The AUD/USD surged to the upside last week, driven higher by hawkish comments by the Reserve Bank of Australia. However, an RBA deputy governor threw some water on the rally on Friday that could mean a short-term top is in. The RBA set a bullish tone early in the week when the minutes of its … Continue reading AUD/USD Forex Technical Analysis – Debelle’s Dovish Comments May Have Stopped the Rally
The euro's surge to an almost two-year high put a cap on the global market rally in Friday's quiet session, with most major exchanges consolidating after a second strong week of gains. The MSCI Asia-Pacific index declined for first time in ten days while the European Stoxx 600 index was fractionally in the green as were US equity futures ahead of earnings reports from General Electric, Honeywell, Schlumberger and others. Oil gained with Brent flirting with $50, zinc rallied along with most base metals. European stocks are little changed, while Asian stocks decline with Tokyo shares falling for first time in three days. Also overnight, AUD traders were caught wrongfooted for the second time in one week after the Aussie fell sharply following an unexpectedly dovish speech from RBA Deputy Governor Debelle, who said there’s no significance in the board’s neutral rate discussion, which earlier this week sent the Aussie surging. "No significance should be read into the fact the neutral rate was discussed at this particular meeting," Debelle said in text of speech. "Most meetings, the board allocates some time to discussing a policy-relevant issue in more detail, and on this occasion it was the neutral rate." In addition to the drop in AUDUSD, Australian sovereign yields all dropped 5-7 basis points in bull steepening move; three-year yield drops as much as nine basis points to 2.00% - the steepest decline since March on a closing basis. Kiwi rallied to highest since September 2016 on Finance Minister Joyce comments; yen little changed. S&P futures near unchanged. WTI crude holds near $47; Dalian iron ore falls 0.7%. But most of the attention was on the EUR in the aftermath of Thursday's paradoxical Draghi press conference, which led to a "bipolar" market reaction, seen as dovish by rates while hawkish by FX. Summarizing the market reaction, Yann Quelenn, a market strategist at Swissquote Bank said,“Draghi tried to talk the Euro down, even going so far as to suggest that ECB’s quantitative easing could be increased and prolonged. But the currency markets were not buying Draghi’s line, and neither are we. Available bonds are too scarce, and turn to a taper is too clear to disguise." As a result, bonds jumped even as the euro headed for its strongest level against the dollar in almost two years on bets the European Central Bank will start tapering its stimulus program despite Draghi's sounding particularly dovish, with the greenback already under pressure from U.S. political developments. Yields on Italian bonds dropped... ... while the EUR surged to the highest since August of 2015, and is up 11% for 2017... ... while the US dollar dropped to the lowest since August amid growing political concerns after reports that U.S. special counsel Robert Mueller expanded his investigation of Trump less than a day after the president told the New York Times that any digging into his finances would cross a red line. “Everything speaks in favor of further EUR appreciation -- increasing portfolio inflows, changing monetary policy, improved political risks,” according to Peter Kinsella, a London-based senior foreign-exchange and rates strategist at Commonwealth Bank of Australia. “It’s an armor-plated rally and it won’t stop” Euro zone stock markets were modestly lower on the day, as some analysts against expressing concerns a stronger euro may do more to undermine growth going forward. MSCI's gauge of stocks across the globe was steady after rising for a 10th straight session on Thursday, its longest such streak since February 2015. It has advanced around 3 percent in the latest rally. In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan, which has gained about 5 percent in the past two weeks, eased 0.2 percent, dragged down by a fall in material and financial shares. Japan's Nikkei dropped 0.2 percent. "We can be pretty sure that when Draghi sat down for his press conference yesterday the last thing he expected to see was the euro hit its highest level in over two years and for equity markets to slide back," said CMC Markets analyst Michael Hewson. "The strength of the euro does appear to be acting as a bit of a headwind for European stocks as they look to close the week sharply lower, in contrast to the performance of UK and US stocks this week." As of 6:10am ET, S&P500 futures were little-changed close to a record-high level as investors looked forward to a Federal Reserve meeting and manufacturing data next week. E-mini contracts were almost flat at 2,472.25 after the cash index ended Thursday within one point of its record-high close. Nasdaq 100 futures were also little-changed as the benchmark index climbed to all-time intraday highs for the second consecutive day. Contracts on the Dow Jones Industrial Average also held steady on Friday. European stocks are little changed, while Asian stocks decline with Tokyo shares falling for first time in three days. In currencies, the Bloomberg Dollar Index was down 0.1 percent, in line for a weekly loss of 0.8 percent, at 10:41 a.m. in London, as the greenback weakened against most of its G-10 peers. The yen was up 0.2 percent at 111.71 per dollar. The euro climbed 0.1 percent to $1.1642 after reaching a 23-month high earlier in the session. The common currency has gained 1.6 percent this week, its second straight five-day advance. In commodities, oil headed for a second weekly increase as U.S. crude inventories continued to shrink. West Texas Intermediate was 0.4 percent higher at $47.09 a barrel. Copper advanced 1.3 percent to $6,033 a ton, a four month high, leading a rally in industrial metals. Gold was poised for its first back-to-back weekly advance since June 2. Bullion for immediate delivery added 0.2 percent to $1,247.25 an ounce. In rates, the yield on U.S. 10-year Treasuries fell two basis points to 2.24 percent. Benchmark yields in Germany dropped three basis points to 0.5 percent, down nine points this week. Yields in France dipped three basis points. Bulletin Headline Summary from RanSquawk and Bloomberg RBA speakers temper AUD appreciation EU equities trade subdued following yesterday's volatility Germany and Turkey traded barbs over democratic values as relations between the NATO allies slumped to their lowest ebb of the postwar period. The International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors. As Parliament breaks for the summer, Prime Minister Theresa May needs to come up with answers to the political drama unfolding at home and threatening her Brexit strategy as investors predict more trouble on the horizon for a country once seen as the stable counterpoint to European turmoil. Looking ahead, highlights include Canadian CPI Market Snapshot S&P 500 futures rise 0.2% to 2475.20 STOXX Europe 600 unchanged at 384.07 MXAP down 0.2% to 159.13 MXAPJ down 0.2% to 524.46 Nikkei down 0.2% to 20,099.75 Topix down 0.2% to 1,629.99 Hang Seng Index down 0.1% to 26,706.09 Shanghai Composite down 0.2% to 3,237.98 Sensex up 0.04% to 31,918.38 Australia S&P/ASX 200 down 0.7% to 5,722.84 Kospi up 0.3% to 2,450.06 EUR/USD: +0.1% to 1.1641 USD/JPY: -0.2% at 111.71 GBP/USD: +0.3% to 1.3005 German 10Y yield fell 2.3 bps to 0.507% Italian 10Y yield fell 7.8 bps to 1.821% Spanish 10Y yield fell 4.4 bps to 1.441% Brent Futures up 0.7% to $49.62/bbl Gold spot up 0.3% to $1,247.58 U.S. Dollar Index down 0.2% to 94.17 Top Overnight News Trump Inquires About Power to Pardon; Aussie Tumbles After RBA Comments; Power Struggle at Guggenheim Trump Removal of Mueller Likely Would Trigger Justice Purge Ten of the nation’s biggest lenders including JPMorgan Chase & Co. and Bank of America Corp. together made $30 billion last quarter, just a few hundred million short of the record in the second quarter of 2007 Mario Draghi said policy makers are still waiting for inflation to catch up with the economic recovery as they put off discussions on winding back stimulus until after the summer President Donald Trump’s interview with the New York Times on stirred speculation he may consider firing Special Counsel Robert Mueller for investigating Trump’s business dealings as part of the Russia probe The International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors OPEC and Russia’s plan to clear the global oil glut hasn’t worked as they hoped, but there’s little expectation the world’s largest producers will act more aggressively when they meet this weekend Investors may turn to equity at the expense of debt given he rolling five-year return on global stocks has outpaced government debt over the past three months as weighted by the standard deviation of gains ACS Studies Counterbid to Atlantia’s $19 Billion Abertis Offer Paysafe Gets 590p/Share Takeover Proposal from CVC, Blackstone Microsoft Regains Turnaround Momentum on Strong Cloud Growth EBay Rattles Investor Faith With Slow Merchandise Growth Visa’s Kelly Extends First-Year Win Streak as Outlook Raised Zinc’s Rally Set to Endure as Top Producer Predicts $3,000 Google Says Russia Leads in State Requests to Remove Content Exxon to Challenge Treasury Finding It Violated Russia Sanctions Credit Suisse’s Once-Mighty Stocks Unit Withers Under Thiam Delta Wins Lease Deal for Air Terminal at New York’s LaGuardia Asia equity markets traded marginally in the red, following the lacklustre close on Wall St. amid a slew of earnings releases which were ultimately mixed. ASX 200 underperformed, led by the soft resources, metals and energy sectors, whilst Nikkei 225 also traded in the red to conform to the tone in the region, as JPY's indecision during the session offered no direction for the currency. Elsewhere, Shanghai Comp. and Hang Seng both traded subdued, with the PBoC's increased open market operations of CNY 140bln failing to lift the Chinese bourses. Finally, 10yr JGBs trade marginally higher amid the cautiousness in the region, with the curve steepening as the super-long end underperforms. Participants also await the auction for 10yr, 20yr and 30yr government paper. Top Asian News HNA Group’s Dealings With U.S. Travel Startup to Be Probed OZ Minerals Says CFO Luke Anderson to Leave Co. in September Bank Indonesia Says Rate Review Delayed by Swearing-in Ceremony RBA’s Aussie Dollar Rollercoaster Shows Dilemma for Global Peers Reliance to Give One Free Share for Each Held After 8-Year Gap Huhtamaki Shares Fall as Indian Tax Reform Hits Demand China Artificial Intelligence Bid Seeks $59 Billion Industry AAC Drops Most in 7 Years as Jefferies Cites Revenue Warning European equity markets trade mixed amid currency influence. Subdued trade has been evident, following yesterday's ECB press conference, with EU bourses trading range bound for the morning. The FTSE out-performs as it benefits from the weaker GBP. Telecoms out-perform as earnings continue to dictate the state of play, following a strong report from T-Mobile US being followed by a beat for Vodafone. Fixed Income markets have been led by bunds, with the latest ECB survey being responsible for a second round of bidding in German paper. The survey cut the inflation forecast by 0.10% for 2017 — 2019, with the statement stating that risks are still tilted to the downside. Top European News U.K. Government Borrowing Jumps as Inflation Boosts Debt Costs Landis+Gyr Trades Below Offer in Largest Swiss IPO Since 2006 European Banks’ 2Q Likely to Be Better Than U.S. Peers: HSBC SKF CEO Says Electric Cars May Hurt Part of Bearing Business ECB: Professional Forecasters Cut Inflation Outlook Through 2019 Siemens Slams Brakes on Russia After Turbines Spotted in Crimea Hochtief Slumps as ACS Mulling Abertis Bid Lowers Buyout Chance Swatch’s Strong Forecast Bolsters Decision to Keep Workers In currencies, RBA Deputy Governor Debelle stated no automatic reason to conform to recent hikes abroad. New Zealand Finance Minister Joyce stated NZ firms are coping well with NZD at current levels, added NZD reflects strong NZ economy. FX markets have slowed this morning, as FX traders seem non-excitant following yesterday's volatility. The price action largely came overnight from the antipodeans. Comments from New Zealand's Finance Minister Joyce stated that NZ firms are coping well with NZD at current levels further adding that a strong NZD reflects strong NZ economy and he is unperturbed by NZD strength. NZD/AUD broke through 0.94 as bulls arrived, consolidating just below at 0.9390, a firm break of this level could see a test of 0.9480. Further, Aussie weakness aided the NZD/AUD push, as RBA Deputy Governor Debelle stated that there is no automatic reason to conform to recent hikes abroad. In commodities, precious metals have continued their bullish grind, spurred by the Trump reports yesterday. Gold looks toward 1250.00, as July's recovery continues. Oil continues to struggle to find any real direction, however, WTI's July 43.65 upward trendline continues to provide support, WTI bulls would need to see a firm break of 48.50 to indicate a change in momentum No economic data is scheduled in the US. DB's Jim Reid concludes the overnight wrap Good practise today for the arrival of the twins as a late night work dinner coupled with waking 45 minutes before my already early alarm has left me feeling decidedly sleep deprived. It was an interesting macro dinner with 26 clients and DB representatives including our own CEO. The consensus from clients seemed to be that the carry trade would survive the summer but with question marks about what happens once both the ECB and the Fed start their imminent balance sheet changes. There was plenty of optimism on Europe with the Euro seen as likely to appreciate further with perhaps that appreciation eventually being the risk to growth. On the other hand there was plenty of negativity on the UK with Brexit seen as a potential disaster for the economy, Gilts and Sterling. I'm not quite so sure on the Brexit impact but there is certainly huge execution risk. Curveballs that could derail the short-term carry party were that Mr Trump might decide to turn to the delicate geo-political issues (e.g. North Korea) to divert attention away from the legislative challenges and also that the upcoming debt ceiling deadline around October could be really interesting. The latter being another test of Mr Trump's relationship with Congress. Finally on the dinner, one client remarked that this was the first of such gatherings in a long time where nobody had really mentioned buying very historically cheap volatility. That he thought might be a sign that now might be the time. So an interesting night and given that it occurred on an important Draghi day it was interesting that there wasn't much discussion on what he said at his press conference. All the talk yesterday leading into the event was on whether or not we would get an affirmation of the hawkish signals made in Sintra last month. In the end it felt like Draghi was checking in for his summer holiday, not pulling back from the Sintra sentiments but also not wanting to rock the boat with new info and risk being called back from hols to deal with a disturbed market in illiquid conditions. In fairness it wasn’t a completely damp squib and we thought our European chief economist Mark Wall summed it up nicely with a “two steps forward, one step back” conclusion. Mark noted a few dovish elements from the meeting including the unchanged language on inflation in the press statement, the fact that the committees have not yet been tasked with studying the policy options, the use of Praet’s more cautious “patience” watchword, the technical reinterpretation of the word “reflation” he used in Sintra, and once again the confidence in the flexibility of the asset purchase programme which in Mark’s mind is a hint that if it needs to continue it can. On the other hand, Draghi appeared fairly undeterred by the post-Sintra tightening of markets which seemed to give the green light for the Euro to surge another 1% yesterday and break-through 1.160 for the first time since August 2015. Govies chopped around but the range for core markets wasn’t particularly ground breaking. 