HEADLINES – INTERNATIONAL
RBA rate decision today at 02:30PM AEDT. According to Bloomberg survey, The Reserve Bank of Australia may leave the cash rate target unchanged at 1.5%
Mario Draghi of ECB responded to the charge by U.S. National Trade Council and confirmed that The ECB has not intervened in the foreign exchange markets since 2011 and adding that Germany’s trade surplus was the result of productivity gains. (The recent assertions is that Germany is a currency manipulator and Germany is using a “grossly undervalued” euro to gain an unfair trade advantage)
NZIER’s Monetary Policy Shadow Board recommends the Reserve Bank New Zealand keep the official cash rate at 1.75% on Feb. 9, according to e-mailed statement from New Zealand Institute of Economic Research.
Banks in the U.S. expect to ease standards on commercial and industrial loans this year, while tightening standards on commercial real estate borrowers, according to special questions included in the Federal Reserve’s January senior loan officer opinion survey.
Median single-family home prices in Montreal up 6.2% to C$297,389 in Jan. from a year ago, according to the Greater Montreal Real Estate Board.
US Labor market conditions strengthened in Jan. by 1.3 index points, according to the Federal Reserve’s labor market conditions index. The index is derived from 19 labor market indicators, heavily weighted by the unemployment rate and private payrolls and also includes JOLTs and wage measures
Billionaire bond investor Bill Gross says investors should plan for asset purchases by global central bankers to continue to dominate financial markets and keep interest rates artificially low. Yields on 10-year U.S. Treasuries are likely to rise gradually but stay artificially low “due to the kindness of foreign central bank quantitative easing policies,” according to Gross, 72, who runs the $1.77 billion Janus Global Unconstrained Bond Fund.
MARKETS IN DETAIL
The Japanese yen rose versus all of its G-10 peers, driving USD/JPY to its lowest level since Nov. 29 as traders unwound stale yen short positions across several currency pairs, notably against the CAD and the AUD.
AUD/USD trading lower amid broad-based positive USD sentiment ahead of RBA decision
According to Bloomberg, FX traders are trying to adjust positioning while balancing a Fed that is intent on hiking rates two or three times this year with a new administration which has expressed some misgivings about dollar strength
CNH hovers near 6.80 level for 3rd straight session, continues to trade at ~600pip premium to onshore yuan; China’s Jan. FX reserves scheduled for release Tues., analysts surveyed by Bloomberg expect the number to stay above $3t.
EM currencies pare gains as MXN leads losses among LatAm peers after 2-week rally. Stocks climb
Treasuries edge to session highs as U.S. stocks approach lows led by energy sector as oil extends drop.
Curve remains near session wides with 5s30s extending through 120.5bp ahead of quarterly refunding consisting of $24b 3Y Tuesday, $23b 10Y Wednesday, $15b 30Y Thursday
Consensus is for Treasury curve to bear steepen based on expectations fiscal policy will be inflationary; convexity-related hedging has potential to exacerbate long-end underperformance as yields rise; steeper curve faces near-term risk from improved odds of March rate hike, however.
The S&P 500 Index retreated from near record levels, as shares most tied to economic growth struggled after wage growth and uneven retail results raised questions about the strength of the American consumer. S&P 500 fell 0.2 percent to 2,292.55 at 4 p.m. in New York, while the Dow Jones Industrial Average slipped 0.1 percent to 20,052.30.
The Stoxx Europe 600 Index slid 0.7 percent as banks and carmakers led declines. The benchmark index is up just 0.1 percent in 2017.
MSCI index of developing equities reached the highest level since September as Chinese shares traded in Hong Kong led gains on speculation pension funds would be allowed to invest in equities.
The S&P/ASX 200 Index futures contract fell 0.2%; futures relative to estimated fair value suggest an early decline of 0.1%. ASX 200 yesterday closed at 5615 level, Utilities and technology stocks led losses. New Zealand was closed Monday.
Oil fell 0.1 percent in New York to $53.77 per barrel after U.S. drillers boosted rig count to the most since October 2015, according to Baker Hughes Inc.
Gold advanced for a third day, climbing 0.8 percent to $1,229.57 an ounce, the highest since November.
Nickel climbed after the Philippines reiterated plans to shutter mines, while copper rose amid the prospect of a strike in Chile.