Spot values at a glance:
Stocks in Asia dropped with U.S. equity-index futures and bond yields after a report that North Korea could respond to fresh sanctions with a hydrogen bomb in the Pacific. The yen and gold advanced. Elsewhere, S&P Global Ratings cut China’s sovereign credit rating.
- US President Donald Trump upped the pressure on Kim Jong Un’s regime with a fresh set of sanctions against individuals, firms, and financial institutions doing business with North Korea. According to the president, these new measures, which include a 180-day ban on ships that have visited the country or done a ship-to-ship transfer with one that has – will disrupt crucial North Korean shipping and trade networks.
- Trump also said that the People’s Bank of China has ordered local banks to cut of business with the rogue state. Treasury Secretary Steven Mnuchin added that he made China’s central bank aware of the administration’s executive order in advance of the announcement on Thursday morning.
- Kim Jong Un responded to Trump’s moves by calling him a “mentally deranged U.S. dotard,” according to remarks published by a state-run news agency. North Korea foreign minister Ri Yong Ho told reporters in New York that Trump’s threat to “totally destroy” the nation, made earlier this week in his address to the UN, was like “the sound of a dog barking”. He added that countermeasures flagged by Kim Jong Un might refer to a “strongest-ever” ground-level test of a hydrogen bomb in the Pacific, according to Yonhap News.
- Initial jobless claims for the week ended Sep. 9 declined unexpectedly to 259,000, from 282,000 in the week prior; economists surveyed by Bloomberg had predicted a rise to 302,000.
- US household wealth increased in the second quarter to yet another record, driven by solid gains in financial assets and rising property values, figures from the Federal Reserve in Washington showed Thursday. The increase in household wealth reflects steady growth in house prices, which were up 5.7% in June from a year ago, as well as a 2.6% rise last quarter in the S&P 500 Index, which is hovering near a record high.
- The S&P 500 Index retreated 0.3%, falling for the first time in days, with tech shares leading declines as Apple Inc.’s selloff resumed. The Dow Jones Industrial Average shed 0.2% while the tech-laden Nasdaq Composite declined 0.5%.
- According to a Bloomberg article, corporate America has amassed a record amount of cash. Non-financial companies’ liquid assets, which include foreign deposits, currency as well as money-market and mutual fund shares, reached a record of almost $2.3 trillion in the second quarter, according to Federal Reserve data released Thursday. That’s up nearly 60% since the recession ended in mid-2009.
- The US dollar weakened, as the Dollar Index reverted back to the 92 handle this morning.
- The benchmark 10yr Treasury yield pared its overnight gain earlier today on fresh geopolitical concerns, falling 3bps to 2.25% earlier today in Asia.
- UK Prime Minister Theresa May is slated to deliver a speech on Friday afternoon to clarify her evolving position on the terms of an exit from the EU and what the relationship between the 2 parties will look like after the divorce.
- The other 27 member states in the bloc are united in their stance that the UK must agree on a financial settlement before any trade talks begin; May is mulling putting forward 20 billion euros for this so-called “Brexit bill.” It’s expected that the prime minister will strike a conciliatory tone and ask for a transition period after March 2019 to dampen any shock to the British economy.
- China was downgraded by S&P Global Ratings for the first time since 1999, cut to A+ from AA, with rapid credit growth the proximate cause of the cut. Earlier this year, Moody’s also lowered the sovereign credit rating for the world’s second-largest economy.
- Ironically, the downgrade might be good news for bulls, at least in the short term, judging by the previous instance, and also because it gives Chinese policymakers more reason to prop up financial markets ahead of the Communist Party’s 19th Congress next month.
- Australia’s central bank chief Philip Lowe signalled no rush to join global peers in reining in stimulus even as the nation’s economy “does look to be improving”. Lowe reiterated that a rise in global interest rates “has no automatic implications” for Australia, but warned that tightening would eventually flow through Down Under and people should be prepared for that as the jobs market improves and inflation rises.
- Spot gold rebounded 1-month low to gain 0.3% to $1,398.21/Oz earlier today, amid increased safe haven demand after fresh sanctions from Trump imposed on Pyongyang.
- The line in the sand continues to be $1,300/Oz. A recover back above it could signal more upside for the precious metal. Otherwise, the next support target that may be tested could be around $1,265/Oz – the 50% retracement level following gold’s rally from mid-July to mid-September.
- Silver for immediate delivery continues to remain technically weak. Bias remains to the downside following a failure to hold above the $17/Oz level.
- Crude oil futures closed above the $50/bbl handle for the second consecutive day last night. Oil is headed for a third weekly gain before an OPEC-led committee meets in Vienna to discuss ongoing production curbs.
- Russian Energy Minister Alexander Novak said it’s too early to talk about prolonging the deal past the end of Match, while his Algerian counterpart stated the matter would be discussed.
