• U.S. firms in China decry local favouritism as market improves
• China should reduce intervention in foreign exchange markets - state media
• Australia consumer mood stays dark despite brighter signs- Westpac survey
• UK creditworthiness under pressure from Brexit uncertain, risks up -Moody's

Looking Ahead - Economic Data (GMT)
• 08:30 GB May ILO Unemployment Rate, 4.6% eyed, last 4.6%
• 09:00 EZ May Industrial Prod, 1.1%, 3.6% eyed; last 0.5%, 1.4%

Looking Ahead - Events, Auctions, Other Releases (GMT)
• 08:00 C.Bank of Spain Gov Luis Linde to speak at Congress about saving accounts
• 09:30 ECB's Galhau and Deutsche Bundesbank's Dombret to speak at conf.
• 14:00 Fed's Yellen delivers semi-annual monetary policy testimony
• 09:30 PT E0.50/0.50 bln, 10/28 yr auction
• 09:30 DE 10Y 5.0 bln auction
See North American Open for a detailed listing of US/NorAm releases, events.

Yellen's testimony may cause another USD dip
While expectations for market-moving comments from Fed Chair Yellen's first day of Congressional testimony are not that high, there is a risk that she dials back the hawkish rhetoric from the June FOMC. Comments by Fed officials Brainard and Harker overnight suggest that some on the FOMC are having doubts about another rate hike in 2017. Brainard is a noted dove, but Harker has been on the more hawkish to neutral side in the past, so when he suggests the Fed should consider how the market reacts to planned balance sheet reduction and whether it should then hike rates a third time, it seems significant: Fed’s Harker Says Slowing Inflation Gives Him Pause on Raising Rates. It remains to be seen whether Harker and Brainard's views reflect a more widespread Fed position, but this Friday's US CPI data take on added importance and the risk appears to be for further USD weakness when Yellen testifies tonight.

EUR/USD-Politics gives longs a much-needed catalyst
With speculative accounts building long EUR/USD positions since mid-May and the latest IMM data showing net longs at +77.5k contracts, the repeated failures to breach the 1.1450 level were starting to cause impatience. The latest chapter in the Trump White House/Russia drama gave the market the excuse to push through that level, and if anything encouraged fresh longs. The break above 1.1450 has refreshed the short-term trend higher as the 5, 10 and 20-day moving averages have realigned in a bullish formation and all point higher. Support is at the ascending 10-day MA (1.1410 today) and while that level holds, a move towards the May 3, 2016 high at 1.1616 is the objective of the current trend.

USD/CAD may rebound after BOC decision
The market is pricing more than a 90% chance the Bank of Canada will hike rates 25bps from 0.50% at today's meeting. It would be the first hike in nearly 7 years, but a few high-profile economists, including those at TD and CIBC, think it is a closer call than the market expects. The BOC has clearly signaled a rate hike so there would be more volatility if they surprised the market by standing pat. USD/CAD would soar in that case, but even if they do hike, it could end up being a "sell the rumour/buy the fact" event for the pair. USD/CAD has fallen nearly 3.5% since the June 21 high at 1.3348 and the CAD has been the best performing major currency over the past 2 weeks. If the BOC hikes and the statement implies they are merely removing the falling oil-price buffer put in place by cutting rates 50bps in 2015, it would suggest they are not at the start of a prolonged tightening cycle. This could see the CAD pare some of its recent outsized gains.
 
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Dow Jones Symphony - Home
Dow Jones Newswires, 13 July 2017 03:57
Global Forex and Fixed Income Roundup: Market Talk


0757 GMT - The latest Swiss producer and import price index suggests inflationary pressures remain largely absent in the economy. The combined index fell 0.1% on both a monthly and annual basis in June. Producer prices were down 0.6% on the year while import prices were up 0.9%, the latter likely reflecting some of the recent weakening in the Swiss franc against the euro. ([email protected])

