Asia Roundup: Antipodeans decline despite upbeat Chinese data; dollar defensive after Fed Brainard's dovish comments dam

Market Roundup

• Japan FinMin Aso – BoJ still aiming for 2% inflation after policy assessment, government and BoJ closely coordinating policies - Reuters.
   
• Japan METI/ESRI survey – Q3 big mfg sentiment index +2.9, Q2 -11.1, +8.6 forecast for Q4, previous survey +12.0, FY ‘16/17 CAPEX +4.9% y/y, +3.8% previous.
   
• Japan Mitsubishi Heavy poised to break record for orders – Nikkei.
   
• Renault marketing 3-year samurai via MUFJ/MS, SMBC Nikko – IFR.
   
• China Stats Bureau – Investment stabilizing, consumption improving but downward pressures still large, progress in cutting property inventories,  economic foundations not solid enough – Reuters.
   
• China Aug industrial output +0.53% m/m, +6.3% y/y, +6.1% y/y forecast.
   
• China Jan-Aug fixed-asset investment +8.1% y/y, +8.0% forecast, previous +2.1% y/y.
   
• China Aug retail sales +0.83% m/m, +10.6% y/y, +10.3% y/y forecast.
   
• RBA AsstGov Kent – Prospects of sustained economic growth good, terms of trade to stay plausible, most of mining fall over, jobless to fall, wages likely rise, AUD didn’t fall as much as forecast, China key uncertainty.
   
• Australia Aug NAB biz conditions off to +7, confidence up to +6, July +9, +4.
   
• New Zealand Aug food price index +1.3% m/m, +0.5% y/y.
   

Economic Data Ahead

• (0300 ET/0700 GMT) Spain Aug CPI, +0.1% m/m, -0.1% y/y forecast; last -0.7%, -0.6%.
   
• (0300 ET/0700 GMT) Spain Aug HICP, unch m/m, -0.3% y/y forecast; last -1.3%, -0.3%.
   
• (0315 ET/0715 GMT) Switzerland Aug producer/import prices, -0.2% m/m forecast; last -0.1% m/m, -0.8% y/y.
   
• (0330 ET/0730 GMT) Sweden Aug CPI,  unch m/m, +1.2% y/y forecast; last +0.1%, +1.1%.
   
• (0330 ET/0730 GMT) Sweden Aug CPIF, unch m/m, +1.5% y/y forecast; last +0.1%, +1.4%.
   
• (0400 ET/0800 GMT) Italy Jul industrial output, +0.2% m/m, -1.0% y/y forecast; last -0.4%, -1.0%.
   
• (0430 ET/0830 GMT) Great Britain Aug CPI,    +0.4% m/m, +0.7% y/y forecast; last -0.1%, +0.6%.
   
• (0430 ET/0830 GMT) Great Britain Aug – core, +0.5% m/m, +1.4% y/y forecast; last -0.1%, +1.3%.
   
• (0430 ET/0830 GMT) Great Britain Aug RPI,    +0.4% m/m, +1.8% y/y forecast; last +0.1%, +1.9%, index 263.4.
   
• (0430 ET/0830 GMT) Great Britain Aug RPIX; last +0.1% m/m, +1.9% y/y.
   
• (0500 ET/0900 GMT) Eurozne Q2  employment; last +0.3% q/q, +1.4% y/y.
   
• (0500 ET/0900 GMT) Germany Sep ZEW economic sentiment index,  2.5 forecast; last  0.5.
   
• (0500 ET/0900 GMT) Germany Sep ZEW current conditions index, 56.0 forecast; last 57.6.
   
• (0600 ET/1000 GMT) United States Aug NFIB business optimism index; last 94.6.
   
• (1400 ET/1800 GMT) United States Aug budget balance, $107 bln deficit forecast; last $64.4 bln deficit.
   

Key Events Ahead

• N/A   Vienna central bankers meeting (till tom), various speakers-attendees.
   
• N/A   Milan conference, Italy EconMin Padoan, others to speak.
   
• N/A   Norway regional network survey, last 0.28.
   
• 08:40 Spain 6 and 12-month treasury bill auctions.
   
• (0500 ET/0900 GMT) ECB Pres Draghi speaks in Trento, Italy after receiving award.
   
• (0500 ET/0900 GMT) Italy E6.25-8 bln 0.1/0.65/2.25/3.25% 2019/23/36/46 BTP auctions.
   
• (0500 ET/0900 GMT) Netherlands E2-3 bln zero% DSL 2022 auction.
   
• (0530 ET/0930 GMT) ECB zero% 7-day refi, E41 bln allotment forecast, E41.8 bln maturing.
   
• (0540 ET/0940 GMT) Belgium E1.7-2.1 bln 3 and 12-month treasury certificate auctions.
   
• (1400 ET/1800 GMT) ECB Lautenschlaeger speaks at Strasbourg EZ parliament event.
   
• (1700 ET/2100 GMT) Washington, DC Hoover Institute event, Alan Greenspan to attend.
   

FX Beat

DXY: The dollar index, against a basket of currencies trades up at 95.22, having touched a high of 95.45 in the previous session.

EUR/USD: The euro consolidates between a narrow range as the dollar was on the defensive after dovish comments from Federal Reserve Governor Lael Brainard warned against the Fed withdrawing support for the economy too quickly. Markets now see less prospects of a U.S. rate hike next week as a Federal Reserve policy maker remarks reduced speculation on the near-term interest rate hike. The European currency trades flat at 1.1232, having touched a high of 1.12678 in the previous session. Investor’s attention will remain on series of data from Eurozone economies for further cues on the major. Immediate resistance is located at 1.1270, break above could take it over 1.1330. On the lower side, support is seen at 1.1210 (10-DMA), break below could drag it near 1.1150.

