Europe Roundup: Shares Slide As G20 Meeting Ends With No Growth Plan, fED Worries Loom – Monday, February 29th, 2016

Market Roundup

  • PBOC cuts reserve requirement for most banks to 17%.
  • USD/JPY snaps 3-day bull run-114.00 top 112.77 base.
  • EUR/USD heavy to new trend low of 1.0896.
  • EUR/GBP tight within 0.7859-0.7998 range.
  • Swiss Feb KoF Indicator 102.4 vs 100.4 previous, 98.8 expected.
  • German Jan Retail Sales -0.8% y/y vs 2.5% previous revised, 1.6% expected.
  • UK Jan Cons Credit bln vs 1.148bln previous, 1.3bln expected.
  • EZ Feb Flash CPI -0.2% y/y vs +0.3% previous, 0.0% expected.
  • CNY weakens to 3-week low of 6.5539 vs USD after RRR cut.
  • G20 – World needs to look beyond ultra-easy policy for growth.
  • China Prem Li – To intensify fiscal policies.
  • PBOC Zhou – G20 needs to improve policy coordination.
  • IMF Lagarde sees renewed sense of urgency to act collectively.
  • German FinMin Schaeuble – Econ better than volatile mkt suggests.
  • UK ChancExch Osborne pushes Brexit onto G20 list of risks.
  • CFTC IMM CTA data – Specs cut USD longs for 9th week, low since May ’14.
  • Ex-BoE Gov King – Fresh global clash looms.
  • SNB Chair Jordan – Could change exemption level on negative rates.

Economic Data Ahead

  • (0830 ET/1330 GMT) Statistics Canada releases Q4 current account data which is seen narrowing to a -$15.5 billion deficit from $16.2 billion in Q3.
  • (0830 ET/1330 GMT) Canada’s industrial product price index is expected to decline 0.1 pct m/m in January after dropping 0.2 pct in December. Raw material price index likely fell 3.3 pct in January after plunging 5.0 pct in the previous month.
  • (0945 ET/1445 GMT) The ISM Chicago releases its Purchasing Managers Index for February which is expected to have edged down to 53.0 from 55.6 in January.
  • (1000 ET/1500 GMT) The National Association of Realtors’ pending home sales index are likely to have edged up 0.5 percent in January.

Key Events Ahead

  • (0945 ET/1645 GMT) Fed Trade 30-year Fannie Mae/Freddie Mac max $1.825 bln.
  • (2330 ET/0430 GMT) New York Federal Reserve President William Dudley speaks on policy at a joint People’s Bank of China conference in Hangzhou, Zhejiang, China. While Dudley has expressed some concerns about implications of the global market selloff, suggesting he would hold off on another rate hike in March, he was last out sounding confident on economic momentum and ruled out talk of negative rates.

FX Recap

USD: The dollar fell 0.1 percent against a basket of currencies, having gained on Friday after upbeat U.S. data showing the U.S. economy grew faster than previously thought in the last quarter of 2015. The index has broken major resistance around 97.90 and jumped till 98.17, it was trading around 98.16. The greenback dropped against the Japanese yen as investors sought shelter from the fall in equities.EUR/USD: The euro hit a 4-week low of $1.0896, down 0.3 percent on the day after making a high of 1.10682. It was trading around 1.10140 and the short term trend is weak as long as resistance 1.10880 holds. Any break above 1.10880 will take the pair till 1.1100/1.1155 in short term. The minor resistance is at 1.1070. On the lower side major support is around 1.0980 and any break below 1.0980 will drag it till 1.0920/1.0890/1.0835.USD/JPY: The Japanese yen rose sharply against the dollar after G20 meeting in Shanghai ended with no new plans to improve global growth. It was trading around 112.97 and the short term trend is slightly weak as long as resistance 115 holds. On the lower side major support is around 112 and break below targets 110.80/110. The minor resistance is around 115 and break above targets 116/117.50. The yen gained 1 percent to 112.90 per dollar and 123.47 yen per euro.GBP/USD: The Sterling was trading near a 7-year low of $1.3868 against the dollar, hurt by Brexit worries. It has broken major support 1.38780 and declined till 1.38410. The short term trend is still weak as long as resistance 1.3930 holds. On the lower side major support is around 1.3840 and any break below targets 1.3800/1.3780 level. The minor resistance is around 1.3930 and break above targets 1.3980/1.4050. The short term bearish invalidation is only above 1.4200. It was trading at 78.745 pence per euro, having hit a 14-month low of 79.28 pence on Feb 25.USD/CHF: The Swiss Franc has made a high of 0.99886 and slightly declined from that level. It was trading around 0.99725 and the short term trend is slightly bullish as long as support 0.9900. On the higher side any break above 1.000 will take the pair till 1.0035/1.00725/1.01300. The major support is around 0.9900 and break below targets 0.9850/0.9780. The overall bullish invalidation is only below 0.9650.AUD/USD: The Australian dollar struggled at $0.7120, having fallen 1.4  percent on Friday. It was trading around 0.7160 and the short term trend is slightly weak as long as resistance 0.7260 holds. On the higher side major resistance is around 0.7180 and break above targets 0.7260/0.7300. The major support is around 0.7100 and break below will drag the pair till 0.7075/0.7020. The heavy yen buying sent the Aussie 0.6 percent lower to 80.70 yen.NZD/USD: The New Zealand dollar dropped on mounting expectations of an interest rate cut by the Reserve Bank of New Zealand (RBNZ), dragging the Australian dollar a touch lower. It fell 0.8 percent to $0.6581 after soft economic data and news that ANZ Bank forecasts two easing, in June and then September. The kiwi was 1 percent lower against the yen, while the euro powered up 0.7 percent.

