Most Asian indices were in the green as rising oil prices bolstered sentiment, even after recent disappointing economic data emerged from the US, China and Japan. Investors continue to be unnerved as optimism remains that central banks will come to the rescue by way of stimulus.
- US retail sales in July posted zero growth from a month earlier, missing the consensus estimate of a 0.4% gain.
- PPI last month declined unexpectedly 0.4% month-on-month and 0.2% year-on-year, missing estimated increases of 0.1% and 0.2% respectively. Core PPI, which strips out the effects of food and energy, slid 0.3% month-on-month; a 0.2% rise was expected.
- The University of Michigan reported its consumer sentiment gauge rose to 90.4 from 90.0, lower the 91.5 predicted by economists.
- The Fed’s St Louis President James Bullard said he thinks the current regime, plagued by low growth, productivity and rates of return on real government debt, will persist and thus foresees the policy rate to stay flat over the horizon with just one rate hike.
- The S&P 500 Index fell 0.1% last Friday, after closing at an all-time high for the ninth time in a month. Lacklustre retail sales numbers led to risk aversion; sectors that led declines include materials and telecoms.
- The US dollar sold off initially but managed to pare back most losses towards the close; the Bloomberg Spot Dollar Index, which tracks the greenback against a group of 10 major peers, closed 0.1% lower.
- US 10yr Treasury yields fell 5bps to 1.51%, as the implied probability of a Fed hike this year fell to 16% this morning, down from 18% last Friday.
- Canada’s economic recovery is lagging so far behind the US that even a rebound in crude prices is failing to boost the Canadian dollar.
- According to Bloomberg data, the 4-week correlation between the loonie and crude oil fell to an 18-month low last week. Oil has surged 7% in August while the loonie is up just 0.6%, trailing other commodity-linked currencies such as the Norwegian krone and the Mexican peso.
- Canada’s relative economic weakness was highlighted on 5th Aug when jobs data in the US continued to gain traction while that of Canada’s slipped.
- BOE’s plan to purchase £10 billion worth of corporate bonds to revive the economy following Brexit may not be large enough to make a difference, as the plan is spread over 1.5 years which effectively means buying less than £600 million a month in a market where some traders put monthly secondary-market turnover at about £10 billion.
- By comparison, the ECB accumulated £13 billion worth of corporate bonds in just the first 2 months alone for its own program.
- 2Q GDP expanded by an annualized 0.2% quarter-on-quarter, slowing from the previous quarter expansion of 2.0% and missing analysts’ expectations of a 0.7% growth.
- Business spending contracted for a second straight quarter, falling 0.4%; a gain of 0.2% was expected.
- Private consumption matched expectations, increasing by 0.2%.
- M2 money supply growth in July slowed to 10.2% year-on-year, from 11.8% the previous month; economists were expecting an increase of 11.0%.
- The IMF said China’s $2.9 trillion worth of “shadow” credit products are high-risk and illiquid and called for reforms. The commentary also highlighted the potentially-bigger risks to the nation’s financial stability, compared to that from companies’ loan defaults.
- As authorities allow more companies to collapse, domestic bond failures soared this year to a total of $3.4 billion since 2014.
- Spot gold decline 0.8% to $1,335.97/Oz, to essentially close flat for the week. The $1,330 support continues to hold firm.
- Silver for immediate delivery slumped 2.5% last Friday, to close at 19.7125/Oz for the week.
- WTI futures expiring in September extended its recent rally, climbing 0.9% to $44.91/bbl earlier today.
- Saudi Arabia signalled it’s prepared to discuss stabilizing markets at informal OPEC discussions next month.
- Spot 1.3467
- USDSGD rose for the third consecutive session, adding 0.2% to 1.3476 earlier today.
- The August high of 1.3493 acts as the next resistance point.
- Spot 0.7649
- The Aussie dollar extended its weakness against the US dollar from Friday, by a further 0.2% this morning to 0.7637.
- The currency pair is currently trading around a previously-broken resistance level of 0.7650.
- Spot 1.2966
- USDACD ended Friday 0.7% lower at 1.2951, as higher crude oil prices continued to buoy the Canadian dollar.
- The next key support remains at the 1.2800 handle.
- Spot 6.6533
- The PBOC sets its fixing rate 0.2% higher to 6.6430 against the dollar.
- Onshore yuan fell the most in 6 weeks as recent economic data signalled that growth is stalling.
- USDCNH was 0.1% higher at 6.6579.
- Spot 1.2933
- GBPUSD pared some of its 0.5% losses last week, rising 0.2% to 1.2940 earlier today, but not before reaching a 1-month low of 1.2901 at the open.
- Reports on inflation, retail sales and unemployment benefit claims for July are due to be released this week and will provide more detail on how the economy is faring post Brexit.
- Poorer-than-expected economic numbers will drive speculation for more stimulus and weaken sterling further.