USD/JPY: The dollar steadied after declining to an early low of 101.42, though it held above last weeks low of 101.20. The Japanese yen has gained so far this year as investors expect the Bank of Japans massive stimulus over the period will have limited impact in strengthening Japans economy. The yen trades between 100 and 103 handle ahead of the BOJs policy meeting, where it is expected to reveal the results of a comprehensive review of its policy it had announced in July. The major trades 0.1 percent up at 101.92, attempting to extend gains above the102.00 handle. The pair will be drive by broad market sentiment as the U.S data calendar remains light. Immediate resistance is located at 102.64 (10-DMA), break above targets 103.00. On the downside, support is seen at 101.42 (Session Low), break below could take it near 101.20 /101.00.

GBP/USD: Sterling stood firm after rising from a 1-week low of 1.3235 touched in the previous session. The major rallied above the 1.3300 handle after Federal Reserve board member Lael Brainard speech indicated less chances of U.S. interest rate hike in the upcoming policy meeting. Sterling trades flat at 1.3335, having hit an-intraday low of 1.3317. Investors will closely watch UKs consumer and wholesale inflation data for further cues on the pair. Immediate resistance is located at 1.3375, break above could take it over 1.3400. On the downside, support is seen at 1.3299 (10-DMA), break below targets 1.3250. Against the euro, the pound was little changed at 84.24 pence, pulling away from a 1-week low of 84.95 pence hit last week.

AUD/USD: The Australian dollar declined, after retreating from a 1-week low of 0.7494 struck in the previous session. The major weakened as appetite for high-yielding and riskier assets diminished, with investors ignoring positive economic data from Australia and China. Chinas industrial output rose 6.3 percent in August from a year ago, compared with 6.1 percent expansion in July while retail sales for last month rose 10.6 percent y/y against expectations of 10.3 percent. Meanwhile, National Australia Banks business sentiment survey for August showed current business confidence increased at 6, surpassing previous reading of 4. The Aussie trades 0.3 percent lower at 0.7542, hovering towards an early low of 0.7537. The major will be driven by broad market sentiment, amid lack of relevant fundamental triggers. Immediate support is seen at 0.7520, break below could drag it lower 0.7500. On the upside, resistance is located at 0.7586 (10-DMA), break above targets 0.7600.

NZD/USD: The New Zealand dollar weakened; however, the downside was capped by a jump in food prices which could lift inflation slightly. The economys food price index for the month of August rose 1.3 percent, after posting a decline of 0.2 percent in the previous month. The Kiwi trades 0.1 percent down at 0.7341, having touched a high of 0.7364 earlier in the session. Investors focus now shifts towards New Zealands current account balance figures due later in the day for fresh cues on the pair’s direction. Immediate resistance is located at 0.7371 (5-DMA), break above targets 0.7400. On the downside, support is seen at 0.7302 (20-DMA), break below could drag it till 0.7268.

Equities Recap

Asian shares gained followed by an overnight rally on the Wall Street after Federal Reserve governor Lael Brainard comments reduced the prospects of a near-term U.S. interest rate hike.

MSCIs broadest index of Asia-Pacific shares outside Japan gained 0.6 percent.

Tokyos Nikkei added 0.34 pct at 16,729.04 points, Australias S&P/ASX 200 index declined 0.17 pct at 5,210.80 points and South Koreas KOSPI rose 0.5 percent at 2,002.26 points.

Shanghai composite index slumped 0.3 percent at 3,013.14 points, while CSI300 index was trading 0.4 percent down at 3,248.68 points.

Hong Kong’s Hang Seng was trading 0.6 percent higher at 23,425.60 points. Taiwan shares ended 0.07 percent down at 8,940.83 points.

Commodities Recap

Crude oil prices edged down, having declined as low as $46.88 a barrel in the previous session, on growing concerns over increased drilling in the United States and on profits taking. Global benchmark Brent crude oil was trading 0.4 percent lower at $47.94 per barrel at 0428 GMT, with U.S. West Texas Intermediate crude also down by 0.4 percent at $45.85 a barrel.

Gold edged higher after Federal Reserve official slashed expectations of a U.S. interest rate hike as early as next week. Spot gold was up about 0.2 percent at $1,329.64 an ounce by 0436 GMT, having touched low of $1330.12 an ounce in the previous session. U.S. gold futures were up 0.5 percent at $1,332.40 an ounce.

Treasuries Recap

The 10-year U.S treasury yield stood at 1.6595 percent lower by 0.013, while 5-year was at 1.1949 percent down by 0.008 bps.

The Australian government bonds trade nearly flat, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year Treasury note hovered around 2.11 percent mark and the yield on short-term 2-year remained steady at 1.60 percent.

The New Zealand government bonds closed modestly lower after recent data showed that the country’s food prices, which account for about 19 percent of the consumer price index (CPI), posted the biggest monthly jump in three years. The yield on the benchmark 10-year bond rose 1/2 basis point to 2.485 percent, the yield on 7-year note also ended 1/2 basis point higher at 2.160 percent and the yield on short-term 2-year note climbed 1/2 basis point to 1.960 percent.

Canadian government bond prices were mixed across the maturity curve, with the two-year bond down 0.5 Canadian cent to yield 0.586 percent and the benchmark 10-year flat to yield 1.151 percent. Earlier in the session, the 10-year yield touched its highest since June 21 at 1.204 percent.