Asian equities fell as investors fretted about the prospect of a US rate-hike, as the benchmark 10yr Treasury yield rose above 1.75% overnight. Adding to the risk-off sentiment, Alcoa kick-started 3Q earnings season with disappointing results and brought the health of corporate America into focus.
- The Fed’s minutes of its recent September policy meeting are due tonight, and may help gauge how much pressure Yellen faced from her fellow colleagues that were eager to raise interest rates last month.
- Odds on the Fed boosting rates before the year is out rose to 68%, as indicated by futures pricing data on Bloomberg.
- Treasuries sank as investors demanded the highest yields since June to compensate for signs that consumer prices may be on the rise.
- A bond-market gauge of inflation expectations, which measures the difference between 10yr yields and similar-maturity Treasury Inflation Protected Securities, touched its highest level since May. The Fed’s preferred measure of prices, the core PCE Index ticked up to 1.7% in August which was the highest this year, recent data showed.
- The benchmark 10yr yield climbed 5bps to 1.76%. 10yr Treasuries have declined 5.8% over the past 3 months, the most among 155 government bond indexes tracked by analysts.
- The dollar added to its recent strengthening, with the Bloomberg Dollar Spot Index rising 0.5% overnight.
- The S&P 500 Index fell 1.2% to post its biggest percentage drop since early September as Alcoa kicked off 3Q earnings season by reporting poorer-than-expected numbers. Health-care shares led decliners, led lower by Illumina Inc after the company issued a revenue warning.
- US presidential nominee Donald Trump lashed out at senior Republicans as he pledged to continue his campaign unshackled from party leaders and vowed to punish “disloyal” members, including House Speaker Paul Ryan and 2008 GOP nominee John McCain, threatening a civil war within the party. National polls showed Hillary Clinton ahead by 5bpts.
- The pound tumbled during New York hours to 1.2090 against the greenback, partly on “hard Brexit” concerns, but pared weakness after Prime Minister Theresa May accepted that Parliament should be allowed to vote on her plan for taking Britain out of the EU.
- The recent move by May eased earlier concerns that she may have been taking too much of a gung-ho approach to the discussions, reflected by the 6% drop in sterling this month after she signalled her intention to put immigration curbs before Britain’s interests.
- Machine orders for August, an indicator of future capital spending, fell 2.2% month-on-month and rose 11.6% year-on-year. Both exceeded consensus estimates of -4.7% and 7.9% respectively and should help prop up 3Q investment spending.
- BOJ board member Harada said in a speech today that the central bank should take additional easing measures without hesitation should the situation arises.
- According to Moody’s, Australia is set to be the fastest-growing Aaa-rated commodity exporting economy in 2016. The credit-accessor added that the country’s deep capital markets and low foreign currency debt will mitigate the risk of any abrupt tightening in financial conditions.
- Spot gold continued to edge lower, making a 0.2% lower low of $1,252.44/Oz before paring back some of its previous session’s losses. The precious metal continues to be supported at the key level of $1,250/Oz, although it has been trading below its 200-day moving average of $1,261.76/Oz for most of its past 4 sessions.
- Silver for immediate delivery was little changed, with the metal maintaining comfortably above the key $17/Oz support.
- Crude oil for November delivery slipped 1.1% to $50.79/bbl amid uncertainty over whether Russia would join an OPEC deal to curb supply. Russia’s biggest oil producer, Rosneft PJSC, said it won’t cut output, Reuters News reported.
- Spot 1.3782
- USDSGD retreated sharply off the 1.3800 handle, falling 0.2% to 1.3765 last night. The momentum continues to remain to the upside and the 1.3800 is likely to be tested again soon.
- Spot 0.7581
- AUDUSD rose 0.7% to 0.7588 to erase almost all of its previous session’s declines.
- The currency pair has continuously struggled to get back above the 0.7600 handle, and has a higher chance of falling lower to 0.7500.
- Spot 1.3214
- USDCAD was 0.4% lower at 1.3187, although the currency pair has since pared declines to rise back above the 1.3200 handle.
- The 200-day moving day average of 1.3206 continues to be supportive of the currency pair.
- Spot 6.7235
- The PBOC weakened its fixing again this morning, which was 0.24% weaker at 6.7258.
- Today marks the sixth straight day the central bank has weakened the yuan’s reference rate, the longest run of cuts in 9 months, as speculation mounts that policy makers will allow further declines as the dollar rises.
- Many analysts are now predicting 6.8000 as the next key level to watch and a possible target over the next few months, Bloomberg reported.
- Spot 103.44
- USDJPY erased previous day’s gains, declining 0.5% to 103.18 last night, despite more easing calls from BOJ officials.
- The 104 handle continues to be key, and a break above it could see USDJPY rise to the 108 level.
- Spot 1.2293
- GBPUSD reversed all of last night’s 1.4% drop to 1.2090, and was 0.7% higher this morning at 1.2329, following Prime Minister May’s tabled amendment that accepted the motion to allow a full and transparent debate on the government’s plan to leave the EU.