10y Bunds traded as high at 0.557% and as low as 0.520% in a short space of time before eventually finishing near the bottom of that range and 1.2bps lower on the day. French and Dutch 10y bonds were also 2.6bps and 1.4bps lower. There was a decent rally for the periphery however with yields in Italy and Spain 8.4bps and 9.6bps lower, respectively. It was notable that the move for latter now means that the Spain-Germany 10y spread is at the narrowest since 2015. So where does that leave the ECB? With the council deliberately avoiding setting expectations for the timing of a policy decision, Mark believes that this reduces the probability of a decision as soon as September. December might however also be considered too late and so in Mark’s view an announcement on October 26th now feels most likely with committees tasked on September 7th. The onus now will be on the inflation data in the coming months. Financial conditions and of course economic growth shouldn’t be underestimated either. Next month’s Jackson Hole speech will benefit from another month of inflation data and is likely to be the next big event for markets. That rally for the Euro appeared to weigh on equity bourses in Europe with the Stoxx 600 eventually closing -0.38%. Across the pond the S&P 500 slipped into the red in the first hour of trading after US special counsel Robert Mueller announced that he was examining a broad range of financial transactions involving President Trump. That story broke one day after Trump told the NY Times that any investigations around his personal finances would be crossing a red line. Markets recovered however and the S&P 500 (-0.02%) eventually ended little changed. The Dollar index ended the session down -0.50% while Gold was +0.26%. This morning in Asia it’s been a fairly quiet end to the week although the tone is slightly risk off. The Nikkei (-0.25%), Hang Seng (-0.24%), Shanghai Comp (-0.11%) and ASX (-0.40%) have all slipped into the red. Commodities are broadly unchanged along with the USD. Jumping to the latest on Brexit, this morning the Guardian are reporting that the UK cabinet will agree to the free movement of EU citizens for up to 4 years as part of a transitional deal. The article suggests that a consensus in the cabinet has been secured, with the news likely to help the softer-Brexit camp. One to watch today potentially. Yesterday’s economic data was a bit of a sideshow but for completeness, in the UK, June retail sales (ex-auto fuel) was slightly higher than expectations (+0.9% mom vs. +0.5% expected). Over in the US initial jobless claims fell 15k to 233k last week, lower than expectations of 245k while the Philadelphia Fed’s headline manufacturing index fell 8.1pts to a still solid 19.5 in July, albeit a bit below market expectations (23.0), with many of the key component indices also weaker (including shipments and new orders index). Before we take a look at today’s calendar, this morning our European equity strategy team have published a first take on Q2 earnings season. DB’s Wolf von Rotberg highlights that so far Q2 is off to a weak start: with around 20% of Stoxx 600 companies having reported, only 47% of companies have beaten on EPS, down from the stellar 63% in Q1 and below the historical average of 53%. Most of the reports so far are from non-euro earners – and with the euro up 4% during Q2, FX pressures are likely to keep the Q2 beat ratio subdued once the euro earners start reporting. FX strength is also leaving its mark on the full-yearconsensus earnings expectations, with Euro area earnings revisions having turned sharply negative over the past two weeks. The team see downside risk to their expectation of 10% EPS growth this year, given our FX strategists’ recent 14% upward revision to their year-end projection for the EUR trade-weighted index (every 10% rise in the EUR TWI lowers EPS by 5%). Looking at what is a very quiet day ahead now. In the UK, public sector net borrowing data for June is due. Across the Atlantic, there are no prints due in the US, however Canada will release data on June CPI (Bloomberg est: 1.1% yoy) which could worth a watch given the recent focus on global inflation. Away from the data, US earnings seasons remains a focus, with General Electric, Honeywell International, Colgate-Palmolive and Fifth Third Bancorp schedule to report.
The relentless risk levitation continued overnight, as global shares extended their stretch of consecutive record highs on Thursday for a 10th day after a cautious BOJ lifted Asian stocks to a decade high with a dovish announcement that offered no surprises, while pushing back Kuroda's 2% inflation target to 2020, the 6th consecutive delay. With all eyes on the ECB in just over an hour, US equity futures are in the green, following solid gains around the globe. European stocks extended their biggest gain in a week while Asian equities maintained their rally. Microsoft, Blackstone, Philip Morris and Ebay are among companies reporting earnings. Initial jobless claims data due. Traders - so mostly algos - are riding a global risk "high" in stocks as Asia's and then Europe's early 0.4 percent gains ensured MSCI's 47-country All World index was up for a 10th straight session. This is the longest winning streak in global stocks since February 2015 and shows little sign of fatigue even as bond yields edged modestly higher again. The Stoxx Europe 600 Index rose 0.3 percent as of 9:53 a.m. in London. The U.K.’s FTSE 100 Index rose 0.5 percent to near the highest in a month. The MSCI Emerging Market Index fell 0.1 percent, the first retreat in almost two weeks. The VIX index closed below 10 for a record fifth consecutive day. Appropriately, Bloomberg dubbed the move a "no-vol" nirvana, in which stocks and bonds keep rallying as volatility evaporates. The overnight focus was on the Japanese central bank's decision to push back its ambitious inflation target again, sending the yean weaker to 112.4 per dollar. Attention now shifts to whether ECB head Mario Draghi will give a hint later that it plans to wind down its 60 billion-euro-a-month stimulus program. As previewed earlier, the most likely outcome is that Draghi will follow in Kuroda's footsteps and not rock the boat. The risk, if any, is that Draghi does not come out sounding hawkish enough, which could prompt a big drop in the Euro which has been soaring in recent weeks on expectations the ECB will begin tightening policy soon. "They are going to try and not upset markets," said Nick Gartside, international Chief Investment Officer of fixed income at JP Morgan Asset Management. "I think the real action is going to be the September meeting. That is when we probably get a little bit of news on tapering." A cheat sheet of what to expect from the ECB is below. The euro is up almost 10% so far this year but and was a shade lower at $1.1507 ahead of Draghi's post-meeting news conference, having hit a 14-month high of $1.1583 on Tuesday. "It may be as we approach "1.20, which is realistic let's be honest, that it generates a little more alarm for the ECB," Gartside added. European bourses followed markets from Tokyo to Sydney higher, and the MSCI All-Country World Index traded at a record high. With the Bank of Japan delaying the time-frame for reaching its inflation target -- a sign its stimulus is in place for a while to come, attention turns to the European Central Bank’s meeting for clues on policy paths. Oil held onto gains as stockpiles decreased. The U.S. dollar strengthened for a second day after hitting a 10-month low Tuesday, though it was still down for the week. After the BOJ failed to inspire any volatility, traders are now left with Mario Draghi who speaks at 8:30am ET. Like the BOJ, the ECB is forecast to keep policy on hold Thursday. A report that the bank has been examining options for asset purchases does add to speculation that Mario Draghi will concede time is approaching to adjust the bond-buying program as the economic recovery expands. In global macro, the Yen was weaker after the BOJ failed to deliver even a trace of hawkishness, sending the Nikkei 0.6% higher. The Aussie dollar slipped on profit taking after initially nearing 80 cents on solid jobs data; The Yuan weakened against the dollar for a second day after the PBOC added a net 60 billion yuan in repos on top of reported liquidity injection via banks on Wednesday. Dalian iron ore futures flat. Elsewhere in currencies, the euro fell 0.1 percent to $1.1506, still close to a 14 month high. The British pound fell 0.1 percent to $1.3005, the weakest in a week. The Bloomberg Dollar Spot Index climbed 0.3 percent, the biggest increase in more than two weeks. The Japanese yen sank 0.3 percent to 112.34 per dollar, the largest decrease in almost two weeks. In commodities, gold sank 0.3 percent to $1,238.03 an ounce, the largest decrease in almost two weeks. WTI crude fell less than 0.05% to $47.11 a barrel. The Bloomberg Commodity Index decreased 0.1%, the largest fall in a week. In rates, the yield on 10-year Treasuries fell less than one basis point to 2.27 percent. Germany’s 10-year yield rose one basis point to 0.55 percent, the first advance in a week. Britain’s 10-year yield rose two basis points to 1.212 percent. Southern European government bonds underperformed better-rated peers having closed the gap with Germany to the tightest level in months in recent days. Italian, Portuguese and Spanish government bonds are seen as the biggest beneficiaries of the central bank's ultra-loose monetary policy stance of the past few years, and some worry that the market is not fully reflecting the increased risk these countries now face if the ECB moves towards tighter policy. "We have seen very little impact on peripheral spreads since Sintra but this could change very rapidly in a short period of time if the messaging is a bit too hawkish today," said DZ Bank strategist Daniel Lenz. Market Snapshot S&P 500 futures up 0.1% to 2,473.50 STOXX Europe 600 up 0.4% to 386.88 MXAP up 0.01% to 158.97 MXAPJ down 0.04% to 524.69 Nikkei up 0.6% to 20,144.59 Topix up 0.7% to 1,633.01 Hang Seng Index up 0.3% to 26,740.21 Shanghai Composite up 0.4% to 3,244.87 Sensex down 0.2% to 31,881.42 Australia S&P/ASX 200 up 0.5% to 5,761.45 Kospi up 0.5% to 2,441.84 German 10Y yield rose 0.6 bps to 0.548% Euro down 0.1% to 1.1504 per US$ Italian 10Y yield unchanged at 1.899% Spanish 10Y yield rose 1.2 bps to 1.571% Brent Futures down 0.1% to $49.64/bbl Gold spot down 0.3% to $1,238.00 U.S. Dollar Index up 0.2% to 94.98 Top News BOJ keeps stimulus unchanged; pushes back 2% inflation goal timing to fiscal 2019; raises assessment of economy to ’expanding moderately’ Draghi Moves On From Sintra as ECB Refines Stimulus Message BofA Said to Halt Transactions With HNA Amid Debt Concerns McCain Diagnosed With Brain Cancer After Procedure for Clot South Africa Regulator Seeks Further Information on DuPont, Dow Goldman Partners Mark End of Era as Stock Holding Drops Below 5% Blackstone Is Said to Raise $3b in First Asia PE Fund: Reuters Japan June trade balance 439.9b yen vs 488.0b yen estimate Australia June jobs 14k vs 15k est; unemployment rate 5.6% vs 5.6% est; full-time jobs 62k; participation rate 65.0% vs 54.9% est China, U.S. agree on cooperation to cut trade deficit: Ministry PBOC said to have injected liquidity via some banks on Wednesday German June tax revenue down 6.5% on repayments, ’lively’ 2Q upswing Deutsche Bank Expects DOJ Subpoenas Over Russia Probe: Guardian Asia equity markets carried over the momentum from the US, where all three majors closed in the green with the energy sector outperforming on the back of a larger than expected draw in DoE crude oil inventories. ASX 200 (+0.6%) outperformed on the back of the upside seen in oil markets, as well as a strong performance from Financial names, while Nikkei 225 (+0.6%) benefitted from a softening JPY, although the currency breaking above the 112.00 handle. Elsewhere, Shanghai Comp. (+0.25%) and Hang Seng (+0.2%) conformed to the upbeat tone, with the former lagged following a lacklustre CNY 60b1n liquidity injection by the PBoC. Finally, 10yr JGBs traded lower amid the global risk-on conditions, with underperformance in the long end leading to steepening of the yield curve. Top Asian News BOJ Keeps Easing Unchanged as It Pushes Back Inflation Goal Steel Rebar in Shanghai Tanks 5% From 2013 High as Buyers Wary Kuroda: People Won’t Lose Trust in BOJ Because Forecasts Missed Aussie Yield Retreats From Job-Data High Ahead of RBA Speech Global Steelmaker Recovery on Show as Posco’s Profit Jumps Yaskawa Electric Raises Forecasts After 1Q Profit Beat Foreign Insurers Are Said to Plan $2 Billion of Malaysia Deals Kuroda: Current Monetary Policy Is Sustainable, Flexible European bourses trade in the green, as earnings continue to dictate play. A dovish BoJ has helped with the flow in equities, however full focus does remain on the ECB. 9/10 Stoxx 600 sectors trade in the green, with utilities in the red, evident of the risk on tone. The FTSE was also unfazed by the stela UK Retail Sales beat. Fixed Income markets do trade subdued however, with many arguing that the risk is to the downside for Gilts. Gilts were in focus as we approached the latest UK data, Retail Sales, beat on all accounts, however, could not spark any