Article / 30 October 2017 at 8:00 GMT

Morning Markets: Nikkei hits 21-year high, China stocks and bonds fall

Head of Editorial Content / Saxo Bank
Denmark

Morning Markets


Watchlist

  • Spain: Preliminary GDP (0800 GMT)
  • EU: Business climate indicator (1000 GMT)
  • EU: Consumer confidence index (1000 GMT)
  • US: Personal income, consumer spending (1230 GMT)
  • Germany: CPI (1300 GMT)

Japan’s Nikkei 225 shot to a new, 21-year high in the early Asian session but proceeded to retreat lower, finally closing just 0.01% in the green. Asian shares started the weak on mixed footing with the South Korean Kospi index rising by 0.21%, Hong Kong’s Hang Seng falling by 0.04%, Australia’s S&P ASX 200 rising 0.27%, and the Shanghai Composite down by 0.77%.

Today’s Asian session also saw Chinese 10-year bond yields jump to their highest level in three years, with the concurrent decline in equities pointing to a rise in volatility following the artificial calm of the 19th Party Congress. 

Oil prices are broadly holding their gains into the European bell after Brent crude rallied to north of $60/barrel in today’s Asian session on Saudi statements regarding production cut extensions: gold, meanwhile, headed lower on the descending slope of its Catalan independence-related spike.

Today’s forex session sees investors fleeing the kiwi in light of New Zealand’s new Labour government and its market-unfriendly policy mix. NZDUSD dropped a further 0.5% overnight while the USD index also headed 0.2% lower, underscoring the NZD’s weakness. 

On the data front, we have Spanish GDP and inflation data at 0800 GMT as well as EU business and consumer surveys and economic sentiment data at 1000 GMT. As well, investors expect President Trump to announce Federal Reserve chair Janet Yellen's replacement Thursday.

Market signals

Asian session

  • Crude has gained ground on Saudi comments on extending output cuts to late 2018
  • A decision on the new Fed chair will be announced on Thursday, after the FOMC meets
  • China's Shanghai Composite took a tumble, after hitting a 22-month high on Friday 
  • The Shanghai Composite was down 0.83% to 3,388.29 at 0649 GMT
  • China's 10 year bond yields soared to their highest level in three years
  • Japan's retail sales rose 2.2% in September from a year earlier
  • The Nikkei 225 closed up 0.01% at 22,011.67, adding to Friday's hefty gain
  • BoJ governor Haruhiko Kuroda is likely to be reappointed for another five years in April
  • Kuroda supported PM Abe's stimulus policy with monetary easing
  • Energy stocks helped drive a S&P/ASX200 rebound; it closed up 0.27% at 5,919.10
  • Weak steel sentiment in China and lower iron ore prices weighed on Australian miners

Forex ahead

  • The US dollar retreated against the yen; it was worth ¥113.6270 at 0540 GMT
  • Profit-taking is likely to keep AUD below 0.77; it was worth 0.7675 at 0537 GMT
  • USDTRY, USDRUB tumble by 0.54%, 0.56% respectively overnight
  • AUDNZD shoots past 1.12 handle on NZ Labour Party fears

From the Floor

Busy week. The US dollar might be sensitive to any upside surprise in inflation,” says Hardy

Crude comfort. "Sentiment remains strong but Brent’s $61/b resistance might attract profit-taking,” says Hansen

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

In opinion

Under the radar
With plenty of data due out in the US and Europe this week, an important Bank of Japan monetary policy statement may fly under the radar for many traders, says Max McKegg.

Steel sentiment shaky
Sentiment towards China's steel-making industry continues to weaken as Beijing forces steel mill closures aimed at curbing pollution over winter, says Saxo Capital Markets Australia.

Data flurry
There's a busy week ahead in data releases, with key economic figures due out from the US and the Eurozone, says Kay Van-Petersen in this week's Macro Monday.

Dollar drag
The favourite for the next Federal Reserve chair, investment banker Jerome Powell, has put a drag on the USD rally despite a strong GDP, write Saxo's SIngapore trading team.

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 Overseas miners will feel the impact of softer iron ore prices, as Beijing forces some steel mills to close as part of its push to curb pollution. Photo: Shutterstock

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