Most Asian stocks rose, following gains in US shares as investors focus on evidence of strength in the world’s largest economy, following a positive consumer spending report last night. Government bonds, precious metals and crude oil rebounded as well.
- Core PCE, the Fed’s favoured inflation gauge, for last month rose 0.1% month-on-month and 1.6% year-on-year, maintain previous month’s pace; economists were expecting 0.1% and 1.5% rises respectively.
- Personal spending and income matched expectations, coming in at 0.3% and 0.4% respectively. In addition, previous figures were revised higher across the board.
- According to Bloomberg pricing data, the odds of a Fed hike in September fell from 42% on Friday to 32%, mirroring a decline in treasury yields and a slightly higher equity market.
- Treasuries surged, paring or erasing Jackson Hole losses; benchmark 10yr yields shed 7bps to 1.56%.
- The yield spread between 30-year bonds and 2-year notes shrank to the least since 2007, indicating traders are betting on higher borrowing costs.
- The US dollar edged higher earlier today, with the Bloomberg Spot Dollar Index climbing 0.2%; the gauge had advanced 0.8% on Friday and a further 0.1% last night.
- The S&P 500 Index rebounded to close 0.5% higher led by good consumer spending reports, halting its longest run of losses since June; financial stocks led gainers following last Friday’s hawkish comments from the Fed.
- Retail sales in July rose 1.4% from a month earlier, beating expectations of a 0.8% rise.
- Retail trade last month fell less than expected, by 0.2% instead of the 0.9% forecasted.
- July jobless rate improved to 3.0% from 3.1% in June.
- Building approvals in July jumped 11.3% month-on-month, reversing last month’s decline of 3.7% and beating expectations of a 1.1% rise.
- Spot gold was 0.4% higher earlier today at $1,325.59/Oz, although the precious metal is clearly on a downside bias. The previous support of $1,330/Oz now acts as a resistance level, while to the downside, the next area of support should come in between $1,300/Oz and $1,310/Oz.
- Silver, too, seems to have lost a little shine lately; spot silver continues to be capped at the $19.00/Oz resistance.
- Spot 1.3613
- USDSGD remains largely unchanged as it continues to maintain above the 1.3600 handle.
- Spot 0.7565
- AUDUSD pared its previous day’s losses to rise 0.3% to 0.7582.
- The pullback seems to be a correction though, as for it to be a reversal, a rebound back above 0.7600 is warranted.
- The apparent willingness of the Fed to hike rates means incoming RBA Governor Philip Lowe may have the ability to hold onto the policy ammunition that his predecessor bequeaths him.
- Spot 1.3028
- USDCAD extended its recent rise, advancing 0.3% to a high of 1.3048 last night.
- Tomorrow night’s GDP release should shed more light on the economy; analysts are expecting a quarterly annualized contraction of 1.5%, more than the BOC’s most recent forecast of -1.0%, which could lead the central bank to cut is full-year growth target rate and weaken the Canadian dollar further.
- Spot 6.6894
- The PBOC strengthened its fixing by 0.1% to 6.6812 against the dollar.
- USDCNH was 0.1% lower at 6.6859 after testing the 6.7000 level yesterday.
- Derivative markets are pointing to renewed bets on yuan depreciation after this weekend’s G-20 summit in China; speculation is rife that the PBOC would let the yuan fall between the G-20 gathering and the currency’s entry into the IMF’s SDR on Oct 1st, especially with the chances of a Fed hike in September increasing.
- Spot 102.13
- The yen held losses against the dollar at the 102 level following its 2% advance over the past 3 sessions.
- Spot 1.3083
- After falling for 3 straight days, GBPUSD remained largely unchanged below the 1.3100 handle.