September 1, 2016

Daily Observations:

Most Asian equities pared earlier losses, following positive manufacturing data from China indicating a pickup in economic activity in the world’s second-largest economy, which also drove the Australian dollar and some industrial metals higher.

US:

  • ADP employment in August rose by 177,000, more than the expected rise of 175,000; July’s rise was revised upwards from 179,000 to 194,000.
  • The S&P 500 Index wiped out its entire gains for August yesterday, with the gauge dropping 0.2% for the day and 0.1% for the month. Energy producers led declines, dropping with crude oil.
  • Energy companies trimmed their August advance to 0.6%, while utility stocks posted their biggest monthly decline in more than a year. Phone companies had their worst month since 2015 as technology and financial shares both rose for a second month.
  • The greenback pared some gains, as the Bloomberg Spot Dollar Index retreated 0.2% earlier today and looks set to snap a 4-day winning streak.
  • The benchmark 10yr Treasury yield rose 1bp to 1.58%; 10yr yields have been trading in a fairly tight range for the past month, mostly kept within the bounds of the 1.50% – 1.60% range.

Canada:

  • Canada’s economy grew at the fastest pace in three years in June, regaining momentum after Alberta wildfires led to the biggest quarterly contraction since 2009.
  • GDP for June grew 0.6% month-on-month and 1.1% year-on-year, better than the projections of 0.4% and 1.0% respectively.
  • On a quarterly annualized basis, GDP fell 1.6%, more than the 1.5% expected, owing largely to limited oil production due to the Alberta wildfires.

Brazil:

  • Brazilian President Rousseff was ousted by lawmakers, paving the way for a shift in economic policy after 13 years of leftist rule.

Australia:

  • Retail sales in July was stagnant from a month earlier, missing projections of a 0.3% rise.
  • Private capital expenditure over the second quarter fell 5.4%, more than the 4.0% drop forecasted.
  • On a more positive note, according to the Bureau of Statistics, Australian firms have planned to spend A$105 billion in 2016-2017, more than the originally expected A$97 billion.

China:

  • China’s official manufacturing PMI in August rose to expansion territory of 50.4, from 49.9 the previous month and beating the consensus estimate of 49.8. This was the highest since 2014.
  • The Caixin’s measure, however, declined to 50.0 from 50.6 and was lower the expected figure of 50.1.
  • Non-manufacturing PMI fell to 53.5 from 53.9.

Precious Metals:

  • Spot gold declined 0.8% to $1,304.29/Oz last night, its lowest level post-Brexit.
  • Gold’s gains in 2016 have been dented after Fed officials indicated a greater likelihood of further monetary tightening before the end of the year. Traders will closely monitor tomorrow’s nonfarm payrolls report as a better than expected one would further increase odds of a September hike, and thus further dampening demand for precious metals.
  • Silver for immediate delivery continues to be supported above the key $18.50/Oz level.

Oil:

  • Crude oil futures expiring in October slumped 3.6% to $44.70/bbl, after an energy report showed crude inventories last week rose by 2.3 million barrels, more than the 1.3 million projected. Oil imports into America increased by 3.2% to 8.9 million barrels last week, the highest since Sep 2012.

 

USDSGD:

  • Spot 1.3637
  • The Singapore dollar maintained near its weakest levels in more than 2 months against the dollar, ahead of tomorrow night’s key US jobs report.

 

AUDUSD:

  • Spot 0.7538
  • AUDUSD rebounded off the 0.7500 handle to gain 0.5% to 0.7548, buoyed by better forward-looking capex figures and positive manufacturing data from China.

 

USDCAD:

  • Spot 1.3105
  • The loonie fell to its weakest level against the dollar in 3 weeks after Canadian GDP contracted by the most since 2009, on a quarterly annualized basis.
  • USDCAD rose 0.3% to a high of 1.3146 last night.
  • Last night’s GDP result was worse than the BOC’s most recent forecast of -1.0%, which could lead the central bank to cut is full-year growth target rate and weaken the Canadian dollar further.

 

USDCNH:

  • Spot 6.6902
  • Offshore yuan advanced following better-than-expected manufacturing PMI data, gaining as much as 0.1% to 6.6865 against the dollar.
  • The PBOC strengthened its fixing by 0.2% to 6.6784 against the dollar.

 

USDJPY:

  • Spot 103.27
  • USDJPY maintained near one-month highs, just below the 103.50 resistance level. The pair is currently on a 5-day positive streak.

 

GBPUSD:

  • Spot 1.3145
  • GBPUSD edged 0.1% higher earlier today to 1.3152.
  • Goldman Sachs analysts commented that the pound will likely weaken further once Brexit talks between European leaders commence, and especially so if leaders take a tough negotiating stance once Article 50 is triggered.
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