0742 GMT - Ireland's EUR750 million tap of March 2022- and February 2045-dated government bonds Thursday is one of the handful of opportunities left this year to buy Irish debt in the primary market given that it almost reached its funding target. "The supply outlook for the rest of 2017 is very modest as the NTMA [Ireland's National Treasury Management Agency] is within its funding range for 2017," says Jens Peter Sorensen, chief analyst for fixed income at Danske Bank. The NTMA has one more bond auction scheduled in the third quarter after this one, and Mr. Sorensen says "maybe one more tap auction in 4Q" will follow. He considers a syndicated deal in the remainder of 2017 unlikely. Prior this auction the NTMA has already raised EUR8.75 billion in bonds versus its annual target of EUR9 billion to EUR13 billion. ([email protected]; @EmeseBartha)

0730 GMT - S&P raised its outlook on Telecom Italia's BB+ rating to positive Wednesday, citing the successful execution of the efficiencies plan, but UniCredit analyst Stephan Haber is unconvinced. He says is "does not make sense" to assign a positive outlook before the details of French Iliad's entry to the Italian telecom market. UniCredit has a hold recommendation on Telecom Italia bonds, which reflects risks from Iliad's market entry.([email protected], @tasosvos)

0725 GMT - The U.S. dollar falls broadly after U.S. Federal Reserve Chair Janet Yellen on Wednesday made comments that were perceived as dovish and potentially dampening the outlook for future interest rate rises. The euro trades up 0.3% at $1.1449, while sterling is up 0.5% at $1.2942. Higher-yielding currencies were the strongest performers, however, with the Australian dollar rising 0.6% to a 16-week peak of $0.7728. "The antipodeans (AUD, NZD) were the biggest gainers in Asia, as carry traders returned to high yielding currencies to take advantage of the rate differential. ([email protected])

0717 GMT - The better-than-expected China trade data highlight the good momentum in both domestic and external demand, Citi says, pointing to solid 2Q GDP growth and the prospect of continued stability for the yuan exchange rate. However, trade-diversion risks remain for 2H, the investment bank adds. June's trade surplus with the US was the widest since November 2015 at $25.4 billion. While Citi thinks a trade war will be averted, China may need to make some concessions that might put some pressure US-bound exports. Regional geopolitics could also cloud the trade outlook, it adds. ([email protected]; @chester_yung)

0708 GMT - Greek government bond yield spreads mildly outperform their eurozone peers in their tightening versus German bunds in early trade. The outperformance most likely results from the European Commission's recommendation on the previous day that the European Union should end disciplinary procedure against the country over its excessive deficit. The 10-year Greek-German spread trades 2 basis points tighter, marking a bigger move than made by other eurozone sovereigns. The five-year Greek bond trades at a yield of 5.33%, down about 10 basis points on the day. ([email protected]; @EmeseBartha)

0704 GMT - The Singapore dollar has risen 4.5% against the greenback this year, but BMI Research thinks further gains are likely to be limited as the central bank may step in to cap the rally from building further. But it expects the city-state's currency to rise longer-term, calling it undervalued and highlighting what it calls Singapore's strong external position. The dollar is at S$1.3762, and BMI sees it ending the year at S$1.39 before a decline to S$1.35 in 2018. ([email protected]; @journosaurabh)

0700 GMT - China's broadly upbeat June trade data suggest foreign and domestic demand for local goods remains robust. But Capital Economics says the pace of imports is likely to slow "given the increasing headwinds to China's economy from policy tightening." But exports are expected to remain supported by the strong outlook for China's main trading partners. ([email protected]; @Ese_Journo)

0700 GMT - The European Central Bank's next meeting on July 20 is "all about the press conference" and how President Mario Draghi will want to position the markets for the September 7 meeting, says Marchel Alexandrovich, senior European economist at Jefferies International. Mr. Draghi's goal will be to avoid a tightening in financial conditions and to leave the ECB with maximum flexibility as it moves forward. Therefore it is "very unlikely" that Mr. Draghi will speak of outright tapering next week, Mr. Alexandrovich says. ([email protected] , @EmeseBartha)

0655 GMT - Building permits in Cyprus issued between January and April rose to their highest level since the height of the island nation's banking crisis in 2013 and local banks should be pleased with it, according to Moody's. After all, construction and real estate loans account for nearly a fifth of local banks' gross loans, so a recovery in these sectors is positive for banks' asset quality. Bank of Cyprus is set to benefit the most, given that such loans make up for almost a third of its book. The Caa1-rated lender also holds EUR1.4 billion worth of property via debt-to-asset swaps, according to Moody's. ([email protected], @tasosvos)