selling into Gilts, as Draghi approaches Top European News France Says ‘We Want Our Money Back’ as Brexit Talks Wrap Up Danske Bank CFO Says Writebacks Can’t Continue in Normal Cycle London’s Super-Prime Housing Slump Spreads to Luxury Properties EasyJet Falls; ‘Good News, But Not Good Enough’: Analysts Sports Direct Ends Four-Year CFO Wait as Ashley Plugs Key Gap SAP Lifts Sales Outlook, Buying Back Stock on Cloud Growth Zooplus Drops; Kepler Says Weak 2Q, Investment Case Unchanged In currencies, FX markets have been subdued since the open, as much of the volatility was seen from JPY and AUD overnight. European FX traders did await the UK Retail sales beating across the board, aiding cable in retaking the 1.30 handle. EUR/GBP saw a dip lower; however, closer attention will be on the ECB later this afternoon. GBP has not seen all bullish news this morning, with comments from Fox stating that the UK can still survive with no Brexit deal, once again intruding the possibility of a 'hard brexit.' In commodities, precious metals trade lower, evident of the risk tone that has been seen in recent trade, as Gold, Silver and Platinum all trade in the red. Elsewhere, Oil trades subdued following the unexpected draw yesterday, yet has contained around yesterday's high, with WTI firmly above 47.00/bbl. Looking at the day ahead, the ECB rate decision and Draghi press conference around lunchtime will be the key focus. In the US, initial jobless claims numbers (est: 245K) and the Philadelphia Fed Business survey will be out. US earnings seasons remains a focus, with Microsoft, eBay, Visa, American Airlines, Alliance Data systems, PPG Industries and Philip Morris schedule to report US Event Calendar 8:30am: Initial Jobless Claims, est. 245,000, prior 247,000; Continuing Claims, est. 1.95m, prior 1.95m 8:30am: Philadelphia Fed Business Outlook, est. 23, prior 27.6 9:45am: Bloomberg Consumer Comfort, prior 47; Economic Expectations, prior 52 10am: Leading Index, est. 0.4%, prior 0.3% DB"s Jim Reid concludes the overnight wrap If you're a parent and got any advice for what to do when the "terrible twos" hit then I'd appreciate it. After being a wonderful mild mannered, mischievous little girl, 22-month old Maisie has suddenly over the last two weeks tried to stamp her independence. The good news is that she hasn't yet fully rebelled and found a wayward boyfriend, demanded her ears pierced or got a tattoo but in a short space of time has decided that she won't sit in her high chair for dinner, will run away when it's time to have her nappy changed (or teeth cleaned) and will go feral when taken up for her nightly bath. Bedtimes have also suddenly got more difficult with a lot of crying from nowhere. With only around 6 weeks until the birth of the twins I'm hoping this is just a phase!! So what's the only thing that calms her down... yes the TV. Bad parenting habits are beginning to creep in. I can now see how sometimes it easier to do the wrong thing and give in! We'll all be glued to the TV this afternoon as today sees the last main scheduled macro event before the summer slow season well and truly kicks in. In saying that I'm sure I'm tempting fate but if Mr Draghi doesn't surprise it feels that after his press conference today (1.30pm BST) it may be relatively quiet on the macro front until the Jackson Hole Symposium on August 24th-26th. The Bank of England meeting in two weeks is surely less interesting post this week's inflation figure so all eyes on the ECB. The Fed rate decision next week could bring further details on the balance sheet discussion but is also unlikely to be a meeting with a big surprise. Within the ECB the battle is perhaps between Draghi and the rest of the council as the President was certainly more hawkish in Sintra on June 27th than he was when he spoke for the committee at the last meeting on June 8th. This power balance will be judged by the strength of the signal at the press conference. According to our economists, the more that Draghi’s new “confidence, persistence, prudence” mantra makes it into the press statement, the more confident the market will be about the Council converging to Draghi’s more constructive view. DB expect the President to open the door to a September decision on QE without any pre-commitment. With that in mind we thought it would be interesting to quickly recap how European assets have performed since Sintra. Unsurprisingly the most eyecatching are the moves in European govies. Front and centre is the move for Bunds where 10y yields have shot up 29.7bps to 0.540%. Similar maturity OATs are 20.4bps higher at 0.799% while Dutch yields are up 21.6bps to 0.661%. The range is a little wider in the periphery but the same theme applies. In Portugal yields are 13.3bps higher while Spain and Italy have seen moves of 18.7bps and 29.8bps, respectively. Meanwhile the Euro has rallied nearly 3% and recently broke through 1.150 versus the Dollar for the first time since May last year. In equity land the Stoxx 600 is down -0.83% in total return terms however this translates to a +2.13% gain when converted into Dollars given the strength of the Euro. The same applies for the DAX (-2.50% and +0.41%) while the FTSE MIB (+2.27% and +5.32%) has outperformed. Most notable however has been the moves for European Banks which have clearly benefited from the underlying rate move. The Stoxx 600 banks sector is +4.35% in Euro terms and +7.46% in USD terms. So we’ll wait to see what today’s message brings. Before we get there though we’ve already had the outcome from one central bank meeting this morning, that being the BoJ. As expected, there were no changes to policy. The policy balance rate was held at -0.100% and 10y JGB yields will continue to be targeted at around 0.000%. Notably, while the BoJ has raised its assessment of the economy (noting that growth will continue above potential through fiscal 2018), the inflation outlook was revised lower. The BoJ has delayed its target for inflation reaching 2% to around fiscal 2019. The BoJ previously delayed its target for inflation back in November last year to fiscal 2018. Inflation forecasts for this year and next were also revised lower. The Yen (-0.10%) is a shade weaker post the headlines while JGBs are little changed. Staying with Japan briefly, our economists have noted that the Abe government’s approval rating has dropped below 40% with a Jiji press survey putting his rating at 30%. Our team highlight that a rating in the 30s is viewed as a caution signal for an administration’s viability and a drop into the 20s could be terminal. The team hold the view however that there are no opposition parties with sufficient public backing to run a government. Nonetheless its one to keep an eye on. Elsewhere in Asia this morning, most equity markets have climbed with the Nikkei (+0.36%), Hang Seng (+0.20%), Shanghai Comp (+0.16%), Kospi (+0.08%) and ASX (+0.56%) all nudging higher. Back to yesterday. Despite there being fairly minimal newsflow to feed off, it was on the whole a relatively positive day for risk assets. Another leg higher for Oil (WTI +1.55% to just over $47/bbl and matching the highs from earlier this month) as well as a better than expected earnings report from Morgan Stanley appeared to be enough to drive markets higher. The S&P 500 (+0.54%) finished up for the 10th time in the last 13 sessions with all sectors finishing a bit stronger. The recent rally and bounceback for tech stocks is certainly catching the eye though. The S&P 500 IT index last night surpassed its dotcom peak from 17 years ago to close at an all-time high. The Nasdaq (+0.64%) also turned in another record high and is now up 5% from the lows earlier this month. The Dow was up +0.31% with the underperformance driven by some disappointing IBM earnings, however the index did still close at a new record high. At the same time the VIX, for the fifth day in a row, closed below 10 (at 9.79) which is the longest such run since data started getting collated in 1990. Meanwhile closer to home European equity markets firmed up with the Stoxx 600 closing +0.77% ahead of the ECB. In bond land 10y Treasury yields were just 1.1bps higher at 2.270% while Bunds 1.0bp lower. Away from markets, developments in and around Washington continue to bubble away in the background. Last night the CBO announced that a repeal of Obamacare without replacement would result in 32 million more people being uninsured over 10 years, which is 10 million more than the previous Senate Republican bill. A vote next week is still being talked about with Republican senators supposedly scrambling behind the scenes to come to some form of consensus however it still feels like most have moved on to other policies. On that note, Politico ran an article last night suggesting that Trump is targeting a corporate tax rate ‘in the 20s’ which is being talked about as a more realistic goal for the administration after previously pledging in their campaign to slash the rate to 15%. So it will be interesting to see if there are any further stories on that front. Staying with the US, the US / China trade talks got off to a slightly tense start yesterday, with US Commerce secretary Wilbur Ross noting the $309bn trade deficit as “…if this were just the natural product of free market forces, we could understand it, but it’s not…”. Shortly after, both the US and China cancelled their press conference scheduled for the end of the day, originally expected to discuss the outcomes of the trade negotiations. Before we look at today’s calendar, we wrap up with other data releases from yesterday. In US, both the June housing starts and building permits data were slightly better than expectations. After three consecutive months of decline, US housing starts rebounded to be up 2.1% yoy to 1,215k. Permits were also stronger, rising 5.1% yoy to 1,254k. The MBA’s new purchase mortgage applications index rose 1.1% last week and was up 6.0% yoy. Looking at the day ahead now, in UK, the June retail sales figures are due, with YoY (ex-auto and fuel) expected to be 2.5% as per Bloomberg consensus. The ECB rate decision and Draghi press conference around lunchtime will however by the key focus. Over in the US, initial jobless claims numbers (est: 245K) and the Philadelphia Fed Business survey will be out. US earnings seasons remains a focus, with Microsoft, eBay, Visa, American Airlines, Alliance Data systems, PPG Industries and Philip Morris schedule to report
In what has been a less exciting session than the previous two, the euro retraced some recent gains as traders grew concerned they may have overestimated the ECB's hawkish bias ahead of Thursday’s rate decision; in turn the dollar edged higher after the collapse of the GOP healthcare bill sent it to the lowest since September on Tuesday. Not even Citi could infuse any excitement in the overnight session, which its called "Purgatorial": Markets are more or less flat so far today as we face a temporary dearth of data and speakers. USD remains weak, but there has been no real excuse to continue selling yet. The ECB and the BoJ are both up tomorrow and any potential moves may be linked to pre-positioning/squaring rather than anything that today may offer us… There is little of note this afternoon that could tickle the fancy of even the most excitable FX watcher – We are staring into the abyss… and DoE inventories are staring right back. As oil is flat so far today, that print could provoke a small twitch. Elsewhere, we get US housing starts and Canadian manufacturing shipments… In Dante’s inferno, Purgatorio immediately precedes Paradiso. Fingers’ firmly crossed. European equities got a boost from both the weaker euro and from corporate results, while oil fluctuated and gold fell. The Stoxx Europe 600 gained 0.3% in early trading after falling 1.1% Tuesday, its largest drop this month as concerns emerged that the stronger Euro would pressure exporters, leading to the first decoupling between the EURUSD and the Stoxx in two months. S&P 500 futures were little changed (up 0.05%) after the cash index closed at another record on Tuesday. With the USD just off 10-month lows, there continues to be an easing of loosening of financial conditions for emerging markets which also supports equities. After decent gains in Asia on the back of positive signs from China this week, MSCI's world stocks index looked set for a ninth day of gains which would mark its longest winning streak since October 2015. Cited by Reuters, Marijke Zewuster, Head EM research at ABN AMRO said "Most emerging markets are doing quite well at the moment, especially in Asia. The figures for China are positive. If you look at the underlying figures they are relatively strong at the moment." In Asia, MSCI's index of Asia-Pacific shares outside Japan and its index of emerging market shares were both up 0.5 percent at their highest since April 2015. China's Monday fireworks were long forgotten, with the CSI 300 index leading winners as mainland stocks rallied sending the Shanghai Composite and ChiNext higher by 1.4% and 1% respectively. Hong Kong’s Hang Seng Index was up 0.6 percent. Japan’s Topix Index swung between gains and losses, while South Korea’s Kospi Index rose 0.2 percent. The Yuan weakened for first time in eight days despite strongest daily fixing since October; seven-day repo falls five basis points after PBOC injects 100 billion yuan of liquidity. Following Tuesday's unexpectedly hawkish RBA announcement, Australian bonds were firmer with the 10-year yield dropping 3 bps. Australia’s S&P/ASX 200 Index rose 0.8 percent as bank shares climbed. Analysts said new capital requirements looked fairly benign. The U.S. dollar, which dropped sharply on Tuesday after the collapse of the GOP healthcare bill, managed a modest rebound on Wednesday. Against a basket of other major currencies, it was up 0.3 percent at 94.878, but still down around 7 percent on the year and within sight of Tuesday's low of 94.476. The modest USD gains were due to expectations the European Central Bank and the Bank of Japan may strike dovish tones when they meet on Thursday which could dent recent strength in the euro and the Japanese Yen. Meanwhile, the bearish pileup continues, with hedge funds most bearish on the dollar since 2013. On Thursday, the ECB is expected to adjust their language but substantive changes to their policy will likely come later in the year. The BOJ is expected to raise its growth forecast but cut its inflation outlook, underlining the cautious tone adopted recently by major central banks. Emerging-market stocks climbed for an eighth-straight day to the highest since April 2015, lifted by strong finish for Chinese equities, iron ore futures also +3.7%, helping AUD and NZD marginally outperform with domestic equity markets. MXN initially rallies after S&P raises country’s outlook. Treasuries pare rally