Most Asian equities rallied, led by a surge in mining companies, following yesterday’s higher-than-expected PPI data in China, boosting prices of industrial metals and other commodities. Turkey’s lira reached a record low ahead of the latest data on its current-account deficit. Both the US dollar and gold held onto their respective gains achieved overnight.
- November wholesale inventories gained 1.0% from a month earlier, accelerating slightly from October’s 0.9% rise and exceeding the consensus estimate of 0.9%.
- US stocks fluctuated together with the dollar overnight, while Treasuries retreated as post-US election asset moves stalled a day before Donald Trump is slated to hold a press conference which could provide more details on his policy preferences.
- The S&P 500 Index closed little changed, while the Dow Jones Industrial Average fell 0.2% as investors prepared for 4Q earnings reporting season. Gains in consumer discretionary and financials stocks negated losses from real estate and the energy sectors.
- The US dollar strengthened slightly, with the Bloomberg Dollar Spot Index and Dollar Index both closing 0.1% higher in New York.
- The benchmark 10yr Treasury yield gained 2 bps to 2.38% overnight, and added another 1bp earlier today to 2.39%, following strong investor appetite of last night’s $24 billion 3yr US bond sale.
- Billionaire bond manager Bill Gross said investors should watch for 10yr Treasuries’ move above 2.6%, a threshold that would mark an end to the three-decade bond bull market. Gross considers the 2.6% level to be a more important level than the Dow Jones Industrial Average’s 20,000 level.
- According to Sanford C. Bernstein & Co., 30 years of divergence between stocks and bonds may be about to end. The new era, marked by rising or more volatile inflation, will see equities and bonds return to the correlation they’ve displayed since 1763. Analysts expect this correlation to rise if the path of projected inflation from here is up.
- Turkey’s central bank lowered the level of FX reserves it requires commercial lenders to hold by 0.5%, and added that additional steps will be taken to protect price and financial stability.
- Yet, this only brought a short reprieve to the lira, before its slump continued. The Turkish lira has weakened more than 10%, relative to the US dollar, this year so far, continuing a trend that’s made it the world’s worst-performing major currency in 2017.
- China’s bond market is facing more turbulence as banks scramble to avoid loses on wealth management products that raised $3.8 trillion from the nation’s savers. The investment plans typically use leverage to boost returns of their holdings parked in fixed-income securities. That model is under threat after Chinese corporate notes plunged the most in 9 years last quarter.
- Spot gold rose above its $1,180/Oz resistance level, adding 0.4% to $1,190.65/Oz last night – a one-month high.
- Nearing the next resistance level of $1,200/Oz, as well as its 50-day moving average of $1,192/Oz, a fresh wave of selling is expected to come in at the aforementioned price levels. The precious metal however has been recently buoyed by a weaker USD, as well as increased seasonal demand ahead of the Lunar New Year.
- Silver for immediate delivery advanced 1.8% to $16.9143/Oz, registering a fresh 3-week high.
- Crude oil futures expiring in February sank 2.2% overnight to close at $50.82/bbl, a 1-month low, amid speculation US crude supply is rising just as the market weighs compliance by OPEC on promised production cuts.
- The Energy Information Administration increased its projection for US production this year, from 8.78 million bpd to 9 million, while a separate government report later today is expected to show crude inventories rose last week.
- Spot 1.4358
- USDSGD was largely unchanged following yesterday’s 0.4% decline.
- The recent low of 1.4270 remains the key level to watch; a clean break past it would signal more declines to follow for USDSGD, with the next level of support coming in at 1.4150.
- The resistance above at 1.4410 remains.
- Spot 0.7376
- AUDUSD rose as much as 0.3% last night to test its 0.7385 resistance level for the second consecutive day, before paring gains slightly in Asia trade this morning.
- The Aussie dollar have been buoyed by recent strength in iron ore prices.
- Beyond 0.7385, the next point of resistance lies at 0.7525, while the support level below at 0.7300 represents a good entry level for Aussie bulls.
- Spot 1.3248
- USDCAD rebounded off the 1.3200 handle, rising as much as 0.3% to 1.3257 last night amid crude oil’s decline to a 1-month low.
- The support of 1.3100 remains as the next key support as it coincides with the 200-day moving average. A clean break below it would also signal a reversal in the currency pair’s uptrend since May last year.
- Spot 6.8999
- USDCNH rose 0.4% to 6.9145 this morning before paring some of its gains to back below 6.9000.
- The PBOC had earlier left its reference little changed, at 6.9235 to the US dollar.
- The yuan has resumed its depreciation trend this week, after being confronted by a short squeeze and soaring funding costs last week, which propelled CNH to a record weekly advance to the dollar.
- Spot 116.09
- USDJPY continues to be supported at its 115 level, and rose 0.5% above the 116 handle earlier in its session.
- The 115 support is proving to be a resilient one, and a renewed charge back to the recent high of 118.66 could be in the offing.
- Spot 1.2159
- GBPUSD stopped short of its rebound below the support-turned-resistance 1.2200 level, erasing most gains from earlier in the session.
- A bearish bias continues to weigh on the pound following PM May’s recent comments pointing towards a “hard” Brexit scenario, especially ahead of next week’s Supreme Court hearing on the Brexit process.
- The next key support below comes in at 1.2090.