September 14, 2016

Daily Observations:

Asian stocks, currencies and bonds extended losses as the prospect of global central banks turning less accommodative spurs appetite for US dollars. Crude oil and gold hovered near their respective one-week lows. Chinese equities opened lower this morning amid speculation the central bank won’t add to stimulus.

US:

  • The budget deficit in August deepened to $107 billion, from $64 billion in July, due to weak revenue growth and a steady increase in government spending.
  • For the second time since last Friday, stocks, bonds and precious metals all fell, leaving investors few places to hide. Oil joined the rout after the IEA predicted the supply glut will extend into next year.
  • The S&P 500 Index closed 1.5% lower, paring an initial drop of as much as 1.8% after the index rebounded off its 100-day moving average; energy stocks led decliners, while trading volume was the second-highest in two months.
  • The 10yr benchmark 10yr Treasury yield rose to its highest in 3 months, advancing 6bps to 1.73%. Treasury yields rose amid a weak 30yr auction and concerns that the ECB and BOJ will end QE sooner than expected.
  • The dollar rallied broadly, as the Bloomberg Dollar Spot Index advanced 0.8%, erasing Monday’s decline in the process.
  • According to a Bank of America survey, investors are boosting cash holdings to almost a 15-year high, and a record 54% say stocks and bonds are overvalued.

UK:

  • Inflation in August came in weaker than expected; CPI rose 0.3% month-on-month and 0.6% year-on-year, less than the 0.4% and 0.7% predicted.

Japan:

  • According to a Nikkei report, the BOJ will focus on negative rates now that QE purchases are reaching a limit. In a separate report by Bloomberg, the BOJ may adjust which tenors of government bonds it buys to avoid excessively negative yields.

Australia:

  • Australia is planning to launch the offering of its inaugural 30-year bond as soon as next month, the Australian Office of Financial Management (AOFM) said yesterday. The AOFM is betting the global hunt for yield will ensure investors are keen to snap up the new security. The longest bond currently on issue from Australia, due in 23 years, yielded 2.91% earlier this morning, and the new longer one is likely to have a higher yield than that.

Precious Metals:

  • Spot gold resumed its decline, and fell by as low as 0.9% to $1,314.24/Oz earlier this morning. The key $1,300/Oz support is likely to be tested again soon.
  • Silver for immediate delivery erased all of its previous day’s gains, declining 1.6% to a low this morning of $19.7955/Oz. The key support for silver lies around $18.50/Oz.

Oil:

  • Crude oil for October delivery slumped 3.0% to settle below the $45/bbl handle, after the International Energy Agency reported that world stockpiles of oil will continue to accumulate through 2017, a fourth consecutive year of oversupply, due to declining demand in India and China.
  • OPEC also revised up its projections for rival supplies in 2017, predicting an increase in output from outside the group before major producers meet later this month.

 

USDSGD:

  • Spot 1.3659
  • USDSGD rose 0.6% to 1.3686, the highest in more than two months.
  • Momentum is to the upside and the next resistance of 1.3722 should be reached soon.

 

AUDUSD:

  • Spot 0.7484
  • AUDUSD slumped 1.3% to 0.7442, breaking below the key 0.7500 psychological level for the first time since end-July.
  • The next support comes in around the 0.7400 level, where the 200-day moving average resides as well.

 

USDCAD:

  • Spot 1.3157
  • USDCAD advanced 0.8% to 1.3190, on the back of a stronger US dollar and weaker oil prices overnight.

 

USDCNH:

  • Spot 6.6759
  • The PBOC weakened its fixing by 0.25% to 6.6895 against the dollar.
  • Offshore yuan rose against the dollar, as USDCNH fell 0.2% to 6.6708 earlier today.

 

USDJPY:

  • Spot 103.00
  • The yen weakened on renewed speculation the BOJ may seek to move rates further into negative territory, according to a Nikkei report.
  • USDJPY rose to a one-week high, 1.2% higher to 103.20 earlier today.

 

GBPUSD:

  • Spot 1.3190
  • GBPUSD reversed prior day’s gains, sinking 0.7% to 1.3167 on the back of weaker inflation numbers and US dollar strength overnight.

 

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