- Progress made in rebalancing suggests that it’s in OPEC’s interest to wait before committing to an extension, according to Goldman Sachs Group Inc.
- Crude oil has risen more than 7% this month on forecasts for rising crude demand and as US refineries recover from Hurricane Harvey.
- About 68% of global investors intend to increase green investments and one-in-two companies has a strategy to reduce their environmental impact, according to a survey commissioned by HSBC Plc published Sept. 12. Most companies said they lack any clear competitive advantage to be more transparent, particularly regarding cost of funding. Only 66% of the investors surveyed hold green bonds, which isn’t surprising given that total outstanding issuance is relatively small at $232.2 billion in July, according to the report.
- The report estimates that about $90 trillion of investment is needed in new green infrastructure over the next 15 years. In 2016, $22.9 trillion of assets were managed under responsible investment strategies, a 25 percent increase from 2014.
- In separate news, Morgan Stanley and Citigroup Inc. announced they will get all of their energy from renewables in a few years. The banks are aiming for their operations to be carbon-neutral, Morgan Stanley by 2022 and Citi by the end of the decade. Both plan to buy power from clean energy projects.
- Solar installers are looking to partner with companies, as they wrestle with a market that is shrinking after 16 years of rapid growth. Their long-time sales model of knocking on doors, cold calling at home and setting up mall kiosks has proven to be costly. Some have realised it might be more effective to use the umbrella of bigger established companies to find customers, according to a Bloomberg report.
- Sunrun Inc., for example, will try to sell panels through Comcast Corp., the biggest cable-TV company in the U.S. Last month, the two agreed to a deal in which Comcast will use its vast marketing arm to tap some of its 27 million customers for solar. Vivint Solar Inc. is now bundling its panels with an energy management system offered by Vivint Smart Home, a sister company.
- Solar companies hope the alliances will solve a problem of high customer-acquisition costs that often run 20 percent of expenses, sometimes exceeding the panels themselves. They also address another issue: Some potential customers are reluctant to sign on to decades-long contracts with relatively small, little-known companies. That could change by associating with brand names.
- Through early 2016, installers had an almost singular focus on growth, using no-money-down leases to pump up sales. The industry grew a staggering 48% in 2015, but slowed last year to 20%, and seems to be coming to halt this year with new residential installations expected to drop by 2.4% over 2016, according to Bloomberg New Energy Finance. Shifts in government policies have played a big role in diminishing some of the financial incentives for homeowners to install a solar system. The decline has been most evident in California, the biggest US solar market.
- The vulnerability of governments and businesses to cyberattacks was exposed again Wednesday when a top US financial regulator said hackers had breached its electronic database of market-moving corporate announcements in 2016, and may have profited from the information they stole through the use of illicit trades.
- Singapore has overtaken nations including the US, Russia and China as the country launching the most cyber-attacks globally, according to Israeli data security firm Check Point Software Technologies Ltd. A key Southeast Asian technology hub, much of the internet traffic flowing through Singapore originates in other countries. That means a cyber-attack recorded as coming from Singapore may have been launched outside the country.
- Spot 1.3490
- USDSGD slipped back below the 1.3500 handle following broader USD weakness today.
- The main trend since the start of the year remains to the downside, although a break above the key resistance around the 1.3600 could indicate a reversal is on the cards.
- The immediate resistance remains around the recent high of 1.3539, while the key support below lies at 1.3350.
- Spot 0.7928
- The Australian dollar weakened following RBA Lowe’s dovish speech yesterday. The pair was lower by as much as 0.4% today even in spite of a weaker US dollar.
- Further strength in the Australian dollar may be capped, with iron ore prices continuing to weaken. A retreat back to 0.7800 is possible.
- Spot 1.2320
- USDCAD slipped from a 3-week high to declined 0.4% to 1.2311 earlier, as the pair’s recent pullback over the past 2 weeks begins to falter.
- The key resistance remains along the 1.2400 handle.
- Spot 6.5810
- The PBOC kept its reference rate little changed earlier today, at 6.5861 per US dollar.
- The offshore yuan strengthened against the US dollar even despite the downgrade from S&P. It’s worth noting that the yuan surged following Moody’s sovereign rating cut 4 months ago amid speculation the central bank supported the exchange rate.
- Spot 111.73
- The yen gained following fresh geopolitical concerns today. USDJPY declined from a 2-month high to fall 0.8% earlier. The pair is expected to be supported above the 111 handle.
- The main resistance lies at the 6-month high of 114.48.
- Spot 1.3576
- GBPUSD regained above the 1.3500 handle, advancing 0.8% to 1.3587 earlier, ahead of PM May’s speech regarding Brexit later today.
- On the monetary policy front, the BOE is still widely expected to raise rates in the coming months, and increasing rate hike expectation should push to currency pair toward the 1.4000 handle.