with longer maturities leading declines; 10-year yield +1bp to 2.27%. USD swap spreads are edging wider across the curve, led by 10-year sector as swapped issuance is expected to dry up after the latest wave of financial issuance pricings, tempting fast-money dip buyers. Open interest points to liquidations of longs in 10-year futures into Tuesday’s rally. In commodities, WTI crude fluctuated before slipping 0.2 percent to $46.29 a barrel after API reported an unexpected rise in inventories on Tuesday; today's DOE number will be closely watched. Gold dropped 0.3 percent to $1,238.74 an ounce. Iron ore futures jumped 2.6 percent, building on a 7 percent advance over Monday and Tuesday. Bulletin Headline Summary From RanSquawk Quiet thus far in Europe with EU bourses trading with marginal gains. EUR loses its shine amid slight profit taking ahead of tomorrow's ECB meeting. Looking ahead, highlights include US Building Permits, Housing Starts and DoE Crude Report Market Snapshot S&P 500 futures up 0.04% to 2,458.75 Brent Futures down 0.2% to $48.74/bbl Gold spot down 0.3% to $1,238.23 U.S. Dollar Index up 0.2% to 94.83 STOXX Europe 600 up 0.2% to 383.29 Dax up 0.05% to 12,437.20 Shanghai Composite up 1.36% to 3,230.98 ChiNext up 1.04% to 1684.77 Hang Seng Index up 0.6% to 26,672.16 Nikkei 225 up 0.1% to 20,020.86 Topix up 0.09% to 1,621.87 MXAP up 0.3% to 158.63 MXAPJ up 0.6% to 524.27 Sensex up 0.5% to 31,856.89 Australia S&P/ASX 200 up 0.8% to 5,732.13 Kospi up 0.2% to 2,429.94 German 10Y yield fell 0.7 bps to 0.547% Euro down 0.3% to 1.1525 per US$ Italian 10Y yield fell 4.3 bps to 1.9% Spanish 10Y yield fell 1.4 bps to 1.541% Natgas down 0.3% to $3.08/Mmbtu Crude oil up 0.2% to $46.49/bbl Gold down 0.3% to $1,238.60/oz Silver down 0.6% to $16.13/oz Top overnight news ECB’s Villeroy: Euro-zone economic situation is improving; ECB has defeated the risk of deflation Japan Cabinet Office monthly assessment: repeats the Japanese economy is on a moderate recovery Treasuries Soar as Big Futures Trades Show Bulls Are in Control The ECB’s Frankfurt-based staff are examining scenarios for the future path of quantitative easing ahead of a Governing Council decision that is expected to take place in September or later, according to euro-area officials familiar with the matter President Donald Trump is now more likely than ever to end his first year in office without a single major legislative accomplishment Greece’s much anticipated return to bond markets this week has been held off partly due to a ceiling set by the International Monetary Fund on the amount of debt the country can hold, according to three officials familiar with the matter who asked not to be identified as the talks are confidential ECB said to study QE wind down options for decision seen in fall China increases U.S. Treasury holdings for a fourth straight month BOJ easing likely to continue past 2019, ex-director Hayakawa says S&P raises Mexico’s credit rating outlook to stable API inventories according to people familiar w/data: Crude +1.6m; Cushing +0.6m; Gasoline -5.5m; Distillates -2.9m Libya’s ascendant oil boss poses challenge for OPEC and Russia As OPEC wrestles over oil output, top importer’s demand in peril BP mulls partnership for pipeline assets, with possible IPO BHP to double spending in U.S. shale unit amid investor disquiet Hungry oil upstart outsmarts majors in race for Mexico’s riches China drafts rules to regulate crude, fuel retailers Asian stocks traded mixed, following a similar lead in the US where Goldman Sachs' quarterly revenue weighed on the DJIA, while Netflix led the NASDAQ 100 into positive territory following its beat on earnings. ASX 200 (+0.6%) finished positive, with the financial sector providing the support, whilst Nikkei 225 (+0.1%) was choppy amid a lack of news flow and tier-1 data releases to provide a catalyst. Elsewhere, Shanghai Comp. (+0.9%) and Hang Seng (+0.5%) traded in an upbeat fashion, gaining influence from the CNY 140b1n liquidity injection by the PBoC. Finally, 10yr JGBs were flat with some underperformance seen in the long end, while the JGB auction for enhanced liquidity auction added no direction for the market. PBoC set CNY mid-point at 6.7451 PBoC injected CNY 100bln via 7-day reverse repos and CNY 40bln in 14-day reverse repos. Top Asian News R&F Properties Is Said to Join Wanda-Sunac Transaction: 21st New BHP Chairman Flags Board Changes, Asset Review to Investors Murata, CyberAgent, Japan Post May Be Added to Nikkei 225: Daiwa Hong Kong Skyscrapers World’s Most Expensive, Knight Frank Says Apple’s IPhone Manufacturers Join Legal Counter Against Qualcomm Won Bears Stymied as Rally Defies Rate Hawks and Missiles In Europen bourses, the week's subdued summer trade continues, with equities trading in marginal green territory in what has been a fairly quiet session thus far. Nonetheless, notable moves has been seen in the Scandi stocks with the likes of Volvo, Swedbank and Assa Abloy all reporting before the European open. Across fixed income markets, German yields have been slipping with the curve slightly steeper, while the move had been exacerbated by a firm 30year auction. Elsewhere, gilts climbed higher after strong demand for the new 5 year gilt at today's auction. Top European News French Military Chief Quits After Public Budget Spat With Macron European Stock Traders’ Draghi Addiction Ebbs Ahead of ECB Santander Agrees to Buy Back 51% of Elavon: EL Confidencial London’s Home Price Growth Has Flatlined. What Happens Next? Aena Parent Is Said Set to Rule Out Bid for Abertis Cairo, Asia Have Cheapest Taxi Fares in World: Chart (Correct) In currencies, the AUD has continued to grind higher in Asia to further pull away from 0.79, extending on its post RBA gains, while sentiment has also been boosted by rising iron ore prices. Subsequently, this has further supported AUDNZD which is now hovering around 1.0750. Focus will be on the Australian jobs data tonight, while later in the week RBA speakers could look to tame the upside in AUD. EUR slightly pulled off the mid-1.15 with the rally likely to hold until the ECB monetary policy decision tomorrow. A move to 1.16 looks to be on the card unless Draghi deviates from his recent hawkish comments made at the Sintra conference. JPY holding just north of 112.00 after making a slight breach of that level, however support from 111.80 kept USD/JPY afloat. Of note, the BoJ announce their latest decision on monetary policy tonight, with the general consensus that the central bank will maintain its monetary policy and YCC, while they are also expected to lift growth forecasts and cut inflation targets. In commodities, Slight recovery in the USD has pressured the commodity complex with Gold prices slipping slightly. Crude prices trickling lower following last night's API crude report which showed a 1.6m1n build in inventories. Looking at the day ahead, the UK and Europe will be fairly quiet. The US will release data on housing starts for June (est: 1,160k), building permits (est: 1,201K) and MBA mortgage applications. Away from the data, the inaugural meeting of the US-China Comprehensive Economic Dialogue will take place in Washington to discuss economic and trade issues which should be worth a watch. US earnings seasons remains a focus too, with Morgan Stanley, AMEX, Reynolds American and Qualcomm schedule to report. US Event Calendar 7am: MBA mortgage applications July 14; prior -7.4% 8:30am: Housing starts June; est. 1160k, prior 1092k; Building permits June; est. 1201k, prior 1168k 10:30am: DOE weekly petroleum status report July 14 U.S. crude oil inventories; est. -3500k, prior -7564k U.S. gasoline inventories; est. -1300k, prior -1647k U.S. distillate inventory; est. 1200k, prior 3131k U.S. refinery utilization; est. 0.3%, prior 0.9% DB's Jim Reid concludes the overnight wrap We might be inching closer to the dog days of summer but there has still been a steady slate of interesting newsflow for markets to feed off this week. Indeed the last 24 hours has had a bit of everything with data, politics and earnings all in vogue. Softer than expected inflation in the UK, further disappointment with the latest US healthcare bill developments – albeit where expectations were hardly high in the first place – and a fairly mixed read-through from the latest US bank earnings all had a say in markets one way or another yesterday. Tackling those one at a time, the inflation versus central bank battle continued yesterday following the June inflation report in the UK. Headline CPI missed (0.0% mom vs. +0.2% expected) which pushed the annual rate down three-tenths and more than expected to +2.6% yoy. The core also fell two-tenth to +2.4% yoy, albeit back to where it was in April, after expectations were for no change. Lower prices for clothing, recreation, food and alcohol all appeared to weigh on the slightly softer reading. Interestingly that is the fifth time in the last nine months that YoY headline inflation has deviated at least 0.2ppts from the consensus in either direction (of those five occurrences, two have been misses to the downside) which seems to emphasise some of the difficulty in forecasting inflation at the moment. In any case yesterday’s data will perhaps give the BoE doves a little bit of breathing room at next month’s MPC meeting but the wider story in markets is that the last three global inflation readings (UK, NZ and US) have all disappointed (excluding the Euro area reading given it was more of a rubber stamping). It’s worth noting that in the next week we’ll get inflation prints out of both Canada and Australia so it’ll be interesting to see if the softermomentum continues. After trading a little firmer leading into the data, Sterling tumbled as much as -0.90% from its highs although only ended the day a shade weaker (-0.11%) after Governor Carney added later in the session that the data doesn’t change the outlook that price gains will remain above target “for a period of time”. Gilt yields were also sharply lower and stayed so into the close. 10y Gilt yields ended the day down 6.4bps at 1.207% and are now down over 10bps in the first two days of this week so far. Other European bond markets were stronger too with Bunds down 2.9bps to 0.547% and the periphery 5bps to 6bps lower. An ECB story was also doing the rounds on Bloomberg suggesting that the Bank is examining scenarios for the future path of QE including the studying of a tapering path, asset purchase extension and reduced pace and combination of the two strategies. That didn’t seem to suggest any new information however and was subsequently downplayed. Across the pond Treasuries were also well bid (10y -5.5bps to 2.260%) from the off yesterday as the market digested the latest setback in the healthcare bill debacle. After a replacement of the Obamacare bill was ruled out due to a lack of Republican support, it was revealed that a subsequent repeal also lacked the sufficient support. Senate majority leader Mitch McConnell announced that a procedural vote will still be held next week regardless. President Trump had plenty to say but it’s looking more likely that the administration will be moving on to tax reform and infrastructure now, however it remains to be seen how damaging the internal conflicts have been on the outlook for some of the more market-sensitive policies to pass. The USD index fell another -0.55% and is down four sessions in a row to the lowest since August last year. In fairness the healthcare bill headlines didn’t have a huge impact on risk assets in the US. The initial leg lower for the S&P 500 (which was down as much as -0.35%) appeared to have more to do with the latest earnings reports out of Goldman Sachs and BofA. While both banks reported beats at both the earnings and revenue lines the market picked up on some of the softer finer details of the report. In the case of Goldman’s there was a disappointing read-through from some of the core businesses and particularly FICC. The US bank sector closed down -0.39% and lower for the third session in a row however the broader S&P 500 managed to claw back to a small +0.06% gain and with it, yet another record high. A big boost from Netflix post results on Monday evening saw the Nasdaq turn in a +0.47% gain and so joining the S&P again at a new record high. In fact after falling to a two month low back on July 6th, the index has now turned in a positive session every day since (8 sessions) which is the longest such winning streak since February 2015. Another eye opening stat is that the S&P 500 has now gone 267 days without a 5% correction – the longest such streak since 1996. For completeness European equity markets (Stoxx 600 -1.11%) suffered their weakest day this month largely as a result of the stronger Euro (+0.66%) and some earnings releases. This morning in Asia, most key bourses are slightly up, with the Nikkei (+0.11%), Hang Seng (+0.41%) and the three Chinese bourses (+0.70% to +1.09%) paring back losses in recent days. The ASX200 strengthened +0.67%, supported by the banks (+~3%), which received a broadly benign regulatory outcome on target capital levels. US equity index futures are also a smidgen firmer, while bond markets in Asia have largely followed the lead from Wall Street and Europe in rallying overnight. Staying with the ECB, yesterday’s Q2 ECB bank lending survey showed a net easing in credit standards for corporates as well as a strengthening in loan and CAPEX demand. On a forward basis, the survey suggests banks in Germany and Netherlands expect more easing in credit conditions, while Italian banks expect a net tightening. Loan demand is expected to strengthen further, in both corporates and consumer loans, but slightly lower in mortgages. 2Q17 demand for fixed investment by corporates increased in the Euro area, particularly in Italy, Netherlands and Germany. Before we look at today’s calendar, wrapping up the remaining data from yesterday, in the US the NAHB housing index fell 2pts to 64 in July. Whilst still at a high level, the index is down 7pts from the March peak and is at its lowest level since November 16. Over in Germany, the ZEW survey for July was slightly down to 86.4, suggesting little changes over the past month in analysts’ assessment of current conditions or the economic outlook for the German and wider broader euro area economies. Looking at the day ahead now, the UK and Europe will be fairly quiet. Across the Atlantic, the US will release data on housing starts for June (est: 1,160k), building permits (est: 1,201K) and MBA mortgage applications. Away from the data, the inaugural meeting of the US-China Comprehensive Economic Dialogue will take place in Washington to discuss economic and trade issues which should be worth a watch. US earnings seasons remains a focus too, with Morgan Stanley, AMEX, Reynolds American and Qualcomm schedule to report.