0648 GMT - India's latest slowdown in industrial production suggests the economy isn't out of the woods just yet. Some economists believe May's 1.7% output increase from a year earlier, versus April's 2.8%, is a sign that demonetization impacts lingered on longer than expected. But others reckon the deceleration could have been due to businesses clearing inventory ahead of the July 1 start of the goods-and-services tax. Either way, the production data weren't good news for India, whose GDP growth slowed to a 2-plus-year growth in 1Q. ([email protected])

0634 GMT - German government bond yields finally surpassed the 0.5% level last week and surged above it as stop-loss orders were triggered. But now they're close to 0.5% again and risk dropping below it. Commerzbank closes its tactical short recommendations in bunds, established after European Central Bank President Mario Draghi's speech in Sintra, Portugal in late June, as the "consolidation" in bunds and Treasuries seems lasting. Yields on 10-year German bonds reached a low of 0.508% in early Thursday trading, according to Tradeweb. ([email protected], @tasosvos)

(END) Dow Jones Newswires
 
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THURSDAY, JULY 13, 2017
TOP NEWS
Fed's Yellen says rate and portfolio plans on track, cautions on inflation
The U.S. economy is healthy enough for the Fed to raise rates and begin winding down its massive bond portfolio, though low inflation and a low neutral rate may leave the central bank with diminished leeway, Fed Chair Janet Yellen said on Wednesday. The Fed "continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time," Yellen said in her prepared testimony. Reductions in the Fed's portfolio of more than $4 trillion in securities are likely to begin "this year," she said. But she also noted that given current estimates, the federal funds rate "would not have to rise all that much further" to reach a neutral level that neither encourages nor discourages economic activity.

China June trade beats expectations on robust demand, but headwinds eyed
China posted stronger-than-expected June trade figures on Thursday, bolstered by firm global demand for Chinese goods and robust appetite for construction materials at home, but local curbs on lending could weigh on imports later this year. Exports rose 11.3 percent from a year earlier, while imports expanded 17.2 percent, both beating analysts' expectations, official data showed. That left the country with a trade surplus of $42.77 billion for the month, the General Administration of Customs said. Meanwhile, PBOC injected 360 billion yuan in medium-term loans into the financial system, a fresh sign authorities aim to maintain financial stability while continuing a deleveraging campaign.

Confident Bank of Canada hikes rates for first time since 2010
The Bank of Canada raised interest rates for the first time in nearly seven years on Wednesday, saying the economy no longer needed as much stimulus and sending the Canadian dollar to a near 11-month high on expectations of more rate hikes to come. The increase pushed the official interest rate up to a still-low 0.75 percent. Economists said the central bank's statement suggested at least one more quarter-percentage point rate increase is in store for 2017, with more likely to follow gradually if growth continues to meet expectations. The central bank cited a need to look through soft inflation as it hiked rates for the first time since September 2010 but said it will wait for more economic data before committing to its next move.

UK election jitters push house price rises to 11-month low - RICS
British house price inflation slowed last month to its weakest since just after last year's Brexit vote, but this time domestic political worries played the greatest role, a property industry body said. The Royal Institution of Chartered Surveyors (RICS) said its monthly house price index dropped to +7 in June from +17 in May, its lowest since July last year and below all forecasts in a Reuters poll of economists. RICS asked its members about the main reason for slowing property sales. Some 44 percent blamed domestic political uncertainty after Prime Minister Theresa May unexpectedly failed to win a parliamentary majority in a June 8 election.


EU says Greece public finances back in order, closer to market return
Greece's fiscal position has improved and the European Union should end disciplinary procedures against it over its excessive deficit, the EU commission said on Wednesday, paving the way for the country to return to international bond markets. Greece recorded a 0.7 percent surplus last year and is expected to have a deficit of only 1.2 percent in 2017. "Our recommendation to close the excessive deficit procedure for Greece is another positive signal of financial stability and economic recovery in the country," EU Commission Vice President Valdis Dombrovskis said in a statement. Greek Prime Minister Alexis Tsipras welcomed the commission's recommendation and said the economy was "steadily returning to European normality," according to a statement released by his office on Wednesday.


ANALYSIS

Global policy shift exposes BOJ yield curve control flaw

Bank of Japan policymakers see little to cheer in successfully defending their yield target as European and U.S. central banks start to pull the plug on ultra-cheap money, casting doubt on their view that global bond yield gains will be short-lived.



