The US dollar stabilized following a two-day decline, while oil retreated back below $47/bbl as OPEC members continued to haggle ahead of a meeting on production cuts. Asian stocks were mixed, as investors remain cautious ahead of this weekend’s Italian referendum. Gold struggled to breach the $1,200/Oz resistance.
- The Dallas Fed Manufacturing Activity Index in November rose to 10.2, from -1.5 in October, surpassing expectations of 2.0, indicating a stronger-than-expected outlook for manufacturing.
- US stocks fell the most in 4 weeks as investors speculated recent gains sparked by expectations for brisker economic growth under a new administration went too far too quickly.
- Financial shares that have paced a 3-week surge since the election fell 1.4% as a group, while utility stocks climbed 2.0% as a rout in bonds eased. American bank stocks’ total value has been inflated by more than $300 billion since Trump’s victory.
- The S&P 500 Index retreated 0.5% in New York, halting a 4-day advance, amid lower-than-average trading volumes.
- The US dollar last night recouped some of its losses from earlier yesterday, with the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, closing 0.3% lower.
- 10yr Treasury government bonds gained for the first time in 3 days, pushing yields down 4bps to 2.31%.
- In a speech, Bank of Canada Governor Poloz said the country’s central bank does policy independently from the US and that oil price shocks remain the major reason for divergence with the US economy. Poloz further added that additional policy tools such as negative rates or quantitative easing would be used if needed.
- 8 Italian banks may fail due to an inability to refinance if the Italian prime minister loses the referendum this weekend, according to a report from the Financial Times, citing unnamed officials.
- All polls this month have signalled that Italians oppose the constitutional reform, an outcome that could potentially spark a government crisis as Prime Minister Renzi has said he would resign if the plan is defeated.
- The jobless rate last month maintained at 3.0%, matching expectations.
- Retail sales in October declined 0.1% year-on-year and gained 2.5% month-on-month, beating the median estimates of -1.6% and 1.1% respectively.
- The Bank of Japan posted a net loss of 200 billion yen (or $1.8 billion) in the 6 months through September, its first loss since Governor Kuroda took office, after the value of its foreign currency fell due to a stronger yen. It also wrote down almost 600 billion yen of the value of its bond holdings, and transferred about 242 billion yen to a reserve fund to pay for future liabilities on its huge debt holdings.
- China is planning sweeping curbs on its companies’ overseas acquisitions, including barring most foreign investments of $10 billion or more, Bloomberg reported, citing people with knowledge of the matter.
- The government reportedly will generally suspend several categories of deals while still leaving room for some strategic transactions to be executed. It will restrict overseas investments of at least $1 billion in industries outside a buyer’s core business, as well as foreign property deals of $1 billion or more by SOEs.
- The curbs will last until the end of September 2017 and is said to be implemented in order to alleviate recent depreciation pressures on the yuan.
- According to an OECD report, the RBA is expected to begin tightening monetary policy towards the end of 2017. OECD called the approach “appropriate” given similar monetary-policy developments elsewhere.
- The report warned that significant housing market concerns remain and there is a growing discord between financial market developments and the rest of the economy due to low rates.
- In an interview with Bloomberg earlier today, Singapore’s minister for education and second minister of defence Ong Ye Kung said he sees unemployment staying unchanged next year as the job market continues to keep pace with 2016 levels. Ong further stated that industries including healthcare, precision engineering and aerospace are performing well and are still hiring.
- The potential for spill-over from vulnerabilities in China’s financial system into Asia and anti-globalization sentiment are some of the challenges highlighted in MAS’ annual assessment of the financial sector published Tuesday. The study also flagged the possibility of weaker growth weighing on households’ ability to service debt.
- Spot gold rose 0.4% earlier today $1,195.28/Oz, following yesterday’s 0.6% advance from a 9-month low, amid overnight weakness from the US dollar and rising concerns over this week’s Italian referendum.
- The previous support of $1,200/Oz now acts as a level of resistance; support levels for gold lie at $1,170/Oz and $1,145/Oz.
- Spot silver slipped 1.3% but continues to be supported above the $16.50/Oz handle.
- Crude oil for January jumped 2.2% to $47.08/bbl, as Jabbar al-Luaibi, Iraq’s oil minister, said the country pledged to cooperate with OPEC to reach an agreement this week on easing production that’s acceptable to all members.
- On a separate note, Iran’s oil minister Zanganeh conceded that politics will make an OPEC decision more difficult to arrive at.
- Spot 1.4259
- USDSGD was largely unchanged from yesterday, trading sideways between the 1.4200 and 1.4300 handles.
- The currency pair should be supported around the current 1.4200 handle while the next level of resistance comes in at 1.4444, the year-to-date high.
- Spot 0.7460
- AUDUSD reached a 2-week high of 0.7497 earlier today before reversing and falling 0.2% to 0.7560.
- A rise back to the 200-day moving average of 0.7524 is possible, especially if iron ore continues to rally, but on a longer-term basis, the momentum remains to the downside.
- Support levels further below come in at 0.7259 and 0.7145.
- Spot 1.3430
- USDCAD declined 0.6% to 1.3397 earlier this morning and stronger crude oil prices overnight, before paring losses back above the 1.3400 support.
- The Canadian dollar looks likely to remain at the mercy of oil prices, with OPEC negotiations currently undergoing this week amid continued resistance from countries like Saudi Arabia and Iran.
- Support levels below come in at 1.3265 and 1.3000, while the currency pair’s recent rise over the past months could mean the resistance of 1.3588 may be tested again soon.
- Spot 6.9149
- The PBOC strengthened its fixing by the most in a week, 0.22% stronger to 6.8889 per US dollar.
- USDCNH fell 0.4% to 6.9152, following news of new measures to tighten companies’ overseas direct investments.
- Spot 112.11
- USDJPY was mostly unchanged, following yesterday’s 0.9% decline, as the currency pair found some support around the 111.00 handle.
- The next key resistance lies at 114.50.
- Spot 1.2297
- Following reaching a 2-week high the previous day, GBPUSD reversed gains, falling 0.4% to 1.2386 earlier in its session amid renewed Brexit concerns.
- On a longer-term basis, the 1.2100 handle remains a key support level, while 1.2800 acts as an important resistance handle.