Morning Markets: Asia rising, but the world awaits more stimulus
- Switzerland: Trade balance (published 0600 GMT)
- France: Monthly business survey, goods-producing industries (published 0645 GMT)
- Eurozone: ECB interest-rate announcement (1145 GMT, news conference 1230 GMT)
- US: Weekly jobless claims report - initial claims (1230 GMT)
- South Africa: SARB interest-rate decision (1300 GMT)
- US: Existing home sales (1400 GMT)
- US: EIA weekly natural gas storage report (1430 GMT)
If the world has been troubled by global machinations in the past month, then perhaps today's trading in Asia was a turning point, as strong US corporate earnings not only boosted US shares overnight, but gave Asian markets a case of Brexit amnesia.
The Dow Jones Industrial Average closed at its seventh consecutive record, and the USD hit a four-month high overnight — much of this is being carried by strong results in the US on home building, retail sales and the rate of new jobs being created.
The dollar rose 0.2% to 107.08 yen after rising as high as 107.460 earlier, its highest since June 7 and now returning to pre-Brexit levels. It's being helped along by growing bets of a rate increase as early as September.
Asian stocks reached nine-month highs on Thursday — Hong Kong's Hang Seng, the Shanghai Composite and Japan's Nikkei all posted significant gains. US corporate numbers may have helped sentiment, but they were only part of the reason; stronger capital inflows and a recovery overnight in global oil prices helped fortify buyer appetite. But mostly it was about forthcoming stimulus.
While Asian equities were riding high today the JPY and the NZD both hit their lowest levels in six weeks amid signs that their respective central banks are preparing to step up stimulus. In the Bank of Japan's case, the rumour today was that the Abe government would be considering a monster stimulus package of around 20 trillion yen ($187 billion).
Meanwhile, the European Central Bank is expected to leave its policy unchanged when it meets today, but traders will be looking for any signs that officials will discuss possible stimulus. ECB chief Mario Draghi has said that Eurozone growth will be slow due to Brexit and the obvious corollary is that there is only one solution. Some kind of response will be needed.
European stocks are expected to open lower this morning as markets await the decision, due at 1145 GMT.
- Aussie business conditions rose in the June quarter due to good trading conditions
- The price of iron ore has slid six days in a row, last trading at $55.75
- The New Zealand dollar sunk to its lowest level in six weeks to around US69.54¢
- Both the JPY and NZD hit lows amid signs their central banks will step up stimulus
- Reuters poll says China's economic growth will cool to 6.5% this year
- Crude oil extended gains in the Asian session - Brent crude was at $47.35/barrel
- US crude edged 0.2% higher at $45.86 after adding 0.7% overnight.
- Shares around Asia were higher, with the Hang Seng Index up 0.6% in early trade
- US earnings boosted shares, with the bulk reporting results above analysts’ estimates
- MSCI Asia Pacific Index beat its April peak and the Hang Seng erased 2016 losses
- Japanese shares rose after reports the BoJ is considering a 20 trillion yen stimulus
- At 0514 GMT the Nikkei was at 16,751.12, up 69 points or 0.42%
- At 0519 GMT, the Hang Seng was up 0.66% and Shanghai rose 0.78%
- Mumbai Sensex was down 31 points or 0.11% at 0517 GMT
- ASX/S&P 200 was up 26 points, or 0.48% at 0543 GMT
- Australian dollar has slumped US1.24c this week, and was trading at around US 75c
- NZD fell 1% against USD and AUD rose against Kiwi to $1.07 after RBNZ release
- USD boosted after Fed-watcher Jon Hilsenrath reports possible September hike
- USDJPY rose 0.2% to 107.08 after rising as high as 107.460 in early trade
- EUR was flat on the day at $1.1021 after notching a low of $1.0980 overnight
From the Floor
Bon appetit. ”Risk appetite is pretty healthy here in the Asian session,” says Moltke-Leth. ”So far the euro is pretty resilient.”
Dovish RBNZ. ”The market was really expecting something dovish, and they [RBNZ] really managed to clear the bar,” Hardy says.
Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.
The European Central Bank isn't likely to want to tamper with its policy settings just now, writes James Picerno
ASX breaks 5500
The ASX200 followed the lead of offshore markets to its highest level in a year, writes the team at Saxo Capital Markets (Australia)
NZD has been sold off on the raised expectation that RBNZ will cut rates to 2.00%. But that doesn't mean the New Zealand economy needs a rate cut, writes Max McKegg.
US real GDP growth has averaged only 0.4% since 2006, writes Stephen Pope, but more government spending isn't the way to fix it.
Saudi bonds beckon
Yield-stricken investors hunting for returns could look to Saudi Arabia whose inaugural international bond issue is said to be waiting in the wings, says Saxo's Michael Boye.
Algo trading basics
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Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.
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