JAPAN ECONOMY


MORNING MEETING


BONDS, EQUITIES, OTHER ASSET MARKETS


• US Tsy 10s indicated 2.308%, off from open, JGB 10s 0.081%, Bund 10s 0.505%
• US-Japan-Germany respective 2s indicated 1.341%, -0.113%, -0.631%
• JGBs follow USTs, curve flatter on fair 20yr auction
• 20yr auction stops at 0.611%, vs pre-auction levels of 0.605%-0.6075%
• At 150.02, futures up 14 ticks on day, range 150.03/149.95
• See JPN GOVTS CLOSE for details
• Nikkei off after early gains, 20,183 to 20,062, at 20,090 off 8 points
• AXJ up - SSEC 0.4%, HSI 1.0%, KOSPI 1.2%, STI 0.6%, TWI 0.5%
• ASX and NZX50 also up - 1.0% and 0.3%, Sensex up 0.6% after its open
• Regional commodities futures soggy, Tokyo rubber -1.3%, Dalian iron ore -0.2%
• Oil prices dip as OPEC expects less demand for its crude
• Asia steadier on China demand, IEA Varro - demand OK but market oversupplied

Currency Summaries
JPY
• Changes to central bank expectations behind USD/JPY, JPY cross sogginess
• Long liquidation seen mostly over but most pairs still soggy
• USD/JPY from 113.53 Tokyo fix high to 112.90, option expiries some support
• 112.50-113.00 total USD1.15 bln, 113.20-30 1.3 bln, 50-70 996, 85-95 616
• Techs somewhat more bearish with break below 113.19 daily Ichi tenkan
• Support around 113.50 – 113.46 retracement low July 4
• EUR/JPY on back foot too despite up bias, 129.66 to 129.14, low o/n 129.05
• Cross still holding for most part around its daily Ichi tenkan at 129.32
• GBP/JPY soggy, 145.58-146.35 but holding above 145.23 low yesterday
• AUD/JPY 86.84-87.20, 100-HMA 86.77, NZD/JPY 82.08-42, CAD/JPY 88.64-89.10
• NZD better bid, on bounce from 81.93 low yesterday, CAD high o/n 89.28

EUR
• EUR/USD opened at 1.1412 after inexplicably reversing lower during US session
• EUR underperformance likely due to heavy profit taking on EUR crosses
• USD was offered through the Asian morning and EUR/USD drifted up to 1.1439
• It was trading around 1.1435 heading into the afternoon session
• Sentiment towards EUR/USD remains bullish despite yesterday’s reversal
• Market was long EUR against a number of currencies and needed to pare back
• Buyers tipped just below 1.1400 while sellers ahead of 1.1500
• Consolidation may continue ahead of Friday’s US CPI as focus on inflation
• Broad USD direction will likely be dictated by moves in US yields

GBP
• Cable steady after yesterday's 1.2812 to 1.2910 bounce, Asia 1.2879-1.2905
• On hold between descending 200-HMA at 1.2915, 100-HMA at 1.2883
• Some support from hourly Ichi tenkan at 1.2892
• More dovish than thought Fed neutralizes impact of likely 5-3 BoE MPC hold
• Direction hard to assess ahead of Brexit "Repeal Bill" [nL8N1K356T]
• EUR/GBP 0.8850-68 after trade down from 0.8949 to 0.8839 yesterday
• Ascending 100-HMA at 0.8855, 55-HMA 0.8877, support-resistance

Market Briefs
• China Jun trade surplus $42.77 bln vs $40.8 bln in May
• Exports +11.3% y/y vs f'cast +8.7%; imports +17.2% vs f'cast +13.1%
• Jan-Jun non-financial ODI dives 45.8% y/y to $48.19 bln
• H1 trade with sanctions-struck NoKorea up 10.5%
• PBOC makes mid-term loan injection seen as 'neutral'
• MoF flow data w/e Jul 8 - Japanese moving back into foreign bonds, stocks
• Net Y324.9 bln stocks, Y839.5 bln bonds bought, June Y1.137 tln, 1.434 tln
• Foreign investors ambivalent on Japan assets, net Y898.6 bln bills bought
• Stocks see net Y35.0 bln sales, volume heavy, JGBs Y408.5 bln net sales
• Global policy shift exposes BOJ yield curve control flaw
• NZ Jun consumer conf. index fell to 125.4 from 127.8 -ANZ Survey