Вчера австралийский доллар резко вырос, достигнув 26-месячного максимума против доллара США, после публикации протоколов последнего заседания РБА, которое состоялось 4 июля. В своих протоколах центробанк дает неожиданно оптимистичную оценку экономики, а также сообщает об обсуждении размера повышения процентных ставок. По оценке РБА, целевой уровень ключевой процентной ставки должен быть повышен со временем с 1,5% до 3,5%. Однако аналитики CBA по-прежнему считают, что такой резкий рост AUD / USD на обновленную оценку РБА является чрезмерной реакцией. "Похоже инвесторы интерпретировали оценку нейтральной номинальной процентной ставки в размере 3,5%, как возможную необходимость повышения ставки", - говорят в банке. В СВА по-прежнему считают, что Резервный банк Австралии поднимет ставку не раньше четвертого квартале 2018 года "РБА возьмет нейтральную позицию по процентной ставке в долгосрочной перспективе, но будет корректировать краткосрочную политику в соответствии с меняющимися экономическими условиями", - говорят в СВА. Информационно-аналитический отдел TeleTradeИсточник: FxTeam
Австралийский доллар настроен на ралли и рост до 80 центов США, самого сильного уровня более чем за два года, поскольку центральный банк сказал, что экономика улучшается, по словам менеджера по денежным средствам Eaton Vance Corp. Итона Ванса, который начал выстраивать позиции на усиление аусси в мае, заявив, что доходность по облигациям страны привлекательна по сравнению с казначейскими облигациями США и Резервный банк Австралии, скорее всего, бу читать далее…
U.S. Republicans left scrambling after health bill sinks again (Reuters); Republicans Give Up on Health-Care Reform, Now Seek Straight Repeal (BBG) Trump Blames Democrats and a ‘Few Republicans’ for Health-Bill Wreck (BBG) House Republicans Set Out Plan to Rewrite Tax Code (WSJ) House GOP Budget Ignores Trump’s Cuts to Domestic Agencies (BBG) House Republicans unveil 2018 budget with tax reform instructions (Reuters) UK inflation unexpectedly falls and eases rate-hike fears (AP) Australian dollar at two-year high after RBA minutes (Australian) What If Big Oil’s Bet on Gas Is Wrong? (BBG) Wanda Deals in Jeopardy as China Scrutiny Mounts (BBG) Property Developers Push for Open Drinking on City Streets (WSJ) Goldman’s Traders Turn In Worst First Half of Blankfein’s Reign (BBG); Goldman's bond trading revenue slumps 40 percent (Reuters) BofA’s Interest Income Drops Even After Fed Delivers Rate Hikes (BBG) Russia, after U.S. meeting on diplomatic row, says ready to retaliate (Reuters) Car engine bans in Germany would put 600,000 jobs at risk: Ifo (Reuters) Porsche ponders diesel exit, pushes electric cars: CEO (Reuters) Monetary Policy in Japan Has a New Problem: Amazon (WSJ) EU's Moscovici upbeat about Portugal, sees 2017 growth above 2.5 percent (Reuters) Overnight Media Digest WSJ - Senate GOP leaders abandoned their effort to dismantle and simultaneously replace much of the Affordable Care Act, after the defections of two more Republican senators left the party short of the votes needed to pass President Donald Trump's top legislative priority in his first year in office. on.wsj.com/2u3zGcT - The Trump administration released its road map for remaking the North American Free Trade Agreement that aims to preserve "Buy America" provisions and reduce the U.S. trade deficit, but steps back from some of President Donald Trump' most fiery campaign rhetoric on trade. on.wsj.com/2u3gjR9 - KKR put two executives in line to take over one day for Henry Kravis and George Roberts, the private-equity pioneers atop one of the biggest brands in finance. The New York asset manager elevated Joe Bae and Scott Nuttall to the roles of co-president and co-chief operating officer and added them to its board. on.wsj.com/2u3goEr - Tesla, which has faced criticism from its investors about a lack of independent directors, named Twenty- First Century Fox CEO James Murdoch and Ebony Media CEO Linda Johnson Rice to its board. on.wsj.com/2u3cc7R - Signet Jewelers Ltd said Monday that Chief Executive Mark Light has decided to retire for health reasons and will be succeeded by Virginia Drosos, who has served as an independent board member since 2012. on.wsj.com/2u3bIi0 - Uber Technologies Inc said it is suspending its operations in the Chinese gambling hub of Macau, the latest retreat for the ride-sharing giant as it continues to face regulatory pressure from many overseas markets. on.wsj.com/2u3mdlx FT The fallout from investigations into foreign exchange price fixing deepened on Monday when US authorities hit BNP Paribas SA with a new fine and former traders at three other banks appeared in court over an alleged conspiracy. ITV PLC's appointment of Carolyn McCall as its chief executive could cost the UK broadcaster up to 2.5 million pounds after it agreed to fully compensate the easyJet Plc boss for the loss of long-term share options and bonus payments. The European Commission has accused Teva Pharmaceutical Industries Ltd of anti-competitive behaviour over an agreement it made with US-based rival Cephalon. Carillion Plc has hired professional services firm EY to assist with a review of its finances, as the UK construction and support services group turns to more outside advisers in a bid to repair its balance sheet. NYT - Conservative commentator Ann Coulter unleashed a barrage of criticism about Delta Air Lines on Twitter after she was moved to a different seat on a flight on Saturday, prompting the company to publicly return fire and call her comments "unnecessary and unacceptable." nyti.ms/2tAi2vH - World's largest asset management firm Blackrock said second-quarter earnings had risen 9 percent as investors continued to pour money into the company's expanding fleet of exchange traded funds. nyti.ms/2tA49h5 - KKR named Joseph Bae and Scott Nuttall as its co-presidents and co-chief operating officers, unveiling one of the clearest lines of succession in the private equity industry. nyti.ms/2tAoPoX - Nearly the entire board of Hampton Creek, a high-profile food start-up responsible for the Just Mayo condiment, resigned last month, leaving only the company's founder and chief executive, Josh Tetrick, as its only member. nyti.ms/2tAclh6 Britain The Times Carillion Plc gave its nervous shareholders some reassurance on Monday as it won two big contracts on the HS2 high-speed rail line and boosted the number of City advisers helping it to cut costs and improve cashflow. bit.ly/2uwRQWF The owner of British Gas, Centrica Plc, is spinning off its oil and gas production business into a new joint venture with Bayerngas Norge, of Germany, with a view to a potential initial public offering within two to five years. bit.ly/2uwIpXx The Guardian Karren Brady, the West Ham United chief executive and regular on The Apprentice, is to take over as chair of Taveta, Sir Philip Green's retail empire, as Anthony Grabiner steps down. bit.ly/2uwNzTt Lloyd's of London has warned that a serious cyber-attack could cost the global economy more than $120 billion (92 pounds) – as much as catastrophic natural disasters such as Hurricanes Katrina and Sandy. bit.ly/2uwKm6i The Telegraph The former boss of Barclays and three other ex-directors of the bank have been told that they will stand trial in January 2019 over the bank's emergency fundraising with Qatar almost a decade ago. bit.ly/2uwSjIp A British tech start-up, Virtualstock, which helps leading UK retailers to better manage their digital marketplaces, said it expects to enter the US market in the coming months and double in size by the middle of next year, as the shift to online shopping continues to ramp up. bit.ly/2uwZmRl Sky News Citigroup Inc will become the latest Wall Street giant to unveil plans to cope with the UK's departure from the European Union this week when it names Frankfurt as the location for a major new trading operation. bit.ly/2uwKxhY Primark is recalling thousands of men's flip flops after discovering they contain dangerous levels of a cancer-causing chemical. bit.ly/2uwLcjg The Independent ITV Plc has appointed Carolyn McCall, the boss of easyJet Plc, as its new chief executive, taking over from Adam Crozier, who announced in May that he was stepping down. ind.pn/2uwS0NS
Bulletin headline summary from RanSquawk The USD-index dropped to 10 month lows amid fading hopes of US reforms after Obamacare repeal effectively died last night. Soft CPI from the UK and NZ weigh on both currencies Looking ahead, highlights include BoE's Carney and the API Crude report The Dollar Index sank to its lowest level since September, a fresh 10-month low, after two more Republican defections on Monday night doomed the proposed GOP healthcare plan in the Senate. And while Treasuries rose on concerns about inflationary pressures and the viability of the Trump stimulus agenda, S&P futures rebounded gingerly from session lows, and were up 0.01% after posting nominal declines earlier in kneejerk reaction to the Senate news. The sliding dollar sent the Euro surging as high as 1.560, the highest since May of 2016, and sending European lower for first time in five days amid concern a stronger euro would damp exporters earnings. “Any hopes of dollar support from a successful vote on the Senate’s health-care bill look to be vanishing,” said Rodrigo Catril, a currency strategist at National Australia Bank quoted by Bloomberg. “Near term, the dollar path of least resistance is down. We still think the data - inflation in particular - will provide the Fed with enough ammunition to hike in December and boost the dollar, but this is a fourth-quarter story.” There were no Chinese fireworks today and no ChiNext "Black Tuesday" largely because Beijing was determined to stop the rout after what appeared to be another "national team" intervention in the last two hours of trading. Earlier in the session, Chinese stocks fell after Monday’s selloff as concern about tougher regulations still unnerved the market. Sunac China Holdings tumbled in Hong Kong after a local media report that banks are reviewing the company’s credit risk. The Shanghai Composite had dropped as much as 0.6% at the midday break local time after falling 1.4% on Monday, its biggest one-day plunge in seven months, while the ChiNext gauge slipped 0.8% after sinking 5.1% on Monday, however the now familiar late trading levitation sent the SHCOMP up 0.4% while the ChiNext closed 0.7% higher. Meanwhile, Sunac China - which we will have more to say about later - plunged as much as 13%. The company, one of China's most aggressive acquirors, has seen its proposed plan to buy Dalian Wanda assets trigger concern among lenders and Beijing. it was a busy overnight session in macro with the Aussie soaring to the highest since May 2015 after upbeat RBA minutes flagged improved 2Q growth alongside expectations of increased fiscal spending while suggesting growth is picking up and the estimated nominal neutral cash rate at 3.5%. The announcement caught AUD shorts wrongfooted and started a major squeeze while sending Australian 3-month bank bills sharply lower in heavy selling while 3-year yield rose as much as eight bps to 2.11%. To stabilize the financial system ahead of a surge in liquidity demands, the PBOC injected net 170 billion yuan of liquidity which some however said would not be enough and as a result interbank rates jumped the most in one month; the Yuan gained against dollar while the Shanghai Composite 0.6% lower. Dalian iron ore jumped 4.8% with futures hitting the highest level since May on strong demand from Chinese steel mills. Tempered expectations for Trump's spending plans weighed on European bond yields which edged lower, tracking U.S. equivalents, after the collapse of the second healthcare bill. U.S. 10-year bond yields fell after the news, while German 10-year yields dipped 2 basis points to 0.57 percent when European trading started on Tuesday. In European stocks, the Stoxx Europe 600 Index fell following a grim earnings report from Ericsson AB, which led the decline. Elsehwhere, the pound tumbled by 100 pips to just above 1.30 after UK CPI disappointed to the downside, sliding to 2.6%, from 2.9%, missing expectation, potentially putting the BOE's rate hike expectations on hold. Meanwhile, in the US, S&P futures were little changed ahead of earnings reports by Bank of America and Goldman Sachs. IBM reports after the close. In commodity markets, oil prices steadied as expectations of firm demand, particularly from China, was met ample supply despite Ecuador announcing it would exit the OPEC production cut deal. Brent crude futures eased 0.1 percent to $48.35 a barrel while U.S. crude oil fell 0.2 percent to $45.93. The ongoing dollar weakness sent gold higher for another day, with the yellow metal trading as high as $1,238 overnight. Market Snapshot S&P 500 futures up 0.01% to 2,458 STOXX Europe 600 down 0.3% to 385.64 MXAP up 0.1% to 157.81 MXAPJ up 0.2% to 520.60 Nikkei down 0.6% to 19,999.91 Topix down 0.3% to 1,620.48 Hang Seng Index up 0.2% to 26,524.94 Shanghai Composite up 0.4% to 3,187.57 Sensex down 0.6% to 31,868.93 Australia S&P/ASX 200 down 1.2% to 5,687.39 Kospi up 0.04% to 2,426.04 German 10Y yield fell 1.4 bps to 0.567% Euro up 0.4% to 1.1527 per US$ Brent Futures up 0.2% to $48.53/bbl Italian 10Y yield fell 5.2 bps to 1.942% Spanish 10Y yield fell 3.7 bps to 1.555% Brent Futures up 0.2% to $48.53/bbl Gold spot up 0.2% to $1,236.46 U.S. Dollar Index down 0.3% to 94.84 Top overnight news: U.K. inflation unexpectedly slowed in June, giving respite to Bank of England policy makers concerned that price growth was getting out of hand Citigroup Inc. has chosen Frankfurt as its newest trading hub in the European Union and plans to present that option to its board of directors this week for approval, according to a person with knowledge of the decision Policy makers from Stockholm to Bucharest are now waiting for their colleagues at the European Central Bank to kick off unwinding the record stimulus that was unleashed in the aftermath of the global financial crisis. This Thursday, they’ll be watching for any new signals from President Mario Draghi, who hinted last month that the end of the road was approaching Senate Majority Leader McConnell abandons broad Obamacare replacement vote to seek straight repeal; Trump urges GOP to work on new plan, start from ’clean slate’ RBA minutes say growth likely increased in 2Q; stronger labor market removes ’some of the downside risk’ to wage growth forecast; estimates neutral nominal cash rate of around 3.5% CBRC told some Chinese lenders to lower returns on wealth products China should achieve ’clean floating’ yuan exchange rate: Financial News New Zealand 2Q CPI 0.0% vs 0.2% estimate, y/y 1.7% vs 1.9% estimate Wells Fargo Buys Rest of $10 Billion ‘Active Quant’ Firm Golden BNP Paribas Fined $246 Million Over Currency Manipulation Fed’s Long-Run Miss of Inflation Goal Undermines Rate Hike Case Medtronic Computer Crash to Crimp Quarterly Sales, CFO Says Asian equity markets traded higher as investors await quarterly results this week. ASX 200 (-1.1 %) traded negative with the financial and utilities sectors weighing on the index, whilst Nikkei 225 (-0.6%) was also in the red amid a stronger JPY, following safe-haven flows into the Japanese currency after news that two US Republican Senators are to vote against the Senate Healthcare bill. Elsewhere, Shanghai Comp. (+0.4%) and Hang Seng (+0.2%) jumped following the latest PBOC intervention helped by a CNY 170bIn liquidity injection by the PBoC. Finally, 10yr JGBs traded higher amid caution in the region, with flattening seen in the belly of the curve. Top Asian News BOJ ETF Buying Is Said to Raise Concern Among Some Officials China Is Said to Tell Banks to Cut Yields on Wealth Products China Liquidity Tightens as Tax Demands Outweigh Fund Injections Chinasoft Rises After Announcing Cloud Partnership with Huawei Asia’s Biggest Buyout Prompts Concerns on GLP’s Credit Score S&P Says Wider Indonesia Budget Gap Isn’t Material Policy Easing Alphadyne Hires Ayad Butt as Portfolio Manager in Singapore European bourses were marginally affected by the data, with the FTSE benefiting of the lower chance for an august move. Ericson is the clear under-performing