Equities Recap

Shares slipped in Europe and Asia after G20 finance ministers concluded the meeting with no plans to improve global growth and as investors worried about the U.S. Fed raising interest rates before year-end.The pan-European FTSEurofirst 300 index fell 1 percent at the open and reduced losses after euro zone inflation data, trading down 0.5 pct. Germany’s DAX was down 1.5 percent, Britain’s FTSE 100 index lost 0.8 percent and France’s CAC 40 fell 0.9 pct in early deals.Tokyo’s Nikkei ended down with 1 percent as the yen gained, making it more difficult for Japanese exporters, and on China worries. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent and seemed likely to post its second consecutive month of losses, with a 1.2 percent drop so far this month.The China’s CSI300 index closed down 2.5 percent while the Shanghai Composite index slid 2.9 percent on worries that rising real estate prices would see funds withdrawn from shares. HK’s Hang Seng Index closed down 1.3 pct at 19,111.93 points.

Commodities Recap

Oil prices edged up as some analysts feel a fall, which has seen crude lose some 70 percent since mid-2014, may have reached a bottom. Data on Friday showed a fall in the number of U.S. shale oil rigs in production. Brent crude climbed 17 cents a barrel to $35.27, up 18 percent since Feb. 11. U.S. crude futures were weaker, weighed down by record American crude inventories, dipping 7 cents to $32.70 a barrel, after gaining around 27 percent since Feb. 11.Gold inched higher and seemed to record its best monthly performance in four years, strengthened as turmoil in stock markets drove safe-haven demand. Spot gold rose 1 pct to session high of $1,234.40 an ounce by 0651 GMT, after dropping 1 percent on Friday on strong U.S. economic data.

Treasuries Recap

The 10-year U.S. Treasury yield stood at 1.7451, down 19 bps.JGBs finished the day firmer even with some caution towards tomorrow’s 10-year auction. Dealers apparently did some concession selling, but failed to push yields higher. JGB futures opened at 152.04, down from last Friday’s close of 152.09 and Friday evening’s close of 152.13, and quickly dipped to the day’s low of 152.02 in reaction to last Friday’s losses in Treasuries and subsequent weakness in 5- and 10-year cash. They recovered to as high as 152.19. 5-and 10-year cash yields fell to the day’s low as well (-0.23% in 5s, -0.075% in 10s).The German 10-year Bund yields fell nearly 3 basis points to 0.12 percent, the lowest since April 2015.UK Gilts opened 26 ticks higher than the settlement of 121.21 as core markets drew support from a soft Asian equity session and month end. Buyers gained momentum as June Gilts broke resistance from Friday’s high of 121.57 and support on 10-year cash from Friday’s low at 1.366%.Australian government bond futures dropped, with the 3-year bond contract off 2 ticks at 98.260. The 10-year contract edged 2.5 ticks down to 97.5900, while the 20-year contract was also 2.5 ticks lower to 97.0500. The spread between 10- and 3-year government bonds rose up to 68 basis points, from a 10-month low of 63 basis points set last week. New Zealand government bonds were mixed with yields 1 basis point lower on the short end and 1.5 basis points higher on the long-end.

The material has been provided by InstaForex Company – www.instaforex.com