Looking Ahead - Economic Data (GMT)
• 06:00 DE Jun CPI Final, 0.20% m/m, 1.60% y/y eyed; last 0.20%, 1.60%
• 06:00 DE Jun HICP Final, 0.20% m/m eyed, last 0.20%
• 06:45 FR Jun CPI (EU Norm) Final, 0.0% m/m, 0.8 y/y eyed; last 0.0%, 0.8%
• 07:00 ES Jun HICP, 0.0% m/m, 1.60% y/y eyed; last 0.0%, 1.60%
• 07:00 ES Jun CPI, 0.0% m/m, 1.50% eyed; last -0.10%, 1.90%

Looking Ahead - Events, Auctions, Other Releases (GMT)
• 14:00 Fed's Yellen delivers semiannual monetary policy testimony
• 15:30 Fed's Evans speaks at Economic Summit in Idaho
• 17:00 Fed's Brainard speaks on monetary policy in Cambridge, Mass.
• N/A Franco-German summit in Paris
• 09:00 IT E2.75/2.50/1.0/1.0 bln, 3/7/16/20 yr auctions
• 09:00 IE E0.375/0.37 bln, 5/28 yr auctions
See North American Open for a detailed listing of US/NorAm releases, events.

EUR/USD-Central banks sharpen focus on inflation
The USD fell against most currencies and US yields eased after Fed Chair Yellen conceded inflation was critical in determining the path of the tightening cycle. Yet EUR/USD closed Weds about 0.5% lower, its fall in part explained by a market that was long EUR, with a lot of the crosses unwound through the US session. A number of ECB officials have recently expressed similar caution about inflation and its role in the ECB's policy normalization. Now that the Fed and ECB are moving in the same direction with a hawkish bias, the EUR/USD trajectory will be determined by upcoming inflation data. US CPI this Fri holds heightened interest as the past few CPI reads have been lower than expected and cast some doubt on the Fed's contention that low inflation is transitory; another miss would reinforce the skepticism. EZ inflation data are due Mon and the comparison with US CPI could determine the fate of the EUR/USD uptrend.


 
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Dow Jones Symphony - Home
Dow Jones Newswires, 14 July 2017 05:02
Global Forex and Fixed Income Roundup: Market Talk


0902 GMT - August is traditionally the slowest month in eurozone government bond issuance and this pattern is set to repeat this year. As usual in August, several sovereigns, including the Netherlands, Belgium or Slovakia, don't plan bond auctions at all, while others may cancel them. If history is a guide, Italy is likely to cancel its mid-August BTP and end-month BTPei auctions. Spain also usually cancels the second of its two monthly bond auctions in August, although in 2015 it went ahead. Given its funding progress, a cancellation is more likely this year. France indicates only optional auctions for August, allowing it to decide at short notice whether to hold them. Austria maintains a reserve date in August, but in the past four years it has used such dates for bond sales. ([email protected]; @EmeseBartha)

0836 GMT - Speculative-grade, or junk, bonds in Europe, including the U.K, are "very expensive," as the spread tightening of the past several months leave investors with little risk premium, Prudential plc says in its 2H outlook. The asset manager is just one of the several market participants that see the European high yield market as overvalued when looking at all-in yields, credit spreads or even the iTraxx Crossover index/eurozone PMI relationship.([email protected], @tasosvos)

0830 GMT - Indonesia's trade surplus likely jumped last month as most consumer-goods imports ahead of Ramadan-related festivities occurred in May. However, festivities may have crimped both inbound and outbound shipments in June. The median forecast of 10 economists polled by WSJ is for a $900 million trade surplus, versus May's $474 million. June's forecasts range from $502.5 million-1.46 billion. A survey by IHS Markit discovered demand for Indonesian manufacturing products from offshore buyers continued to increase after picking up in May amid improving global demand. The June data are due Monday. ([email protected])

