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Tuesday, July 19: Five Things the markets speak of
potential monetary policy decisions are currently dictate market movements, if its bond yields, currency values and stock prices.
The European Central Bank (ECB) meets on Thursday and should leave its policy unchanged. This goes for the Fed too, they meet in July 27. In contrast, the Bank of Japan (BoJ), which meets at the end of the month (July 28/29), is expected to provide more monetary stimulus. Are the authorities disappoint if the yen continues to underperform?
In the U.K., the Bank of England (BoE) Carney suggested that August 4 will keep the busy money market dealers. Down below, the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) prepare potential rate changes Markets (August 11 & 2 respectively).
With the results being a coin toss room for some all expect central bankers to ask a question about Brexit in their post-meeting press conference. It is the unknown that should shape future interest rate policy.
1. RBA and the Reserve Bank of New Zealand (RBNZ)
Both the AUD ($ 0.7496 A) and NZD (0.7028 NZ $) have been under pressure in overnight trade. The RBNZ announced a "cooling measures" property, indicating its intention to adopt new macro-prudential measures of countries to mitigate systematic risk to the mortgage bank.
To date, the real estate market Kiwi inflation risks are the main obstacle to further easing by RBNZ in response to the persistent weakness of inflation. Q2 CPI data from New Zealand only reinforces the need for more easing, and fixed income markets have already factored a chance of another cut next month more than + 70%.
The RBA released its minutes of July. Aussie makers said Brexit had a low impact on the Australian economy so far and that the transition to the non-resource sector is well advanced. It was not a surprise to see the RBA indicate that Aussie inflation would remain low for a while. Governor Stevens reiterated that future data would refine the assessment of the prospects, and they adjust policy as appropriate on the basis of GDP and inflation views.
2. Global stock markets seen mixed results
Euro stock indexes are generally trading lower before the open stateside under the pressure from lower recent oil price ($ 45.14 WTI, Brent $ 46.81).
the lowest energy is encouraging investors to take some profits on recent risk rallies. inventories of raw materials and mining led the losses in the FTSE 100, while financial stocks lead losses in the Eurostoxx.
In contrast, shares in Japan rose for the sixth straight session Tuesday on expectations of more and more that the BoJ will soon deploy economic recovery. The Nikkei Stock Average closed up 1.4% after being closed for a holiday Monday. The benchmark index has rallied 10.6% over the last week.
Elsewhere in the region, investors appeared to be also in profit-taking mode - Chinese stocks in Hong Kong fell 1.2%, the Hang Seng Index down 0.6% while Kospi in South Korea and the Shanghai Composite Index lost 0.2% each. Australian S & P ASX 0 slipped 0.1%.
3. Yen and Yuan slip back
Asian currencies slid in overnight trade despite the slight rebound in small Asian bourses. With the yen and the yuan after printing new lower cost, they managed to drag other regional currencies with them (MYR -1.1%, INR and PHP -0.2%).
The yen fell to ¥ 106.32, its lowest print in nearly a month, and return to the level it was negotiated before the vote Brexit. The surprise result on June 23 sparked massive purchases of the yen as a safe haven (USD / JPY ¥ 98.98 low). However, the victory of Prime Minister Abe in parliamentary elections earlier this month has raised hopes that the PM could introduce a new round of government spending to stimulate growth, alongside the further easing by the BoJ policy. This has succeeded in weakening the yen at current levels.
Moreover, the People's Bank of China (PBoC) set the benchmark yuan to its lowest level in nearly six years (¥ 6.7030). Is China controls the yuan in a slow descent to help the weakening of the economy?
4. Commodities
crude is finding it difficult to find any traction from the end. Oil prices are again on the retreat on fears that the global oversupply of gas will continue to weigh on crude markets.
The contract for September Brent was down -0.38% to $ 46.78 a barrel, while its counterpart stateside WTI trades -0.35% lower to $ 45.10 per barrel for deliveries August.
market oversupply has gross bear sub eyeing $ 40 a barrel again, especially with the return of Iran as a major exporter of oil is starting the pressure on world markets.
Despite Saudi retains -540k barrels per day (announced in June) managed to mitigate some of the impact, fears remain that further growth of gross output will only increase pressure on future prices.
Investors will be looking to the release of the API, this morning and tomorrow EIA data for direction.
5. Bond prices advance
price of sovereign bonds and their yields continue to be volatile.
U.S. Treasury prices rallied 10 years in the overnight session, the first time in four days, pushing their yield by three points-based + 1.56%. Print intraday high yesterday was + 1.60%, near its record there about 10 days + 1.366%.
With central banks continuing to have problems with "deflation", investors should not expect high sovereign yields are sustainable.
With the RBA and RBNZ signals, "lower for longer" at least has similar obligations due in Australia and New Zealand also advance, reduce their yields by 7bps to + 1.92% and + 2.26%.
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