DAILY EUROPEAN OPENING NEWS: AUD took a hit on the back of disappointing domestic wage data

ASIA-PAC

Regional stocks were lower, following the lead of their US counterparts, as negative risk sentiment and the stronger domestic currency weighed on Japan’s Nikkei 225 which finished 1.6% lower, although this was off of worst levels. In Australia, the ASX 200 fell 0.6%, with energy stocks and resource names leading the way on the back of softer oil prices and yesterday’s Chinese data respectively. Chinese and Hong Kong markets also fell afoul of risk off sentiment (Shanghai Comp -0.6%, Hang Seng -0.7%), with the tumble in Shanghai metals heaping further weight on industrial names.

Bonds edged higher in the US, Japan & Australia, with Australian 3-year bond futures experiencing notable buy side flow in the wake of the soft wage data.

Japanese GDP QQ (Q3) 0.3% vs. Exp. 0.3% (Prev. 0.6%)

Japanese GDP QQ Annualised (Q3) 1.4% vs. Exp. 1.3% (Prev. 2.5%, Rev. 2.6%)

Australian Wage Price Index QQ (Q3) 0.5% vs. Exp. 0.7% (Prev. 0.5%)

Australian Wage Price Index YY (Q3) 2.0% vs. Exp. 2.2% (Prev. 1.9%)

EUROPE/ UK

BoE Deputy Governor Cunliffe says that the Bank can afford to wait until there is 'clear evidence' that wage growth is picking up before hiking rates. He also highlighted that domestic inflation pressures are low, and that the depreciation of sterling has not caused any second-round effects. (Newswires)

UK PM May's govt defeated opposition amendment on Brexit Bill in the first vote; vote split was 318-52. (Newswires)

GEOPOLITICS

A special envoy of Chinese President Xi is set to visit North Korea on 17th November. (Newswires)

US Trade Secretary Ross suggested that NAFTA is on a very short time fuse. (Newswires)

FX

The AUD took a hit on the back of disappointing domestic wage data, which should not lead to any pressure on the RBA in terms of budging from its on hold stance in the short term. In lieu of the data the AUDUSD pair fell around 50 pips and has settled around 0.7580. The Japanese economy recorded a 7th straight quarter of growth, driven by foreign demand, although it was the broader risk off tone which drove JPY demand, with USDJPY moving towards 113.00. GBP ticked lower, while the NZD drew some support from the selloff in the AUD via the AUDNZD cross.

PBoC sets the CNY mid-point at 6.6263 vs. Prev. 6.6399

COMMODITIES

Oil hasn’t made any notable effort to bounce from its API headline build-inspired sell off, while gold has tip-toed higher and Shanghai industrial metals have fallen heavily on the back of yesterday’s soft activity data and the risk off flows seen elsewhere.

US API weekly crude stocks 6.513M vs. Exp. -2.200M (Prev. -1.562M)

US API weekly dist. stocks -2.527M vs. Exp. -1.300M (Prev. -3.130M)

US API weekly gasoline stk 2.399M vs. Exp. -0.900M (Prev. 0.520M)

US API Cushing number -1.803M vs. Exp. -1.900M (Prev. 0.800M)

 

Russia is said to hesitate on the length of extension regarding the OPEC-led oil cuts deal.

US

US 10-Year T-Note Future settles 3+ ticks higher at 124-23+

The curve was once again mixed; yields on 2-year notes again touched the highest in nine years, though yields were lower along the rest of the curve, leaving the curve to flatten once again (much attention was on 5s30s, which narrowed to just below 77bps, while 2s10s also narrowed to 69bps)

Many have attributed the flattening yield curve to the Fed hiking rates, pushing short term yields higher; but with little signs of inflation and sustainable long-term growth, yields in the belly and on the long end have been more stubborn.

US Senate Finance Committee Chair Hatch unveils modified Chairman’s mark of Senate’s tax overhaul plan. It repeals Affordable Care Act’s individual mandate tax, increases child tax credit from the current USD 1,000 to USD 2,000 and reduces middle income tax rates from 22.5% to 22%; 25% to 24%; and 32.5% to 32%. In recent reports, US House Rules Committee does not accept any amendments related to the tax bill.

The White House stated that it strongly supports the House tax bill. (Newswires)

Fed's Bostic (non-voter) said that he continues to back a December hike; he would pause rate hikes if he sees continued weakening in US inflation. He also noted that it is appropriate to raise rates gradually over the next couple of years. (Newswires)

 

15 Nov 2017 - 06:22- Research Sheet- Source: ransquawk

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