stock amid reporting poor results, with the majority of indices being dictated by earnings. Gilts saw the most influential reaction to the UK data, as the UK paper traded up around 70 ticks following the result, the lOy did slow however, around the 126.80 level (July's High). Periphery bonds trade higher, led by Greece which trade at record levels, set to hit the market this week. Top European News BC Partners Is Said to Be Close to Deal for GoDaddy’s PlusServer STM/Infineon M&A Has Large Cost-Cutting Potential: Natixis REVISED GUIDANCE: EFSF EU3b 10Y, Min. EU500m 2/2056 Tap Economic Growth, Low Rates Boost Bulgarian Bourse: Karaivanova European Miners Snap Gains After Run Into Overbought Territory Gecina Plans to Raise $1.2 Billion to Fund Eurosic Purchase In currencies, markets awaited the UK, CPI, PPI and RPI figures, where the headline CPI figures missed on expected. Focus will remain on the UK as BoE's Carney is expected to speak at 14.30 London time. GBP saw volatility coming into the figure, and following the result, sterling bears continued to attack the currency. GBP/USD trades back towards 1.30, expected to be physiological support, with further support likely at 1.2980. The headline news overnight, came from the US, where reports emerged that US Republican Senators Moran and Lee are to vote against Senate Healthcare Bill, all but confirming that the bill will not succeed. The dollar weakness was clear, as the news triggered stops through last week's highs in EUR/USD, followed by a break of the 1.15 handle. The pair now trades around highs of the 2015/2016 range, with any break through 1.16, aided by more poor US data and a continued dovish tone from the Fed could see a clear change of direction. In commodities, the commodity complex continues to be led by precious metals, albeit marginally so. The safe haven flow has been evident following the overnight reports that US Republican Senators Moran and Lee are to vote against Senate Healthcare Bill, as markets begin to prepare for an imminent winter for President Trump. Oil markets trade marginally higher, with WTI bouncing off the 46.00 area, further support from a trendline beginning on July the 10th. Looking at the day ahead, in the US this afternoon we’ll get the June import price index print along with the NAHB housing market index reading for July. Earnings should be a decent focus for the market today too with Goldman Sachs and Bank of America the latest banks to report (both prior to the open), while Johnson & Johnson (pre-open) and IBM (post-close) are also scheduled. US event calendar 8:30am: Import Price Index MoM, est. -0.2%, prior -0.3%; Import Price Index ex Petroleum MoM, est. 0.01%, prior 0.0% Import Price Index YoY, est. 1.25%, prior 2.1% Export Price Index MoM, est. 0.0%, prior -0.7%; Export Price Index YoY, prior 1.4% 10am: NAHB Housing Market Index, est. 67, prior 67 4pm: Total Net TIC Flows, prior $65.8b; Net Long-term TIC Flows, prior $1.8b DB's Jim Reid concludes the overnight wrap Well that was an epic start to Game of Thrones, although the biggest shock was seeing one of the most famous pop star in the world making his acting debut in last night's show. Talking of world famous singers I have an apology for you this morning. For the last three weeks I've had to manually override an autocorrect on my iPad that changes Sintra to Sinatra. I must have done this 30-40 times in the EMR over the last three weeks but yesterday it finally caught up with me and I failed to edit a mention of the latter to the former. This heralded a string of amusing email replies mostly about how Draghi had done it "My Way" last month. Anyway we look forward to him spreading the news later this week at the post ECB meeting press conference. To be frank, yesterday was relatively dull and my train definitely had an air of emptiness that only arrives with the start of school holidays. Of the main DM equity markets, the S&P, Dow, Nasdaq, Stoxx 600, CAC, IBEX, FTSE MIB, PSI and SMI all finished less than +\- 0.10%. That was even after all the excitement of the huge swings in Chinese bourses 24 hours ago with the Shanghai Comp and Shenzhen in particular seeing high to low swings of 2.81% and 4.09% respectively as the market balanced that strong data versus the potential for tougher financial regulation following the PBoC meeting over the weekend. By and large it was China-sensitive assets which were really the only markets to see any significant moves yesterday. That was most apparent in base metals with Iron Ore (+1.63%), Copper (+1.18%) and Zinc (+1.04%) all standing out. Bond markets were also a smidgen stronger on fairly limited newsflow and thin volumes as the market awaits the ECB meeting later this week. Benchmark 10y Treasury yields edged down 1.8bps to 2.315% while Bunds finished just over a basis point lower at 0.576% with the periphery down 3-5bps. Away from that Sterling (-0.33%) struggled from the get go yesterday and weakened as the day progressed as the second round of Brexit talks between David Davis and Michel Barnier got underway. There wasn’t any significant new updates to report and instead it’s expected that technical teams will carry on work behind the scenes to iron out the details for EU citizens’ rights in the UK with a further update to possibly come on Thursday. This morning in Asia the tone for the most part has been modestly risk-off. The Nikkei (-0.62%), Hang Seng (-0.20%), Shanghai Comp (-0.32%) and ASX (-1.27%) have all weakened. This more than likely reflects a combination of news out of both China – where the banking regulator has imposed lower rates on wealth management products – and the news out of Washington that two more Republican senators have opposed the latest version of the health care plan. This doesn't look good for Mr Trump and his legislative agenda. US equity index futures are also in the red, while the USD has weakened -0.43%. Some of the macro data this morning has garnered some attention too. In Australia the latest RBA meeting minutes included a new reference to a neutral nominal cash rate which partly explains a +1.20% rally for the Aussie Dollar. Across the Tasman, New Zealand Q2 CPI disappointed (0.0% mom vs. +0.2% expected) which continues the theme of some disappointing global CPI reports in recent days. As we'll see in the data ahead it's the UK's turn this morning on inflation. It’s worth noting that following the close last night in the US, Netlifx shares surged as much as 11% following the latest quarterly earnings report. While earnings were largely in line, revenue topped forecasts and subscriber growth surged more than expected. While Nasdaq futures have weakened overnight in line with other bourses following the latest health care developments, it’ll be interesting to see if the results help cap a full recovery in the Nasdaq which was down as much as 4% from the peak on June 9th to the lows on July 6th. It closed last night off just 0.40% from the highs so that Netflix boost might help sentiment in tech stocks again after a more difficult month or so. Moving on. Yesterday also saw a landmark day for the ECB as the CSPP holdings went above €100bn for the first time. To put things in perspective, a similar market cap company would be the 18th largest in the Stoxx 600 and 42nd largest in the S&P 500. It's also roughly equivalent to the annual national output of Kuwait - the 59th largest economy in the world as of 2016. While we're on such comparisons, the entire ECB balance sheet now stands at €4.21tn, which now has the largest central bank holding in the World. This is comparable to the annual GDP of Japan (€4.30tn) - the 3rd biggest economy in the world and a decent distance ahead of Germany (€3.02tn) - the fourth largest. It's staggering to think of it in those terms. Back to the more mundane, net CSPP averaged €286mn/day last week, well below the €365mn average since the program started. However last week saw European markets wind down a little with Bastille Day on Friday and the strong buying recently perhaps reflected a desire to front load ahead of what will now be relatively illiquid summer markets. The CSPP/PSPP ratio was 10.4% last week, which is below the long-term average (even before QE was trimmed in April). However the same ratio for the past two weeks is 13.4%. Indeed the evidence from the more than three months of purchases since QE was trimmed continues to be that the CSPP has been trimmed notably less than the PSPP (CSPP/PSPP ratio 13.6% since April compared to 11.6% before then). Staying with bonds, it was interesting to note the various stories doing the rounds yesterday suggesting that Greece may be returning to the primary bond market for the first time since August 2014. Both Bloomberg and the FT are reporting that Greece is looking to bring a 5y deal to market this week or next following the repayment of a 3y bond yesterday. Notwithstanding the fact that debt relief debates are still yet to be concluded, with 3 bailouts in the last 7 years, and the fact that the country also came close to exiting the Euro, it would make for a fairly symbolic step. Before we look at today’s calendar, a quick wrap up of the few data releases out yesterday post the China numbers. In Europe there were no surprises to come from the final June CPI revisions with headline CPI confirmed at 0.0% mom and +1.3% yoy respectively (unrevised) and the core confirmed at +1.1% yoy (also unrevised and up from +0.9% in May). In the US the NY Fed’s empire manufacturing survey for July dipped 10pts to 9.8 (vs. 15.0 expected), albeit still above the level seen in both April and May. Looking at the day ahead now, this morning in Europe the early focus is likely to be on the ECB bank lending survey for Q2 which we are expecting to receive at around 9am BST. Shortly following that we’ll receive the June CPI/RPI/PPI data docket out of the UK where market expectations for headline and core CPI are expected to hold steady at 2.6% yoy and 2.9% yoy, respectively. Following that we’ll receive the July ZEW survey in Germany. Over in the US this afternoon we’ll get the June import price index print along with the NAHB housing market index reading for July. Earnings should be a decent focus for the market today too with Goldman Sachs and Bank of America the latest banks to report (both prior to the open), while Johnson & Johnson (pre-open) and IBM (post-close) are also scheduled.
Сегодня Резервный банк Австралии опубликовал протоколы июльского заседания, согласно которым, по оценке центробанка, целевой уровень ключевой процентной ставки должен быть повышен со временем с 1,5% до 3,5%. Вместе с тем банк отметил, что существует множество неопределенностей, на фоне которых делалась эта оценка. Вместе с тем, по словам экономистов Capital Economics, РБА пока не готов повышать ставки. "Перспективы экономики Австралии остаются позитивными, а более позитивные данные по рынку труда исключили некоторые риски касательно роста зарплат, несмотря на это, не похоже, чтобы РБА стремился повысить ставки" - говорят в Capital Economics. Информационно-аналитический отдел TeleTradeИсточник: FxTeam
Two months after the Fed fined Deutsche Bank a paltry $157 million for manipulating currency markets after the German bank's traders were found to be using "chat rooms" to rig FX trading, we learn that there was more gambling going on here, and on Monday the Fed announced that it will fine French BNP Paribas $246 million "for the firm's unsafe and unsound practices in the foreign exchange (FX) markets." According to the press release, the Board levied the fine "after finding deficiencies in BNP Paribas's oversight of, and internal controls over, FX traders who buy and sell U.S. dollars and foreign currencies for the firm's own accounts and for customers." And, not surprisingly we once again find that FX rigging was confined chat rooms: "The firm failed to detect and address that its traders used electronic chatrooms to communicate with competitors about their trading positions. The Board's order requires BNP Paribas to improve its senior management oversight and controls relating to the firm's FX trading." Perhaps one day the Fed will realize that as long as its keep settling for paltry amounts that are a fraction of how much the banks make by violating the rules (and yes, participating in chat rooms), this type of behavior will never end. That day won't be today. In its complaint, the Fed notes that during the Review Period: BNPP and BNPP Securities lacked adequate governance, risk management, compliance, and audit policies and procedures to ensure that BNPP’s Covered FX Activities complied with safe and sound banking practices and applicable internal policies; Certain FX traders in the spot market at BNPP, including BNPP Securities routinely communicated with FX traders at other financial institutions through chatrooms on electronic messaging platforms accessible by traders at multiple institutions. BNPP’s deficient policies and procedures prevented it from detecting and addressing unsafe and unsound conduct by certain FX traders, including in communications by traders in multibank chatrooms, consisting of: (i) disclosures of trading positions and discussions of coordinated trading strategies with traders of other institutions; (ii) discussions about anticipated FX benchmark fix-related trading and submissions with traders of other institutions; (iii) disclosures to traders of other institutions of confidential customer information of BNPP; (iv) discussions regarding bid/offer spreads offered to FX customers with traders of other institutions; and (v) discussions of trading in a manner to trigger or defend certain FX barrier options within BNPP, in order to benefit BNPP. Today's action is a follow up to the Fed's previous injunection from January 2017 in which the "regulator" permanently prohibited former BNP Paribas trader Jason Katz from participating in the banking industry for his manipulation of FX prices. Here is a blurb from Katz' admission in early Januar, courtesy of Bloomberg Jason Katz, a former Barclays Plc currency trader, admitted conspiring to fix prices in the foreign-exchange market, the third individual to be charged and the first to plead guilty in a long-running U.S. criminal investigation into the rigging of currency rates. Katz appeared in Manhattan federal court Wednesday, where he admitted to participating in a conspiracy with other bankers to manipulate emerging-market currency trades while working at three different financial institutions from 2007 to 2013. Separately, the Federal Reserve Board said it banned Katz from the banking industry. Katz was released on a $150,000 bond to be secured by property in New York’s Delaware County. His travel is limited to New York, Connecticut and London until April 1 when he is to turn over his passport and remain in the U.S. Before BNP, Katz spent a year as director of emerging markets-foreign exchange trading at Barclays beginning in 2010, according to regulatory filings and his previous LinkedIn profile; his current one has been duly scrubbed. Katz joined BNP Paribas in September 2011 as its director of emerging markets-foreign exchange trading, before leaving for Australia & New Zealand Banking Group Ltd. two years later, the documents show. Before joining Barclays, Katz spent more than nine years at Standard Bank, where he was head of foreign exchange, according to his LinkedIn profile. While the Fed said that BNP has agreed to assist the Board of Governors in the supervision of this Order, it is becoming obvious even to lay people that as long as the Fed keeps its penalties at the "laughable" level, nothing ever will change in the FX market. Adding to the irony, today's penalty comes one day after RBA Deputy Governor Guy Debelle said in an interview with The Australian that "banks that don’t sign up to a new global code of conduct for the foreign exchange market will be barred from dealing with central banks and other signatories to the code." "Certainly they will need to sign up within 12 months, otherwise we, as central banks, will stop dealing with them," Debelle says adding that there are positive signs that banks are already improving their behavior. Today's settlement is hardly evidence of that.