0823 GMT - The magnitude of market reaction to the European Central Bank's taper hint last week "implies that some have been taken a little off guard," says Jennifer McKeown, chief European economist at Capital Economics. Still, Capital Economics expects the ECB to reiterate its signals about "adjusting policy parameters" at the July 20 meeting, and to unveil plans to decrease the current EUR60 billion per month asset purchases by EUR10 billion per month from January and thus to phase them out completely by June 2018. That said, the ECB might be "even keener" to maintain the flexibility to reduce the pace more gradually or even raise it again should economic or financial market conditions so require, McKeown says. ([email protected]; @EmeseBartha)

0820 GMT - The election of Emmanuel Macron as president of France and the new government give France an opportunity to fully address its key credit challenges, like weak long-term growth outlook, rigidities in the labor, goods and services markets, and the large and increasing debt-to-GDP ratio, says Moody's Investors Service. "Our stable outlook on the French sovereign rating recognizes the increasing willingness of the authorities and the electorate to tackle some of its long-term credit challenges," says Sarah Carlson, a Moody's senior vice president, adding that the question is to what extent this willingness translates into economic reforms. Economic growth and debt-to-GDP reductions materially higher than seen by Moody's would imply upward rating pressure, while downward pressure could arise if progress on structural reform failed to materialize or if the commitment to fiscal consolidation were to weaken, Moody's says. ([email protected]; @EmeseBartha)

0809 GMT - Yields on 10-year Treasury bonds can't be "divorced" from the pace of business activity indefinitely, Moody's Capital Markets Research chief economist John Lonski says in response to Blue Chip consensus expectations on U.S. growth and yields. Forecasters expect the economic recovery, already 9.5 years old, to be strong enough in 2018 to lift Treasury yields by 85 bps to 3.2%. But if this yield rise materializes without a "sufficient acceleration" of business activity, it would weigh on equities, cause corporate bond spreads to swell and increase the risk of a recession. And in turn, 10-year Treasury yields would drop well below the 3% mark again, Mr. Lonski adds. ([email protected], @tasosvos)

0759 GMT - Eurozone government bond supply next week will come below the year-to-date weekly average of EUR20 billion calculated by Commerzbank but duration will remain intact with a final tap of Germany's 2.50% August 2046 Bund and with the European Financial Stability Facility's issuance window open, Michael Leister, head of rates strategy at Commerzbank, says. Risk-equivalent issuance, measured by DV01, a measure of bond price sensitivity, looks to set to fall to a four-week low, he says. Next week's two other issuers are France and Spain, both of which scheduled to announce the exact auction terms later in the day. ([email protected]; @EmeseBartha)

0740 GMT - Deutsche Bahn, the German railway company, does not benefit from explicit or implicit guarantees from the German government, but UniCredit analysts still believe the government will grant support to DB when needed. After all, DB is wholly owned by the federal government, and the latter has a constitutional obligation to provide a functional rail infrastructure. This is why the analysts like the extra spread DB bonds offer versus the debt of German government-guaranteed agencies and the German government itself. UniCredit upgrades its recommendation on DB bonds to overweight from marketweight. ([email protected], @tasosvos)

0724 GMT - The French government bond yield curve has remained relatively flat compared to the steepening that took place in German bonds ever since the late-June speech of European Central Bank President Mario Draghi, Societe Generale argues. The 2/5-year part of the German curve steepened as tapering expectations increased. This steepening, where longer-dated yields rise more than short-dated yields, reflects the market's faith in the sequencing of policy tightening that the ECB has so far suggested, with tapering first and rate rises later. SocGen expects French debt to catch up with German bonds and steepen at the 2/5-year part in coming weeks. ([email protected], @tasosvos)

0722 GMT - European Central Bank President Mario Draghi is unlikely to convince markets again that an upcoming reduction in asset purchases is not tapering, the same way he did in December 2016, BNP Paribas Asset Management says. "We are sceptical that Draghi will be able to pull off the same trick," says the asset manager. Last December, the ECB announced a reduction in the monthly pace of asset purchases to EUR60 billion from EUR80 billion, starting from April 2017. But Mr. Draghi went to great lengths to argue a reduction in asset purchases was not tapering. "[T]he natural way to look at a word like that is to have a policy whereby purchases would gradually go to zero. And that's not been discussed," he told reporters back then.([email protected], @tasosvos)

