A Eurex publication focused on European financial markets, produced by MNl Morning Briefing January 11th 2018 Thursday sees a busy data day on either side of the Atlantic, although, by and large, the releases are second tier. The European calendar gets underway at 0730GMT, with the release of the Bank of France Business Survey. At 0800GMT, Spanish November industrial production data will be released. At 0900GMT, the latest Italian retail sales data will cross the wires. The only UK data release comes at 0930GMT, when the Bank of England's Q4 Quarterly Credit Conditions survey is published. The Euro area November industrial production data will be published at 1000GMT. Across the Atlantic, the calendar kicks off with the release of the latest US jobless claims data and the December PPI release, both expected at 1330GMT. The level of initial jobless claims is expected to fall by 5,000 to 245,000 in the January 6 New Year's week, reversing the previous week's gain that lifted the four-week moving average by 3,500 to 241,750. The four-week moving average would rise by 5,000 in the coming week, a fourth straight gain, as a 225,000 level in the December 9 week drops out of the calculation, assuming the MNI forecast is correct and there are no revisions. Final demand PPI is expected to rise 0.2% in Dec after 0.4% increases in the previous three months. Energy prices are seen declining after a 4.6% gasoline-led surge in November, while food prices are expected to rise further after 0.3% gain. Excluding food and energy prices, PPI is forecast to rise 0.2% after an above-expectation 0.3% increase in the previous month that came despite a decline in trade services prices. Excluding trade services as well as food and energy, PPI is expected to rise modestly. The Canadian New House Price Index will be published at the same time. The updated US Natural Gas Stocks data will be released at 1530GMT. Late US data will see the Treasury Budget published at 1900GMT and the latest Fed weekly M2 Money Supply Data at 2130GMT.. Global Economic Trading Calendar
Markets SNAPSHOT: Below gives key levels of markets in the second half of the Asia-Pac session: - Nikkei 225 down 113.98 points at 23674.53 - ASX 200 down 27.678 points at 6069.2 - Shanghai Comp. down 5.181 points at 3416.653 - JGB 10-Yr future up 15 ticks at 150.5, JGB 10-Yr yield down 1.2bp at 0.074% - Aussie 3-Yr future down 3.5 ticks at 97.815, yield up 3.1bp at 2.137% - Aussie 10-Yr future down 2.5 ticks at 97.255, yield up 2.1bp at 2.74% - US 10-Yr future up 4 ticks at 123.04, US 10-Yr yield down 2.56bp at 2.5312% US TSY/RECAP: Tsys recover late after dropping following news from China that they were considering reducing UST purchases, more a function of evaporating offers than heavy buy interest though latter at play covering shorts and taking profits on tactical steepeners set earlier in week. Curves finish flatter after trading broadly steeper in first half: AUSSIE BONDS: *** Post Aussie Retail Sales data, IBH8 98.495/49 bids given 1.6k and 4.3k times respectively. - Currently, 49/495 1.7k x small offer OIS now price in 100% chance of a hike in December from 91% pre data. Retail sales data was robust at 1.2% against 0.4% expected. BOJ: The Bank of Japan purchases total Y960bln of JGB's from the market, all sizes unchanged from the previous operation. STOCKS: Equity markets in Asia are in the red, taking a negative lead from US stocks. Stock markets in Japan and Australia are down for a second consecutive day after a strong rally across Asia kicked off 2018. Aside from some general profit taking after the rally reports that China are considering slowing/halting purchases of UST's as tensions rise between the two countries hurt sentiment. Some grumblings around the US's stance on NAFTA also hurt prospects for trade and exerted some downward pressure US TSYS: Headlines hitting the wires that the report from China yesterday that they are considering slowing /halting UST purchases could be based in incorrect information, Reuters post the headline citing a "China government source" - Other headlines from SAFE (FX regulator) note that UST investment is market driven, and that China has been diversifying its FX reserves investments but investments are the responsibility of reserves management departments. - UST's catch a bid on the news, T-Notes last up 4+ ticks at 123.04, rising from 123.00 before the news. - Yields in the US drop, 10-Year yield now down 2.6bp on the session at 2.531%. - Some lumpy trades paying the move higher in T-Notes including 1.5k at 123.02, 1k at 123.03, 2k at 123.04, and 1.2k at 123.04+. Almost 20k paying the move higher in total. OIL: Oil is slightly lower in Asia-Pac trade having seen a narrow range, WTI last down $0.08 at $63.49, Brent last down $0.10 at $69.10. Oil was broadly flat on Wednesday but is holding gains made earlier during the week and is still near 3-Year highs. - DoE inventory data yesterday showed that headline crude stockpiles fell 4.95mln bbls, above the 3.5mln bbl estimate but some way off the 11.2mln bbl drawdown at API inventories on Tuesday FOREX: USD/JPY is the big mover on the session, some relief over the BOJ keeping purchases in 1-10 Year maturities unchanged saw the yen weaken slightly after dropping from highs of 113.40 since Tuesday on Japan tightening fears. USD caught fresh bid after the China FX regulator SAFE said that reports yesterday that China were considering slowing/halting UST purchases may have cited incorrect sources or been "fake news". This pushed USD/JPY to session highs of 11.78, a gain of 35 pips on the session. - The Aussie was another gainer, AUD/USD last up 24 pips at 0.7865 after hitting session highs at 0.7882 after strong Aussie Retail Sales. Odds of an RBA hike jumped in the wake of the data and yields rose which helped support the rally. The rise was limited by analysis of the data which revealed much of the strength can be attributed to temporary factors. CAD and MXN both weakened on some NAFTA tensions, there was speculation that US President Trump could soon give 6 months notice on the deal, Mexico said they will leave NAFTA is this is the case. - GBP/USD saw some weakness heading into the European session, USD strength knocking the pair below the 1.35 handle and triggering some stops.
Technical Analysis BUND: (H18) Above 162.37 To Shift Focus Higher *RES 4: 162.37 High Dec 27 *RES 3: 162.25 21-DMA *RES 2: 162.04 High Jan 8 *RES 1: 161.56 Hourly support Jan 9 now resistance *PREVIOUS CLOSE: 161.32 *SUP 1: 160.91 Low Jan 10 *SUP 2: 160.80 High Oct 25 now support *SUP 3: 160.26 Monthly Low Oct 2 *SUP 4: 159.78 Monthly Low Sept 28 *COMMENTARY: Failure to gain traction on pops above the 100- DMA (161.86) resulted in a sell-off that sees pressure on 160.80. Bears now look for a close below 160.80 to reconfirm the bearish bias and add weight to the case for a test of 159.78-160.26. Daily momentum studies have corrected and are well placed for a fresh leg lower. Bulls now look for a close above 162.37 to hint at a move back to 163.78 Dec highs with above 162.79 confirming. EUROSTOXX50: Topside Hesitation A Concern *RES 4: 3670.47 Low Nov 6 now resistance *RES 3: 3642.10 Low Nov 8 now resistance *RES 2: 3629.73 2018 High Jan 9 *RES 1: 3614.52 Hourly support Dec 10 now resistance *PREVIOUS CLOSE: 3609.83 *SUP 1: 3589.80 55-DMA *SUP 2: 3570.51 Low Jan 5 *SUP 3: 3524.31 Hourly resistance Dec 29 now support *SUP 4: 3508.37 Hourly resistance Feb 2 now support *COMMENTARY: Hesitation ahead of the 3642.1 resistance is less than ideal for bulls who need a close above this level to confirm initial focus on tests of 2017 highs. Weekly studies remain well placed for further topside following the recovery from a dip below the 55-WMA (3492.82) last week. Bears continue to look for a close below 3570.51 to shift focus back to 2018 lows so far.
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