Asian stocks rallied for a fourth day earlier today and commodities advanced, led by gains in precious metals amid expectations that central banks in the world’s leading economies will add further monetary stimulus.
- The S&P 500 rose 0.2% to cap a 4-day rally, recouping all but around 0.5% of its 2-day decline triggered by Brexit. The US markets will remain shut Monday for Independence Day.
- ISM manufacturing for June came in at 53.2, beating median estimates of 51.3.
- An election on Saturday left neither of the major parties with enough seats to form a government in each of their own right, casting the future of the nation’s leadership in doubt and raising the prospect that Prime Minister Turnbull will be forced to work with a handful of disparate independent lawmakers in order to stay in power.
- The hung parliament is a threat to the country’s AAA rating. Voting resumes Tuesday and Turnbull said the result may be known by the end of the week.
- Chancellor of the Exchequer George Osbourne has set a goal of lowering the corporate tax rate to 15%, from 20%, in an effort to keep businesses investing in the UK as it prepares for Brexit.
- A Bloomberg survey has shown increased expectations of a China bank bailout within the next 2 years, with the majority predicting that it will exceed $500 billion in costs.
- Non-performing loans for Chinese lenders jumped by more than 40% in the 12 months ended March to $210 billion.
- Following Friday’s 7.5% surge, spot silver advanced another 7.0% this morning to $21.1377/Oz, its highest level in almost 2 years.
- Gold added 1.2% to test its post-Brexit high of $1,358.54/Oz.
- Global gold holdings have expanded by more than 500 metric tons since bottoming in January in a signal of investors’ rising concern about slowing growth, a Fed that’s probably on hold and heightened concerns on Brexit.
- Spot 1.3441
- The Singapore dollar extends its advance for a fifth day as near-record low Treasury yields continue to weigh on the US dollar.
- Immediate near-term support comes in at 1.3313, the currency pair’s year-to-date low.
- June PMI is expected to remain the same at 49.8 for a third consecutive month, according to a Bloomberg survey. Data is due for 9pm local time.
- Spot 0.7496
- The currency pair opened the week 0.7% lower due to Saturday’s election results, but has since recovered back to Friday’s closing levels.
- The RBA is due to meet tomorrow and is expected to keep its cash target rate unchanged at a record low 1.75%.
- With the nation’s government in limbo, AUDUSD will continue to bear more risk to the downside with the 200-day moving average of 0.7294 a decent support level.
- Spot 1.2895
- More sideways action is likely for USDCAD, with resistance coming in at 1.3188 and support at 1.2655.
- The currency pair ended Friday 0.1% lower, capping 4 consecutive days of declines.
- Spot 6.6762
- Onshore yuan fell to 6.6639 earlier today, its lowest level since Dec 2010. Offshore yuan was little changed from Friday’s close as it continues to fluctuate between 6.6800 and 6.6700.
- The PBOC strengthened its yuan fixing marginally by 0.04% to 6.6472.
- Shorter-term resistance for USDCNH comes in at the 6.7000 handle, while on a broader basis, the Jan 2016 high of 6.7618 remains a key level.
- Spot 1.3286
- Bank of England Governor Mike Carney is set to make his third appearance in 12 days on Tuesday to address the threats facing the financial system.
- He will outline the macro-prudential tools available to support the economy, boost business lending and encourage investment. It is speculated that he might also ease capital requirements for lenders.
- Carney had signalled a willingness to cut interest rates last week.
- GBPUSD fell 1.6% on Friday; its post-Brexit low of 1.3121 remains the near-term support.