0708 GMT - Although stock markets have been celebrating Yellen's dovish testimony this week, there are reasons to be fearful, says Standard Bank. It cautions investors should stay alert to central banks--including the Fed--anticipate near-term rate hike. The Bank of Canada did its first increase in 7 years this week, and broader tightening "puts a question mark over the ability of asset prices to rise." ([email protected]; @Ese_Journo)

0702 GMT - Japan's industrial production fell 3.6% in May from the previous month, not the 3.3% initially stated. The revision largely stemmed from a drop in output of aircraft engine components and body parts, an official from the Ministry of Economy, Trade and Industry said. Aircraft components aren't part of the preliminary numbers. Meanwhile, May shipments fell 2.9%, versus the initially stated 2.8%, while inventories ended up being flat; the early reading had them as having risen 0.1%. ([email protected])

(END) Dow Jones Newswires
 
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Tadhg Gaelach

Tadhg Gaelach

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FRIDAY, JULY 14, 2017
TOP NEWS
Fitch affirms China's A+ rating with stable outlook
Fitch Ratings on Friday maintained its A+ rating on China with a stable outlook, citing the strength of the country's external finances and macroeconomic record. Short-term growth prospects remain favourable, and economic policies have been effective in responding to an array of domestic and external pressures in the past year, Fitch said. In a Reuters poll of 65 economists, China's economic growth is expected to reach 6.6 percent this year, topping the government's target of around 6.5 percent. But large and rising debt levels across the non-financial sector, combined with the low stand-alone credit quality of Fitch-rated banks in the financial system, remain the most significant risk factor for the sovereign rating, Fitch said.

Sept most likely choice for ECB policy change; July a close call
The European Central Bank is likely to wait until September before announcing a shift away from its ultra-easy policy, while a move this month is seen as too close to call, a Reuters poll of economists showed. The ECB's most likely course of action in September is to announce a tapering of its 60 billion euros of monthly asset purchases, probably starting in early 2018, according to the poll. A little over one-quarter of the economists polled said the ECB will not announce any change in September. A similar proportion of economists predict an extension to its quantitative easing programme beyond December, but with a reduction in the amount of monthly asset purchases.

China June fiscal spending growth quickens to 19.1 pct y/y
China's fiscal spending jumped 19.1 percent in June from a year earlier, quickening sharply from a 9.2 percent rise in May and signaling government efforts to cushion a gradual slowdown in the world's second-largest economy. Central government spending rose 10.2 percent in June from a year earlier while local government spending soared 20.3 percent, the finance ministry said. Government spending in the first six months of the year rose 15.8 percent from a year earlier, the ministry said. China's fiscal revenues increased 8.9 percent in June from a year earlier, also quickening from May's 3.7 percent rise, the ministry said. Fiscal revenue in the first half rose 9.8 percent from a year earlier.

BOJ may concede delay in hitting price goal, but hold off on easing
The Bank of Japan is set to raise its economic growth forecasts but cut its rosy inflation outlook next week, sources say, reinforcing expectations it will lag well behind major global central banks in dialing back its massive stimulus programme. The BOJ is expected to hold off from expanding stimulus at its two-day rate review ending next Thursday, as robust exports and private consumption heighten prospects of a moderate economic expansion. The BOJ is set to slash its consumer inflation forecast for the year ending in March 2018 to around 1.0 percent from the current 1.4 percent estimate made in April, the sources said. The central bank is also seen cutting next fiscal year's inflation forecast to 1.5 percent or below, from the current projection of 1.7 percent, they said.


Trump spending plan will cut deficit but not balance budget -CBO
U.S. President Donald Trump's proposed government spending plan would reduce the federal deficit over the next decade but fail to balance the budget, the nonpartisan Congressional Budget Office said on Thursday. The annual budget deficit in 2027 would be about $720 billion under Trump's proposal, the CBO said in a report, not eliminated as promised by the White House, which has projected a $16 billion surplus. The CBO estimated that Trump's budget would cause the federal budget deficit to shrink relative to the size of the economy over the next 10 years, ranging between 2.6 percent to 3.3 percent of gross domestic product during that period.


Trading bonds in China? You might want this chat app for millennials
A new scheme that connects China's local bonds with Hong Kong promises to open the country's $9 trillion debt market to global investment - but investors venturing into the mainland are coming to terms with the massive community that does business not on trading platforms, but social chat apps.



