Global Markets:
- Asian stock markets: Nikkei rose 0.41% Shanghai Composite rose 0.74%, Hang Seng fell 0.05%, ASX200 fell 1.12%
- Commodities: Gold at $1064.10 +0.28%, Silver at $13.87 +0.45%, WTI Oil at $37.10 +0.92%, Brent Oil at $37.57 +0.94 %
- Rates: US 10 year yield at 2.26% UK 10 year yield at 1.87%, German 10 year yield at 0.56%
News & Data:
- PBoC Intervening To Support CNY Via State Owned Banks – RTRS
- China's Shanghai Composite Index Falls 3.1% To 3,193.32 At Open
- Yoo Sees Low Risk Of Deflation In South Korea
- Yoo: Policy To Focus On Domestic Demand & Exports, Sees Limited Effect Of Fed Hike On Korea
- Recap: Hong Kong Retail Sales Volume (YoY) Nov: -6.0% (exp -2.9% prev 1.2%)
- Williams: Commercial Real Estate Prices Have Grown Very Rapidly – Concern Over High Yield Bonds Has Dropped
- Williams: Normalisation Will Cool Enthusiasm In Asset Markets – Focused On Commercial Real Estate
- South Korea FinMin Choi: Impact From China Stock Drop On South Korea To Be Limited – BBG
-
China stock trading halt last night will not become the norm –Xinhua via BBG
Major currencies update: The first trading session of the year yesterday, proved to be an active one with an Asian induced (more specifically China) market sell-off, which caused risk sentiment to trade on the backfoot across global equities, as well as risk-sensitive currency pairs such as the yen and AUD and NZD. Across the FX, the market has begun to stabilize, with some currencies forming retracements from the initial injection of volatility. The USD/JPY for one, suffered a drop in excess of 150 pips yesterday, before having registered an intraday low at 118.70. The pair has since retraced with spot currently trading at 119.50. Additional concerns have been arguably helping JPY strength in the past, with the BoJ plan for ETF purchases, met with JPY buying in market reaction, and the potentially decreasing need for QE as the outlook for inflation according to the Japanese central bank is improving despite headwinds. The AUD/USD also fell strongly yesterday from a high of 0.7320 to a low of 0.7160, with spot now trading around the 0.7200 figure. Support for the pair is seen at 0.7100 with resistance at 0.7320. The Kiwi did not retrace as the Aussie did, continuing to trade lower in today’s Asian session with spot currently at 0.6740. The 0.6700 figure is seen as the next key intra-week support for the NZD/USD, with resistance sighted at 0.6820. Amidst the impact to the Antipodeans, the USD/CAD remains relatively stable, trading rangebound between 1.4000 and 1.3835.
The action on the EUR/USD and GBP/USD fronts may seem to be somewhat confusing in regards to its response to the deterioration in risk sentiment. Consideration needs to be made by participants as to how the USD would function in response to fluctuations in risk vis-à-vis the EUR and GBP,. During last year’s August turmoil, the Euro rallied, as consensus USD longs covered, however, such similar behaviour is arguably not as strongly present, with the pair whipsawing up to highs of 1.0945, only to fall to 1.0780 lows. Cable exhibited similar behaviour, rallying in early European trading yesterday to highs of 1.4815, only to then reverse to the downside with lows at 1.4620.
Upcoming Events:
- 8:55 BST – Spanish Unemployment Change
- 8:55 BST – German Unemployment Change
- 9:30 BST – UK Construction PMI