With little on the US economic docket in the coming days as the summer doldrums arrive, with Citi saying that "though several events of note linger on the horizon for later this week, G10 is firmly on the beach as of this morning", this week's focus is on the ECB and BoJ meeting along with minutes from the RBA and the Riksbank. Also important are inflation releases from the UK, New Zealand and Canada along with several China data prints. In EM, there are monetary policy meetings in Indonesia, South Africa, Hungary, Kazakhstan and Hong Kong. Here are the key events to look, courtesy of Bank of America, for a macro preview of this week's events and how they may impact currencies see "FX Week Ahead Preview: Is it "End Of Days" For The Greenback": Central banks take centre-stage: watch the ECB and BoJ: BofA believes that after the "Sintra hiccup", the ECB for next week has to choose between "backtracking" and "assuming". They think the ECB will choose the latter, and toughen its language marginally, by removing the easing bias on QE, while insisting on the need for prudence and a "persistent" monetary stimulus. Looking ahead, we think the ECB may wait for the Fed's decision in September before making a move and wait until October before revealing the quantum of QE buying in 2018. At its 20 July meeting, the BoJ policy board is expected to keep its short rate unchanged at -0.1% and keep its guidance on QE unchanged. The weakness in YTD inflation means the BoJ board will likely cut its FY17 core CPI forecasts. But with other indicators pointing to a gradual acceleration in growth and prices, the board has little incentive to change policy, and will likely stick to its optimistic FY18/19 projections. …along with minutes from the RBA and the Riksbank That RBA is expected to likely downplay recent signs of rising prices given the expected tempering effect of supervisory measures on housing activity. Currency strength also argues against a shift to more hawkish tone at this stage. The Riksbank removed their easing bias at the July 4th meeting in a unanimous decision but nevertheless emphasized their dovish tilt and sensitivity to the ECB. It will be interesting to see the thought process of the various members in the Minutes. The week ahead in Emerging Markets There are monetary policy meetings in Indonesia, South Africa, Hungary, Kazakhstan and Hong Kong. Sovereign rating review in Turkey, Saudi Arabia, Czech Rep. and Abu Dhabi. A weekly breakdown from DB's Jim Reid To the week ahead now. After the excitement of China’s data dump this morning there isn’t a huge amount left over the course of the day with final June CPI report for the Euro area and the July empire manufacturing print in the US the only data of note. Tuesday is busy though and we kick off with China property prices data in the morning. In Europe we’ll get the ECB’s bank lending survey for Q2 followed by the June CPI/RPI/PPI data docket in the UK before we end with the July ZEW survey in Germany. Over in the US tomorrow we’ll get the June import price index reading and July NAHB housing market index print. With nothing of note in Europe or Asia on Wednesday, the focus will be on the US with June housing starts and building permits data. Thursday kicks off in Japan where the overnight data includes the June trade data, but the bigger focus will be on the BoJ meeting outcome. During the European session we’ll get Germany PPI and UK retail sales, shortly before the ECB meeting just after midday. In the US on Thursday we’ll get initial jobless claims, Philly Fed business outlook and conference board’s leading index. It’s a quiet end to the week on Friday with UK public sector net borrowing data the only release of note. With the Fed entering the blackout period there is no Fedspeak scheduled this week, while over at the ECB and BoE there are also no scheduled speakers. Other events to note however include the EU’s Barnier and UK’s David Davis meeting for a second round of Brexit talks, kicking off today. The inaugural meeting of the US-China comprehensive economic dialogue on Wednesday in Washington where the first gathering is due to cover economic and trade issues between the two nations. Finally earnings season ramps up in the US with 69 S&P 500 companies due to report including Netlfix (Monday), Goldman Sachs, BofA, IBM, Johnson & Johnson (Tuesday), Morgan Stanley (Wednesday), Microsoft, eBay (Thursday) and GE (Friday). Focusing only on the US, here is a summary table from BofA: Finally, here is Goldman with a focus on the US, together with consensus estimate: The key economic release this week is housing starts on Thursday. There are no scheduled speaking engagements by Fed officials this week. Monday, July 17 08:30 AM Empire State manufacturing index, July (consensus +15.0, last +19.8) Tuesday, July 18 08:30 AM Import price index, June (consensus -0.2%, last -0.3%) 10:00 AM NAHB housing market index, July (consensus 68, last 67): Consensus expects the NAHB homebuilders’ index to tick up in July, after homebuilder sentiment weakened by 2pt. The index remains close to the March cycle high of 71. 04:00 PM Total Net TIC Flows, May (last +$65.8bn) Wednesday, July 19 08:30 AM Housing starts, June (GS +2.5%, consensus +6.2%, last -5.5%); Building permits, June (consensus +2.8%, last -4.9%): The lagged impact of higher mortgage rates appears to be weighing on single family demand for both new and existing homes, despite an otherwise favorable fundamental backdrop. At the same time, the large pipeline of apartment projects in the planning stages suggests scope for a rebound in that segment. Taken together, we expect a 2.5% rebound in overall housing starts, reversing some of the 5.5% drop in May. 08:30 AM Philadelphia Fed manufacturing index, July (GS +25.0, consensus +24.3, last +27.6): We estimate the Philadelphia Fed manufacturing index pulled back 2.6pt to 25.0 in July, after the index declined 11.2pt to 27.6 in June. We expect the index to retrench a bit, but likely to levels still consistent with a solid pace of expansion in manufacturing activity, given encouraging industrial commentary. Thursday, July 20 8:30 AM Initial jobless claims, week ended July 15 (GS 245k, consensus 245k, last 247k); Continuing jobless claims, week ended July 8 (consensus 1,950k, last 1,945k): We estimate initial jobless claims edged down 2k to 245k in the week ended July 15. Initial claims can be particularly volatile around this time of year due to annual summer auto plant shutdowns, and we believe the prior week’s increase likely reflected at least some impact from closures around the July Fourth holiday. We expect this increase in auto-related claims filings to reverse in this week’s report, leading to a modestly lower overall reading. Continuing claims – the number of persons receiving benefits through standard programs – have risen over the last month following a sharp decline in the first four months of the year. Friday, July 21 There are no major economic data releases. Source: DB, BofA, GS
FX Week Ahead, courtesy of Rajan Dhall from fxdaily.co.uk Coming off the back of another bad week for the USD, we look to a barren period for the data schedule in the US, so markets will have to determine whether to extend this weakness based on the evidence so far. Friday's hit on US rates was more a function of the softer retail sales data than the inflation read, where the core year on year was unchanged at 1.7% as forecast. However, with seasonal factors supportive of a pick up in consumer spending in June, there was little improvement on the weak May readings in retail, and USD sellers were back in with force. The greenback ended the week on its lows across the board, but this was tempered to a degree against the JPY and CHF. Even though the JPY is still seen to be a little undervalued at current levels vs the USD, the consistent BoJ policy to keep the key 10yr JGB rate near/at zero is underpinning the spot rate to a degree, but this also depends on whether the global risk tone can be maintained. Despite the backdrop of tensions over North Korea, as well as the ever present risk of president Trump sparking a trade war (with anyone), equities continue to grind higher with their Teflon (Kevlar) coated armour, so the carry trades will naturally follow. On this note, watch out for the China GDP numbers Sunday night and any material drop from the annualised growth rate of 6.9% from Q1 - Q2 forecast at 6.8% and risk sentiment would easily stomach that. Japan are off on Monday - for Ocean Day - but on Wednesday the BoJ meeting is again set to maintain their accommodative stance, just as they publicly communicate on a near weekly basis over the news wires - so nothing new here. The BoJ outlook should show some improvement however, in line with the modest upgrade to their growth forecasts, but JPY divestment and outflow is expected to continue so cross JPY should attract more of the trading next week. Initially, USD/JPY may test 112.00 again as Asia react to Friday's numbers, but strong demand is noted at this level, if not a little lower into the mid 111.00's. There are however, other areas where USD bears are likely to feel just as comfortable, but not without some noteworthy event risk ahead. EUR/USD has been the primary route up until last week, where we saw limits reached into 1.1500. We failed to touch this level after a number of attempts, but dips remain shallow as the positioning for QE tapering later this year remains aggressive. More insider/source stories this week anticipated the ECB meeting in September to be the catalyst, but we have to negotiate Thursday's meeting first. President Draghi and his colleagues are keen to fend off any excessive market reactions, but we have already seen German 10yr hitting 60bps this week, and while this has not been fully reflected in EUR/USD price action, EUR/CHF has offered less resistance on the upside. Pre 1.1100 may offer some resistance, but 1.1125-35 is the next top of note - last seen in May last year. If the market refocuses on EUR/USD again, we sense a tough grind higher, but a move into the 1.1500-1.1600 range nevertheless. This still looks an overstretch in the time frame achieved, but we doubt traders will be deterred from bidding into 1.1300 again, unless EU CPI on Monday slips. EUR/GBP has taken some of the slack however, but this is all down to renewed GBP strength. The focus in the next 5 days will be on whether Cable can build on the gains seen through 1.3000. This is all based on the political mess which has detracted from the hard stance espoused by Theresa May, as her snap election result has backfired hugely - and lifted GBP! Who knew!!! There are still plenty of twists and turns to negotiate, and even though some of the Sterling undervaluation is justified, the reasons for the latest moves will be questioned at these levels. A softer Brexit is still presumptuous at this stage, and with London as a financial sector set to lose out to some degree (Euro swaps clearing) , there WILL be an impact on the UK economy. Over the weekend, ex PM Blair has been 'sounding out' possible sentiment on an EU turnaround, but both Labour and Tory ministers have swiftly responded, with usual mantra the leave means leave. It looks inevitable, but a softer approach will help. EU talks said to start this week, and we have the exit payment to negotiate on first - this will give EUR/GBP a bid on its own (and some), once it is decided upon! Currency jitters are likely to return soon as a result, but how soon? Cable sees strong resistance from 1.3145 to 1.3190, while EUR/GBP sees demand into 0.8700, if not the mid 0.8600's. On the data front, UK inflation is due out on Tuesday, where the headline rate is expected to stay at 2.9%. It is for this reason that certain members at the MPC have turned hawkish, so Gilts will react accordingly. Retail sales on Thursday will be just as influential, with forecasters looking for a rebound from the heavy drop seen in May. Good times for the CAD at the moment, and this is all on the recognition of the healthy data some of us have been pointing to when USD/CAD was pushing through 1.3600 (ahem). I remember at the time, calls for 1.4000 when we cleared 1.3500 initially, and how the mood has changed. More room for the CAD to appreciate for sure, and perhaps to 1.2200-1.2000 towards the end of the year, but that is some 3-5 months away, so perhaps some consolidation first. NAFTA renegotiations hang over Canada as they do over Mexico, but the risks are greater for Mexico as the Canadian benefits have matched those of the US. On the domestic front, the strong data of late has been tempered by inflation, and we get the latest readings which could tame the CAD rally. 1.2825-30 and 1.2950-1.3000 are the initial upside areas where USD/CAD sellers will look to join in on this party, and based on the mood in the USD, we have to wonder if we will even seen these levels before we test 1.2500! AUD/USD ended the week on a very strong note, pushing up into and through most of the 0.7750-0.7850 target range. The upper end is the top of a major breakout point, and this could underline a stronger base in the 0.7200-0.7300 area lower down, but we expect a move on 0.8000 higher up - which is not outside the realms of possibility - will have the RBA getting hot under the collar again. Exchange rate levels threaten imbalances to exports and growth, and along with the RBNZ, prompt verbal intervention when nearing these levels, with 0.7500 in NZD/USD likely set to do the same. The latter somewhat unconvincingly worked through orders in the 0.7330-50 zone last week but failed to hold above here, so perhaps traders are anticipating central bank speak a little earlier. In Australia, we have the June employment report midweek to look to, with the RBA meeting minutes offering little more than we already know due to the detailed statement under a fortnight ago. Monday night offers up the NZ inflation data, while on Tuesday we have the global dairy auctions (Fonterra). All very quiet in the Scandies, but gains in the NOK and SEK vs the USD have taken us to and through some key levels, and say more about the fate of the greenback than anything else. Have a great trading week!
