Asian stocks extended upon a global rally as investors continue to pile on riskier assets, in turn damping demand over haven assets such as gold and the Japanese yen. Base metals such as iron ore and copper surged, buoying commodity producers across Asia.
- The US import price index in January climbed 0.4% month-on-month and 3.7% year-on-year, more than the respective gains of 0.3% and 3.4% predicted.
- The preliminary February reading of a sentiment gauge from the University of Michigan fell to 95.7, from 98.5 in January, less than the 98.0 expected.
- The Fed’s Vice Chairman Stanley Fischer has defended post-crisis US banking reforms, which President Trump wants to undo, and added that the central bank is focused on its dual mandate for inflation and jobs amid “significant uncertainty” on fiscal policy.
- Daniel Tarullo, the Fed official who spearheaded the push to make banks safer after the 2008 financial crisis, plans to step down in early April, amplifying President Trump’s ability to reshape the central bank’s oversight of Wall Street and monetary policy.
- The S&P 500 Index climbed last Friday for the fourth consecutive day, closing 0.4% stronger at a record high; materials, industrials and energy shares led gainers.
- The US dollar was mostly stronger against peers today, with the Bloomberg Dollar Spot Index rising by as much as 0.3% to a 2-week high earlier before paring gains.
- Treasuries slid as US yields continue to rise; the benchmark 10yr Treasury yield closed 2bps higher last Friday, and added another 2bps earlier today after trading up to as high as 2.43%.
- Last Friday’s jobs report showed 48,300 jobs were added in January, soundly surpassing the predicted 10,000 drop, and increasing upon December’s gain of 46,100. 15,800 full-time jobs were added, while 32,400 part-time positions were created.
- The unemployment rate fell to 6.8%, from 6.9% prior.
- In contrast, wage data showed underlying weakness as average hourly wages for permanent employees increase 1% year-on-year, the slowest pace of growth since 2003.
- Industrial production in December rose 1.1% from a month earlier and 4.3% from a year ago, surpassing the median estimates of 0.2% and 3.2% respectively.
- Manufacturing production over the same respective periods came in at 2.1% and 4.0%, better than the 0.5% and 1.7% predicted by analysts.
- 4Q GDP rose 0.2% quarter-on-quarter, and 1.0% on an annualized basis over the same period, missing on the respective consensus estimates of 0.3% and 1.1%.
- Output in Japan expanded in each quarter last year, the longest uninterrupted period of growth over the past 3 years, and was largely boosted by surging exports which gained 11% in annualized terms over the last 3 months of 2016.
- However, domestic consumer spending remained flat over the same period.
- Stocks in Tokyo gained after Japan PM Shinzo Abe and US President Trump refrained from arguing above currency levels during the Abe’s 2-day US visit.
- In its quarterly update of forecasts released today, the RBA left inflation estimates broadly unchanged, while growth in the year to June 2017 was cut by 1 percentage point due to a “base effect” from a contraction in 3Q. It however expects GDP growth to increase to 2.5-3.5% in late 2017 and to be above potential for most of the forecasted period. The RBA also warned that higher commodity price levels are unlikely to be sustained.
- Spot gold fell 0.5% to $1,228.01/Oz earlier today, following its rebound off the $1,220/Oz handle last Friday night.
- Gold’s correction over the past 2 sessions has coincided with US equities making new record highs, as broad risk-on sentiment among investors led them to spurn haven assets in search of riskier ones.
- The precious metal could undergo some consolidation between the range of $1,220/Oz and $1,250/Oz over the near term.
- In contrast, silver for immediate delivery gained 1.0% to $17.9487/Oz on Friday, after reaching the $18/Oz resistance for the first time in 3 months.
- Crude oil futures expiring in March added 1.6% to $52.86/bbl last Friday, after testing the $54/bbl resistance for the ninth time in the last month. 2 consecutive closes above $54/bbl could signal more upside, with a move to the $56/bbl a possibility.
- The jump in oil came after the IEA said OPEC had achieved a record 90% initial compliance with its output-cut deal while demand grew faster than expected.
- In the US, drillers increased the rig count to the highest since October 2015, according to data released by Baker Hughes Inc.
- Spot 1.4227
- USDSGD gained 0.4% to an intraday high of 1.4259 earlier today, extending upon last week’s rise.
- The downtrend since the turn of the year remains intact, but a breakout above the 1.4325 resistance could signal a potential reversal.
- To the downside, the 1.4000 remains the support level to watch.
- Spot 0.7673
- AUDUSD was relatively unchanged from Friday’s close of 0.7674, as the 0.7700 resistance continues to hold firm.
- According to a Bloomberg analysis report, the Australian dollar may extend upon its recent rally on the back of continued strengthening of iron ore prices, which recently rose to a 2-year high.
- Beyond 0.7700, the key resistance comes in at 0.7835 – the currency pair’s high last year.
- Spot 1.3087
- USDCAD declined for the third straight day last Friday, falling 0.3% to 1.3083, and was largely unchanged earlier today after paring an initial rise above the 1.3100 handle.
- The 1.3000 continues to be key, and 2 consecutive daily closes below it should indicate further downside momentum, with the next support below coming in at 1.2800.
- Spot 6.8784
- The PBOC weakened its daily reference rate by 0.11% to 6.8898 to the dollar.
- USDCNH rose 0.3% to 6.8840, and looks set to gain for the sixth consecutive session.
- The 6.8000 remains as a significant support level.
- Spot 113.64
- Building upon Friday’s 0.8% gain, USDJPY climbed a further 0.8% earlier today past 114 before paring back its advance following the slightly-worse-than-expected 4Q GDP release.
- Some consolidation is expected between the range of 112 – 115.50.
- Spot 1.2512
- GBPUSD was relatively unmoved earlier, fluctuating around the 1.2500 handle.
- The long-term post-Brexit downtrend remains intact. The key resistance at 1.2800 needs to be broken convincingly to signal a possible reversal in trend. To the downside, the 1.2400 support remains crucial.