ECB QE POLL


MORNING MEETING


BONDS, EQUITIES, OTHER ASSET MARKETS


• US Tsy 10s 2.347%, touch off early high, JGB 10s 0.078%, Bund 10s 0.522%
• US-Japan-Germany respective 2s indicated 1.370%, -0.108%, -0.614%
• JGBs soften on weakness in US Treasuries overnight
• BoJ offers to buy 1s to 5s, 10s to 40s, as scheduled
• Results of BoJ op for 10s to 25s bucket come in very strong
• 20yr yield pulled down to 0.595% from 0.61% early as a result
• At 150.01, futures off 2 ticks on day, range 150.03/149.92
• Nikkei in 20,101-163 range, at 20,145 up 45 points, 0.2% on day
• AXJ mixed - KOSPI +0.2%, STI +0.5%, ASX +0.5%, NZX50 +0.4%, HSI above par
• SSEC -0.2%, TWI below par and Sensex -0.1% after its open
• Asia commodity futures mixed - Dalian iron ore -1.8%, Tokyo rubber +0.3%

Currency Summaries
JPY
• USD/JPY and JPY crosses bid on Saturday Gotobi Tokyo fix/pre-holiday demand
• Bounces seen in offshore yields help too
• Talk too of renewed moves into summer carriers, JPY funding ccy of choice
• High/higher-yielders especially sought – AUD, NZD and even GBP to extent
• USD/JPY 113.26 to 113.58 before steadying, option expiries help bracket
• 113.25-30 USD865 mln, 113.65-86 666 mln, 114.00 1.5 bln, 114.50 399 mln
• Some resistance above 113.53 200-HMA, support from 113.39 hourly Ichi tenkan
• EUR/JPY 129.17 to 129.51 in Asia, WSJ story on Draghi tightening supportive
• 129.38 daily tenkan pivot, 129.37 200-HMA support, 129.53 55-HMA resistance
• GBP/JPY bid despite Brexit concerns, thinking BoE on hold, Asia 146.48-96
• AUD/JPY bid, 87.50-90, stops eyed above 88.00, 88.17 February 17 high
• NZD/JPY 82.86-83.17, holding below 83.26 high o/n, CAD/JPY 88.97-89.19

EUR
• EUR/USD, EUR complex better bid in Asia, EUR/USD 1.1392-1.1409
• WSJ report yesterday Draghi may tip taper communication at Jackson Hole
• Bounce in US yields however helping to cap EUR/USD for now
• Talk good bids 1.1390 and 1.1380, offers towards 1.1500 option barriers
• Large nearby option expiries today contain action – 1.1300 E1.26 bln
• 1.1360-80 E1.14 bln, 1.1395-1.1435 1.46 bln, 1.1450 908 mln, 1.1500 1.77 bln
• EUR/JPY bid in Asia, supportive, from 129.18 to 129.51 alongside USD/JPY

GBP
• Cable holding bid, market again shrugging off Brexit concerns
• Likely 5-3 BoE MPC for hold also shrugged off, more hawkish talk than not
• Asia 1.2938-52, far cry from 1.2812 low just this Wednesday
• Resistance ahead of 1.3000 - 1.2983 high July 6, then pre-1.3050
• Series of highs pre-1.3050 May 18-23, June 29-July 3
• EUR/GBP quiet, 0.8800-14 after fall from 0.8874 yesterday, 0.8949 Wednesday
• Support from around 0.8800 - flat daily Ichi kijun at 0.8794

Market Briefs
• Eyeing extra budget to aid farm industry - Japan FinMin Aso
• BOJ may concede delay in hitting price goal, but hold off on easing
• Fitch affirms China's A+ rating with stable outlook
• U.S. prepares new sanctions on Chinese firms over NoKorea ties -officials
• NZ mfg activity falls in June after May high -survey
• U.S.-based stock funds net first cash in four weeks -Lipper
• Foreign CB US debt holdings +$6.5 bln to $3.3 tln July 5 week
• Treasuries $6.3 bln to $3.0 tln, agencies +$11 mln to $260.8 bln

Looking Ahead - Events, Auctions, Other Releases (GMT)
• 08:00 ECB's Nowotny holds news conference in Vienna
See North American Open for a detailed listing of US/NorAm releases, events.


 
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