Article / 29 October 2015 at 8:03 GMT

Morning Markets: December in the crosshairs

chart

 

Watchlist


Hot topics: Fed, tomorrow's  BoJ meeting, Friday's NFP print. 

  • Sweden: Retail sales (0830 GMT)
  • Germany: Employment change (0855 GMT)
  • US: GDP annualised, first estimate. (1230 GMT)
  • US:                  Q3 GDP (1230 GMT)
  • US: Initial unemployment claims (1230 GMT)
  • Germany: Preliminary HICP m/m and y/y  (1300 GMT)
  • US:                  Pending Home Sales Index (1400 GMT)
  • Mexico: Banxico monetary policy meeting (1900 GMT)
  • Japan:  Core CPI national and Tokyo (2330 GMT)

Dollar-denominated assets rallied strongly and broadly last night in a forceful welcome to renewed hopes that the US Federal Reserve will soon increase interest rates for the first time since 1986. 

Market expectations that the policy change could come as soon as December bounced beyond 50% after Fed chief Janet Yellen replaced months of muddled messaging with her clearest indication yet that she is prepared to act. (Click here for John J Hardy's excellent illustration of Yellen's rhetorical tweaks.)

Any policy tightening, however, would depend on the data panning out as hoped with no big downside surprises in key indicators such as employment, inflation and GDP. Although US economic data has largely reflected a fairly steady pace of growth for many months, a recent downturn in secondary indicators including estimate misses for consumer confidence, services sector activity and factor orders, serves as a reminder that nothing can be taken for granted.

Meanwhile, markets today are focusing on the Bank of Japan and tomorrow's (0200 GMT) policy-setting meeting though expectations that the bank will unleash another blast of quantitative easing to address the country's ailing economy are beginning to recede. Beyond that, and going into the weekend, we've got US nonfarm payrolls on Friday. Expect market ructions and dashed rate-hike dreams should the jobs data disappoint.


Market signals

Asian session

  • Japanese factory output rose 1% in September after two months of declines
  • The result confounded forecast for a 0.5% drop and followed a 1.2% slide in August.
  • Shares in Tokyo lost early gains as hopes of a Bank of Japan easing retreated
  • The Nikkei 225 was down 0.17% to 18,871.18 at 0509 GMT
  • Shares in Shanghai rebounded from losses made on Wednesday
  • The Shanghai Composite was up 0.43% to 3,389.62 at 0517 GMT
  • Hong Kong's Hang Seng slid into the red; it was down 0.34% to 22,878.57 at 0521 GMT
  • Australia's S&P/ASX200 lost early Wall St-lead gains, and closed down 1.28% to 5,266.90
  • The AUD was trading at $0.7099 at 0100 GMT down from $0.7120 yesterday
  • Overnight gold for December delivery, hit $1,152.10/oz, a two-week low
  • Crude oil shot up 6.3% to $45.94 a barrel, breaking three straight days of losses
  • WTI and Brent both finished up 6.2% and 4.7% to $45.93 and $49.03 respectively.
  • Iron ore continued its price fall, yesterday finishing off 3% to $49.95/t.

Forex ahead

  • Renewed USD selling highlights bearish tone
  • USDJPY backs a tad from post-Fed rally
  • EURJPY in 132.36 to 131.60 range
  • EURUSD lost almost one cent on Asia open
  • GBPUSD consolidating post-Fed losses, range 1.424-71

From the Floor

Watching numbers. “Regarding a possible rate hike there is now incredible focus on incoming data” - Hardy

Not banking on it. “US regional banks are most sensitive to a rate hike” – Garnry

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1...2...3
Today's US pending home sales index could come close to a post-recession high, strengthening the optimistic view that the key housing sector is on the rebound, writes James Picerno.


Shortlived spike
Australia's S&P/ASX200 jumped at the open on a lead from Wall St, before it losing early gains as retail giant Woolworths took a tumble, says the team at Saxo Capital Markets Australia.


Resilient kiwi
The New Zealand dollar has survived a bruising from the Fed and the RBNZ, and the next big test for the commodity currency is the global dairy trade auction next week, says Max McKegg


hawk


Hurrah! The Fed hawk has finally landed. Photo: iStock

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3y
fxtime fxtime
Lets hope the FEd doesn't delay the December rate hike expectation (for whatever reason) as the rapid unravelling of bullish positions will be severe/swift.

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