Political uncertainty continues to drive financial markets, with safe haven assets such as gold and the Japanese yen maintain overnight gains. Most government bonds traded higher following a rally in US Treasuries. Asian equities were mixed; gains in Shanghai, Seoul and Singapore were offset by declines in Tokyo and Sydney.
- The S&P 500 Index was little changed, closing less than 0.1% higher, after climbing back from a selloff earlier in the session. Energy producers turned higher after oil rose following an unexpected slide in US gasoline supplies.
- The NASDAQ eked out gains to finish at a record high for the second consecutive day, but financial stocks dragged the Dow Jones Industrial Average lower, which ended 0.2% down.
- Trades sparked by Donald Trump’s election continued to falter as long-awaited details on pro-growth policies remain undelivered. Even on of the best corporate earnings season since the financial crisis hasn’t been able to jolt equities higher, as macroeconomic uncertainty continues to drive demand for safety.
- The US dollar continues to fluctuate, with the Bloomberg Dollar Spot Index paring losses earlier today following its 0.1% lower close in New York last night.
- The benchmark 10yr Treasury yield fell 5bps to 2.34%, falling for the fourth straight day, amid fading hopes that Trump’s administration would hammer out any comprehensive fiscal stimulus anytime soon.
- According to Moody’s Investors Services, a record $1.06 trillion of junk debt will mature between 2017 and 2021, leaving high-risk companies to hunt for new cash at a time when markets are likely to be less welcoming. The bulk of the debt, $933 billion, will be due after 2019, the reported added. New issuance is likely to rise in the second half of this year to start addressing those maturities.
- Canada’s foreign minister Chrystia Freeland told Donald Trump’s officials her government will take a tough stand against any new trade barriers and told reporters she won assurances that tensions won’t escalate to that point.
- PM Justin Trudeau asked Freeland and other ministers to show Trump’s officials that trade with Canada is of mutual benefit. A meeting between Trudeau and Trump is expected in the coming weeks.
- According to a JP Morgan report, there is a strong likelihood that Marine Le Pen will reach the second round of the presidential election in France but she would most likely lose by a decent margin against any opponent. The bank believes the probability that Le Pen wins the election is only about 14%.
- The PBOC said it met with 9 smaller local bitcoin exchanges to discuss risks and problems in the bitcoin market, and warned them that they risk closure should they seriously violate the country’s regulations. Specifically, the central bank had warned the exchanges not to take part in financial activities such as margin lending or allow money laundering.
- December machine tool orders rose 6.7% month-on-month and 6.7% year-on-year, obliterating the consensus forecasts of 3.0% and 4.5% respectively. According to a Bloomberg report, the better-than-expected figures bode well for a recovery in investment and are a positive sign for growth.
- India’s central bank unexpectedly left borrowing costs unchanged at 6.25% – a 6-year low, for a second straight meeting and signalled that its interest-rate easing cycle is coming ot an end.
- The RBNZ kept its benchmark rate at a record-low of 1.75% earlier today, as expected. Assistant Governor John McDermott said the central bank wants to be usre that inflation will hold at 2% before it considers raising interest rate.
- Spot gold gained 0.7% to a near-3 month high of $1,244.80/Oz last night amid safe haven buying among investors, before paring gains earlier today back below $1,240/Oz.
- The precious metal has gained almost 10% since end-December, and with the $1,250/Oz resistance level looming close by, some consolidation could occur before further moves higher materialise.
- Stanley Druckenmiller said he bought gold in late December and January, reversing the ale he made after the US presidential election. He added that he wanted to own some currency but felt that no country wanted its currency to strengthen, hence he bought gold then since it had come off quite a bit from its highs.
- Silver for immediate delivery erased gains of as much as 0.8% and was relatively unchanged earlier today. The $18/Oz handle is expected to be a key level of resistance.
- Crude oil futures expiring in March rebounded from a 2-month low to close 0.3% higher at $52.34/bbl, after US gasoline supplies unexpectedly fell last week, offsetting the biggest crude supply increase since October.
- In a note to clients, Goldman Sachs says faster-than-expected shale rebound is creating more downside risk to its 2018 crude oil forecast of $55/bb. However, the bank still maintains its expectations that the global market will shift to deficit by June this year
- Spot 1.4174
- USDSGD continues to trade just below the 1.4200 handle, after erasing a 0.3% decline to 1.4137 last night.
- Resistance and support points are at 1.4200 and 1.4000 respectively.
- Spot 0.7622
- AUDUSD reversed overnight gains, and was 0.2% lower at 0.7618 this morning.
- The 0.7600 continues to act as support, however recent price action suggests that the support may be tester or even broken soon. A clean break below could result in a downward move for the currency pair back towards 0.7500.
- Spot 1.3160
- USDCAD was largely unchanged from its previous session’s close of 1.3159.
- Continued oil price weakness continues to be a risk for the Canadian dollar, however the momentum remains biased to the downside for the currency pair.
- 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 6.8482
- The PBOC strengthened its daily reference rate by 0.2% to 6.8710 to the dollar, the most in more than 2 weeks.
- USDCNH remained little changed earlier today, after rising 0.7% over the past 3 sessions.
- The 6.8000 remains as a significant support level.
- Spot 112.17
- USDJPY remained mostly unchanged from yesterday’s close of 112.33, after erasing an overnight decline which saw the currency pair recover from below the 112 handle for the third consecutive session.
- A clean break below 112 could result in a move lower to 110, the 50% retracement level of the currency pair’s rally since Nov. 9.
- Spot 1.2507
- GBPUSD rose 0.5% to 1.2550 overnight, before erasing its advance during Asian hours today.
- 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.