Asian stocks fell with US equity index futures and then yen strengthened ahead of key US payrolls data due for release tonight. The pound suffered a sudden plunge early this morning, which spooked investors as well. Oil held above $50/bbl for the first time since July while gold is set to extend declines for the ninth consecutive session.
- Initial jobless claims last week came in below estimates, at 249,000 compared to economists’ median projection of 256,000. The 4-week average slid to its lowest level since 1973 and bolstered tonight’s non-farm payrolls outlook.
- Tonight’s jobs report is forecast to reinforce recent stellar improvements in the service and manufacturing industries. Investors will keep a close eye on any substantial increase in wages as well, as movement in salaries are seen as a leading indicator of inflation, which is firmly on investors’ radars after the recent recovery in oil prices.
- Treasuries posted their longest slide since April, declining for the fifth straight day. The benchmark 10yr yield rose 4bps to 1.74%.
- The S&P 500 Index rose 0.1%, erasing a 0.4% drop earlier in the day. Technology shares rose, led by Apple, while utility stocks extended their longest losing streak in 14 years.
- The US dollar strengthened broadly, as the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, closed 0.5% higher in New York. The gauge added a further 0.5% earlier this morning, although some of its gains have been pared.
- The pound baffled traders earlier this morning, following its 6% “flash crash”. Market participants questioned whether computer-driven algorithms had triggered the plunge, exacerbated by a lack of liquidity in early Asian hours, while some saw the possibility of human error. Others speculated the crash could be due to an FT article citing French President Hollande as saying the UK must suffer the consequences of leaving the EU.
- BOJ Governor Kuroda rejected the notion that the IMF is saying monetary policies have reached their limits.
- One of Abe’s economic advisers, Etsuro Honda, said Japan needs a double dose of monetary and fiscal stimulus including further easing next month. He further added the BOJ could still increase its purchases of government bonds and deepen the negative interest rates on some bank reserves, though it would be better to wait until the yield curve steepens to cut rates further.
- Spot gold slid below its 200-day moving average for the first time since February, falling 1.4% to reach a low of $1,249.94/Oz. A better-than-expected jobs report tonight could exert further pressure on bullion. The next support below lies at the $1,200/Oz level.
- Silver slumped as well, extending losses by as much as 3.5% to $17.1113/Oz; the 200-day moving average lies at $17.1444/Oz, a break below it could see renewed selling pressure towards the $15.90/Oz support.
- Crude oil for November delivery closed above $50/bbl for the first time since July – 1.2% higher at $50.44/bbl, as declines in US crude inventories and OPEC’s pledge to reduce supply fuelled bets the global glut may ease.
- Spot 1.3733
- USDSGD rose 0.2% to 1.3744 – a four-month high, and breaking past the 200-day moving average in the process.
- Increasing speculation that the Fed could raise rates as soon as November may drive the currency pair higher, with the next resistance point coming in at 1.3842.
- MAS is set to release its monetary statement on 14th
- Spot 0.7576
- AUDUSD broke below its 0.7600 support, falling 0.4% to 0.7561 earlier this morning, driven by broad USD strength.
- Spot 1.3281
- USDCAD rose 0.4% to 1.3249, as the currency pair attempts to break beyond its six-month high of 1.3281.
- Volatility could be on the cards today as both Canada and the US are set to release their respective jobs reports later today.
- Spot 6.7153
- USDCNH rose 0.2% to 6.7182, nearing its 10-month high, as the greenback’s continued surge exacerbate depreciation pressures on the yuan.
- Next Monday will be the first onshore trading day for the yuan since it entered the IMF’s SDR on Oct 1st. Investors will be looking out for clues on PBOC’s efforts to curb excessive volatility on its currency.
- Spot 103.78
- Then yen weakened 0.6% against the USD to 104.16 last night before recovering back some of its losses earlier today.
- USDJPY extended gains, rising 0.5% to 103.67 last night, the highest level since 6th
- The downward trend for USDJPY has been broken; the next resistance for the currency pair lies at 104.32, an almost two-month high.
- Spot 1.2442
- The pound plunged as much as 6.8% against the USD, falling to an intraday low of 1.1841 – the biggest decline post-Brexit, in a move that traders said was exacerbated by computer-initiated sell orders.
- The crash was momentary though, with the currency pair having recovered back more than half, to the 1.2400 handle, within 10 minutes after reaching its low.