- Dollar drops as more bad China news fuels risk aversion.
- China Aug Caixin/Market manufacturing PMI – flash 47.1, 6 ½-year low, 47.7 eyed.
- Dollar index at 8 week low at 95.4.
- EUR/USD hit 2 month high at 1.1295, pullback to 1.1241 levels.
- Euro zone August Markit manufacturing flash PMI 52.4 vs previous 52.4. 52.2 expected.
- Euro zone August Markit Service flashes PMI 54.3 vs previous 54.0. 54.0 expected.
- Euro zone August Markit Composite flashes PMI 54.1 vs previous 53.9. 53.8 expected.
- German manufacturing PMI better than expected, 53.2 vs 51.7 expected.
- Germany GFK Consumer sentiment 9.9 vs previous 10.1. 10.1 expected.
- UK July PSNB -2.069bln vs previous 8.636bln revised. -2.400bln expected.
- UK July PSNCR -3.029bln vs previous 15.381bln revised.
- UK public finances show first July surplus since 2012 as tax receipts swell.
- Greek ruling Syriza party’s far left fraction to form a new party.
- 25 lawmakers set to leave and become independent.
- Riksbank’s Jochnick- can cut rates further, buy bonds, intervene if needed.
- SSEC closes down 4.3% at 3,507.74 points.
- (0830 ET/1230 GMT) Canada CPI, Previous 0.0, Consensus 0.0.
- (0830 ET/1230 GMT) Canada Core CPI, Previous 0.2, Consensus 0.1.
- (0830 ET/1230 GMT) Canada Retail Sales, Previous 1.0, Consensus 0.2.
- (0830 ET/1230 GMT) Canada Core Retail Sales, Previous 0.9, Consensus 0.6.
- (0945 ET/1345 GMT) US August Markit manufacturing PMI flash, 54.0 eyed; last.
- (1000 ET/1400 GMT) Euro Zone August consumer confidence index – flash, -6.9 eyed; last -7.1.
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade operation 15-yr Fannie Mae/Freddie Mac (max $475 mn).
FX Recap
EUR/USD is supported below 1.1300 levels and currently trading at 1.1281 levels. It has made intraday high at 1.1295 and low at 1.1229 levels. The dollar hit an almost eight-week low against a basket of major currencies on Friday, after shocking China data dampened risk sentiment, adding to doubts whether the Fed can hike rates next month. The dollar index fell to 95.4; it’s weakest since June 30. Euro spiked to a two-month high of $1.1295 as a risk-off mood saw increased buying interest. The French flash manufacturing for August dipped to 48.6 from 49.6, while the same gauge improved in Germany hiked to a 16-month high of 53.2 from 51.8 in July. The French services PMI ticked lower to 51.8 from 52.0 and the German gauge also decreased to 53.6, while July’s figure was 53.8. Initial support is seen around at 1.1015 and resistance at 1.1347 levels.USD/JPY is supported below 123.00 levels and posted a high of 123.49 levels. It has made intraday low at 122.81 and currently trading at 122.88 levels. Japan’s factory sector continued to expand in August, according to an industry gauge, raising hopes that the economy will return to growth this quarter. Markit’s Flash Manufacturing Purchasing Managers’ Index (PMI) rose to 51.9 in August from last month’s final reading of 51.2, where a figure above 50 signals an expansion in activity, while a reading below 50 indicates a contraction. Japan’s manufacturing sector has benefited hugely from a rapid weakening in the Japanese yen over the last few years, making domestic production more competitive and increasing firms’ profitability. Initial resistance is seen at 125.68 and support is seen at 120.63 levels.GBP/USD is supported below $1.5700 levels. It made an intraday high at 1.5723 and low at 1.5675 levels. Pair is currently trading at 1.5690 levels. Sterling rose to its highest in seven weeks against the struggling dollar on Friday. Sterling was up 0.2 percent against the dollar at $1.5724, while it was flat against the euro at 71.63 pence. The upside in GBP seems to have run out of steam around 1.5720, or multi-week tops, fuelled by the generalized offered tone surrounding the dollar and increasing expectations of a rate hike by the BoE sooner than market currently estimates. In the data space, UK’s Public Sector Net Borrowing came in at 32.07 billion vs. £2.40 billion initially anticipated. In the US, Markit’s manufacturing PMI is due later, with consensus pointing to a slight improvement to 54.0 for the current month vs. July’s 53.8. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.NZDUSD is supported above 0.6600 levels and trading at 0.6642 levels and made intraday low at 0.6607 and high at 0.6644 levels. A weak consumer confidence index reading for August and a soft rise in job ads last month did little to weigh down the so-called kiwi on Thursday. Earlier on Thursday ANZ’s Consumer Confidence index for August showed a reading of 109.8, down four points from July, and hitting a three-year low. Looking ahead, we have a busy session with a series of key releases from Canada to dominate. The Canadian Consumer Price Index (CPI) is projected to advance to 1.3% in July over the past year, following a quickening of pace to 1% in the previous month, according to consensus. While retail trade is estimated to edge up just 0.2% during June, following a surge of 1% in May. While US flash manufacturing PMI report will fill in the otherwise data-quiet US macro calendar. Initial support is seen at 0.6465 and resistance at 0.6789 levels.
AUD/USD is supported above 0.7300 levels and trading at 0.7330 levels. It has made intraday high at 0.7340 levels and low at 0.7286 levels. The Australian dollar fell against its US peer on Friday after a Chinese manufacturing index came in weaker than forecast, prompting fresh concerns about the strength of the world’s second-largest economy and Australia’s largest trading partner. The AUD/USD fell more than 60 pips to an intraday low of $0.7288 on Friday after the report was released, sliding from $0.7336 beforehand. The implications for China’s trading partners, including Australia who is heavily reliant on Chinese demand, could be extensive. Australia’s export sector is already under massive pressure with commodity prices trading sharply lower than a year ago. Initial support is seen at 0.7225 and resistance at 0.7647 levels.
Market Roundup
World stock markets tumbled on Friday, their worst weekly fall of the year and commodities continued to roil, as more alarming data from China sent investors scurrying to the safety of bonds and gold.Europe’s bourses started deep in red but did regain some ground on improving manufacturing and services data from the euro zone. Britain’s FTSE 100 was 0.7 percent lower, Germany’s DAX, which is having its worst month since 2011, was down just under 1 percent and France’s CAC 40 was off 0.8 percent.
Japan’s Nikkei fell 2.9 percent, 5.2 percent on the week. MSCI emerging markets index was at its weakest in four years. Shanghai stocks dropped 4 percent to below the 200-day moving average for the first time since July 2014. That brought losses for the week to 11 percent. The Hang Seng index was down 2.4 percent for a weekly loss of 7.4 percent.
Commodities Recap
U.S. oil prices headed for their eighth consecutive week of falls on Friday, longest weekly losing streak in 29 years. U.S. crude for October delivery was 25 cents lower at $41.07 a barrel by 1005 GMT. Brent oil was on track for its seventh weekly decline in eight, down 30 cents at $46.32 a barrel.Gold eased on Friday after an earlier rally to six-week highs ran out of steam, but remained on track for its biggest weekly gain since mid January. Spot gold was down 0.2 percent at $1,150 an ounce at 0954 GMT, while U.S. gold futures for December delivery were down $3.20 an ounce at $1,150.
Treasuries Recap
Safe-haven U.S. Treasury yields already feeling a downward pull after minutes from the Federal Reserve’s July meeting slipped further.
Gilts opened 25 ticks higher than the settlement of 118.58. 10-year cash yields broke 1.738%, which was August 12 lows, and the 61.8% Fibo from year lows and highs.
New Zealand government bond yields were as much as 5.5 basis points lower at the long end of the curve. Australian government bond futures rallied, with the three-year bond contract up 5 ticks at 98.070. The 10-year contract gained 8.5 ticks to 97.3900, leading to a bearish flattening of the curve.
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