Submitted by Rajan Dhall from fxdaily.co.uk FX Week Ahead - 10-15 July The week after the US jobs report in recent months has been a mixed one for the USD, and will be no more so next week after headline employment was once again tempered by ongoing sluggish wage growth. After a much higher than expected 222k gain, the 2.5% yoy rate was net unchanged in June, but this due to a downward revision in May. Consequently, the immediate USD reaction was negative, with so much focus on earnings promptly drawing fresh sellers, but this proved limited with some of the key pairings having pushed against some extended levels. EUR/USD is the overwhelming component in the USD index, and has weighed heavily on the greenback due to the aggressive positioning for eventual ECB tightening later this year. Despite all the efforts from a number of governing council members, not least of president Draghi himself to curb some of relentless upward pressure in the EUR and EU wide rates, the improving data outlook and references to reflationary forces offer little prospect of a meaningful retracement. The was highlighted by the strong demand ahead of 1.1100 a few weeks back which then generated the move through 1.1300, and again ahead of the latter level to retest the initial resistance into 1.1440-50. Target levels beyond this lie in the 1.1525-1.1600 area, if not a touch further, but higher levels will not only dampen inflation rates in the region, but also heighten 'defensive' rhetoric from the ECB. Benoit Coeurre tried hard last week, and is due to speak again over the next few days. From the data perspective, we have a number of harmonised inflation releases in the leading member states, as well as EU Sentix investor confidence Monday, industrial production Wednesday and trade numbers on Friday. German trade data also due out. Out of the US, we have a little more colour on employment as we have the trends and Fed labour conditions indices on Monday, with JOLTS job openings on Tuesday an interesting one as April saw this rise to record levels above 6 milllion in April. Over Wednesday and Thursday however we have Fed chair Yellen testimony on the semi annual report on monetary policy and the economy, but so soon after the minutes last week and the constant stream of Fed speak from fellow members, we struggle to see what else she can offer that can truly shape the path of the USD outside of hard data. To that end, Friday is loaded with the top tier next week where both the latest inflation stats and retail sales numbers are due for release. Even so, USD/JPY looks set to probe higher levels. US Treasury yield has been steadily on the rise through the past week, and was given a further push by the sell off in Bunds on Thursday, as were most of the G10 rates. Yield control measures forced the BoJ's hand as the zero target for the 10yr was returned, and this gave the spot rate fresh legs through 114.00. 114.50-115.00 higher up is a very heavy zone to contend with however, and with concerns over North Korea causing heightened tensions in the west, we see strong profit taking interest up here at the very least. Those looking at the Japanese data do so for a much longer term outlook, and core machinery orders at the start of week and industrial production at the end of it head the schedule. The BoJ's Kuroda is due to speak also, but there is even less to get excited about here as there is virtually no prospect of departure from script. Out of China, we have trade data to note on Wednesday, where we expect the greater interest will lie compared to the inflation numbers on Monday. In the UK, the political pundits continue to argue over how the intra and cross party disagreements and divisions impact on whether we get a hard or soft Brexit. We sense the market is a little tired of the negative aspects in focus, but will be hard pressed to ignore the domestic data which has taken a 'tentative' turn for the worse. We have seen a resilience in Cable building up in recent months which has led to a number of attempts on 1.3000+, but which continue to falter at these levels as the market gauges what near term value levels are justified with close to 2 years of EU talks ahead of us. Proponents for higher levels will naturally point to the hawkish talk from certain MPC members, not least of all Haldane, who voted to remain on hold at the last meeting. Were he to act on his assertions, the vote split would balance out at some point in H2, and we can see how impulsive 'pre positioning' can be! Haldane is down to speak again next week, alongside his colleague Broadbent. Cable remains well placed to attack sellers into 1.3000 again, but on the downside, dip buyers citing longer term value rather than rate hike expectations have been stepping in in the mid 1.2800's. Ranges are tightening here, but EUR/GBP is starting to show that familiar stubborness to the upside, though 0.8900 and 0.9000 remain tough obstacles ahead. While the hawkish twist has been a surprise at the BoE, it may be a little more palatable in Canada, but not just on the say so of the BoC. From the early stages of the year, the domestic data has been improving significantly, with the annualised growth rates outpacing some its major counterparts - albeit for now. However, the with the central bank citing broader adjustment to the low Oil price environment and employment levels rising consistently, CAD shorts - which reached record highs some 3-4 weeks ago (!) - have been turned aggressively, not only to see USD/CAD take out 1.3000 but 1.2900 since. The latter figure level gave way on Friday on yet more positive jobs numbers, and raised the odds for a 25bp hike at this week's meeting to over 90%. This may seem generous despite the change in sentiment reflected on both the governor and deputy governor's words recently, and especially so with inflation weak here also. As such, the risk for the CAD may lie to the downside, but a BoC move would generate an extension to the rally which would see 1.2750-1.2800 at the very least. Very little of note out in either Australia or New Zealand next week, so expect the AUD and NZD to follow the general risk themes, pushing higher when the hunt for yield resumes. NZD has been a little more attractive since the government announced the budget surplus a little over a month ago, and along with the relaxed tone from the RBNZ continues to eye a return through 0.7300 vs the USD. Twice we have tested the key 0.7330-50 zone, and twice we have failed, but demand south of 0.7250 remains strong. NZD/JPY is now testing 0.8300, and looking to the highs seen at the start of the year. As a result, one could argue that the AUD has better prospects ahead near term, having weathered a less enthusiastic RBA and in the aftermath of some unwelcome downgrades to some its leadng banks. Growth figures for Q1 were disappointing, and certainly so in comparative terms, but metal prices have been holding much of the recent recovery, so if mining investment is set to turn as the RBA believes, the resilience will continue - for now at least. Even so, AUD/USD north of 0.7750 looks a stretch, but below 0.7550 is just as congested, but will be determined by USD performance ahead. As such, the AUD/NZD base either side of 1.0400 will be pivotal in the next few weeks, while AUD/JPY has a little more room before it nears its respective 2017 highs.
Authored by Joe Hildebrand and John Adams via News.com.au, AUSTRALIA has missed its chance to avoid a potential “economic apocalypse”, according to a former government guru who says that despite his warnings there are seven new signs we are too late to act. The former economics and policy adviser has identified seven ominous indicators that a possible global crash is approaching — including a surge in crypto-currencies such as Bitcoin — and the window for government action is now closed. John Adams, a former economics and policy adviser to Senator Arthur Sinodinos and management consultant to a big four accounting firm, told news.com.au in February he had identified seven signs of economic Armageddon. He had then urged the Reserve Bank to take pre-emptive action by raising interest rates to prevent Australia’s expanding household debt bubble from exploding and called on the government to rein in welfare payments and tax breaks such as negative gearing. Adams says he has for years been publicly and privately urging his erstwhile colleagues in the Coalition to take action but that since nothing has been done, the window has now closed and Australia is completely at the mercy of international forces. “As early as 2012, I have been publicly and privately advocating that Australian policy makers take pre-emptive policy action to deal with the structural imbalances within the Australian economy, especially Australia’s household debt bubble which in proportional terms is larger than the household debt bubbles of the 1880s or 1920s, the periods which preceded the two depressions experienced in Australian history,” he told news.com.au this week. “Unfortunately, the window for taking pre-emptive action with an orderly unwinding of structural macroeconomic imbalances has now closed.” Former Coalition economic adviser John Adams.Source:The Daily Telegraph Adams has now turned on his former party and says both its most recent prime ministers have led Australia into a potential “economic apocalypse” and Treasurer Scott Morrison is wrong that we are heading for a “soft landing”. “The policy approach by the Abbott and Turnbull Governments as well as the Reserve Bank of Australia and the Australian Prudential Regulation Authority, which has been to reduce systemic financial risk through new macro-prudential controls, has been wholly inadequate,” he says. “I do not share the Federal Treasurer’s assessment that the economy and the housing market are headed for a soft landing. Data released by the RBA this week shows that the structural imbalances in the economy are actually becoming worse with household debt as a proportion of disposable income hitting a new record of 190.4 per cent. “Because of the failure of Australia’s political elites and the policy establishment, the probability of a disorderly unwinding, particularly of Australia’s household and foreign debt bubbles, have dramatically increased over the past six months and will continue to increase as global economic and financial instability increases. “Millions of ordinary, financially unprepared, Australians are now at the mercy of the international markets and foreign policy makers. Australian history contains several examples of where similar pre conditions have resulted in an economic apocalypse, resulting in a significant proportion of the Australian people being left economically destitute.” Following his landmark seven signs of the economic apocalypse, which was read by a quarter of a million people, Adams has now identified seven signs that it is too late for Australia to take action. Here they are in his own words: SIGN 1: TIGHTENING MONETARY POLICY The US Federal Reserve has raised interest rates. Picture: Andrew Caballero-ReynoldsSource:AFP A cycle of global monetary tightening has begun. For example, the US Federal Reserve has raised short term interest rates in December 2016, March and June 2017 with more forecasted increases to come. The US Federal Reserve also announced a program, expected to commence within months, which would shrink its balance sheet (i.e. quantitative tightening) by selling its holdings of $US6 billion a month from Treasuries and $US4 billion a month from mortgage bonds, increasing each quarter until the Fed’s balance sheet is being reduced by a total of $US50 billion a month or $US600 billion per year. Market expectations are now being set by officials at the Bank of Canada and the Bank of England for higher interest rates in both Canada and the UK in the near future. Due to Australia’s record high foreign debt, increases in the international cost of credit are being passed onto Australian borrowers through the banking system, particularly on interest-only and investor loans. SIGN 2: INVERTED AND FLATTENING YIELD CURVES Chinese officials kick off trading on the long awaited Bond Connect link. Picture: Vincent YuSource:AP In May 2017, the Chinese Government bond market recorded its first ever inverted yield curve. Also, the US Government bond yield curve, over the past 6 months, has significantly flattened as some market analysts anticipate an inverted US yield curve in late 2017. Inverted yield curves (or where long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality) are known as a market predictor of a coming market crash or broader economic recession. SIGN 3: SOVEREIGN AND CORPORATE DEFAULTS Corporate defaults are emerging around the world. Picture: Bryan R. SmithSource:AFP Sovereign government and corporate defaults in both developed and developing economies are beginning to emerge. For example, China has registered in 2017 its highest level of corporate defaults in the first quarter of a calendar year on record. Delinquencies and charge-offs in the United States soared to $US1.4 billion in the first quarter of 2017, the highest recorded level since the first quarter of 2011. Also, in May 2017, creditors to the International Bank of Azerbaijan (Azerbaijan’s biggest bank) were forced to take a 20 per cent haircut (i.e. a partial default) which was upheld in June by a US Bankruptcy court in New York. SIGN 4: FALLING CONFIDENCE AND CREDIT DOWNGRADES In May 2017, six major Canadian banks were downgraded by Moody’s Investor Service (Moody’s) as concerns rise over soaring Canadian household debt and house prices leave lenders more vulnerable to losses. Moody’s also downgraded China’s sovereign debt in May 2017 for the first time since 1989 and has warned of further downgrades if further reforms are not enacted. In May 2017, S&P has downgraded 23 small-to-medium Australian financial institutions as the risk of falling property prices increases and potential financial losses start to increase. In June 2017, Moody’s downgraded 12 Australian banks, including Australia’s four major banks. Standard and Poor’s and Moody’s downgraded bonds for the US State of Illinois down to one notch above junk bond status as the state has over $US 14.5b in unpaid bills. Despite a new budget deal passing the Illinois state legislature which raises more revenue through higher taxes, Moody’s this week has placed the state government’s bonds under review for possible downgrade. SIGN 5: EMERGING CHINESE CREDIT CRISIS There could be big trouble in big China. Picture: Keith TsujiSource:Getty Images Significant concerns among international observers are now being discussed publicly regarding the $US4 trillion Chinese Wealth Management Product (WMP) market as Chinese bank regulators are now taking significant interventionist steps to drain liquidity and reduce financial risk. As a result of recent interventionist steps, the one-year Shanghai Interbank Offered Rate hit a two year high at 4.30% in May 2017. The Chinese WMP market has, in the past few years, experienced significant growth involving long term asset acquisition funded through the use of short term liabilities. Evidence is emerging that the long-term assets within WMPs are not performing consistent with expectations resulting in difficulties meeting short term debt obligations. The WMP market represents approximately 10% of the Chinese banking system whereas the 2006 07 subprime mortgage backed securities crisis only represented 2% of the US banking system. SIGN 6: SIGNIFICANT GROWTH IN VALUE OF CRYPTO CURRENCIES Bitcoin is on the rise, which is not comforting news. Picture: Roslan RahmanSource:AFP In the past five months, the crypto currencies industry (especially the leading five internationally recognised cryptocurrencies) have experienced tremendous growth in market capitalisation indicating that investors are seeking to escape the formal banking and financial system as well as government mandated fiat currencies. This is particularly acute in Japan where Japanese businesses and citizens have been pouring into Bitcoin given the Bank of Japan’s unconventional monetary policy measures, such as negative interest rates, as well as that Bitcoin has become legal tender in Japan in April 2017. For example, Bitcoin has experienced growth in market capitalisation by approximately 170% in the past 4 months, while Ethereum has grown by an approximate 2504%, Ripple by an approximate 4025%, NEM by an approximate 3194% and Litecoin by 1236%. SIGN 7: DISCREDITED AUSTRALIAN FISCAL AND MONETARY POLICY Australian policy makers have failed to address economic imbalances. Picture: Stefan PostlesSource:Getty Images The 2017-18 Turnbull Government Budget, as well as recent decisions by the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA), have failed to address the structural imbalances and impediments plaguing the Australian economy. For example, many of the assumptions underpinning the Turnbull Government’s 2017-18 Budget, including assumptions relating to growth in real Gross Domestic Product, non-mining investment, wages and household consumption, are highly questionable and almost certain not to eventuate, placing significant risk that the Federal Government will not deliver a budget surplus in FY2020-21 as currently projected. Moreover, despite the introduction of new macro prudential rules by APRA, artificially low interest rates by RBA driven by a flawed monetary policy framework, has seen Australian household debt as a proportion of disposable income continue to climb to a new record high and now stands at 190.4%. * * * Adams' comments confirm the grave fears of Philip Parker, who serves as Altair's chairman and chief investment officer, who just returned hundreds of millions of dollar of his fund's money to clients... "...this is not a winding up of Altair, but a decision to hand back client monies out of equities which I deem to be far too risky at this point." "We think that there is too much risk in this market at the moment, we think it's crazy," Parker said with a candidness few of his colleagues are capable of, at least when still managing money. "Valuations are stretched, property is massively overstretched and most of the companies that we follow are at our one-year rolling returns targets – and that's after we've ticked them up over the past year. Now we are asking 'is there any more juice in these companies valuations?' and the answer is stridently, and with very few exceptions, 'no there isn't'." "Let me tell you I've never been more certain of anything in my life," Parker said. "I am absolutely certain we are in a bubble in this property market. Mortgage fraud is endemic, it's systemic, it's just terrible what's going on. When you've got 30-year-olds, who have never seen a property downturn before, borrowing up to 80 per cent to buy three and four apartments, it's a bubble." In a rather dire forecast, Parker outlined a situation where the stock market could fall as low as 5200 points in the coming months, depending on the confluence of his identified risk factors. "Australia hasn't had its GFC event, we've been living in this fool's paradise. But if China slows down the way the guys think it will towards the end of this year, then that's 70 per cent of our exports [affected]. You can see already that the commodity market is turning down." Some speculated whether there is another motive behind the sudden shuttering, but Parker stridently denied any suggestion that there were other factors at play other than a pure investment decision. No personal issues, no position that has blown up and forced his hand. "No, God no," he said. "We've sold out all of our positions at huge profits for our clients."
Один покупатель выкупил все государственные облигации Австралии на 800 млн австралийских долларов ($609 млн), проданные в среду. Это крупнейшая покупка для одного участника аукциона с 1982 г., сообщает Bloomberg.
Один покупатель выкупил все государственные облигации Австралии на 800 млн австралийских долларов ($609 млн), проданные в среду. Это крупнейшая покупка для одного участника аукциона с 1982 года, сообщает Bloomberg.