A nervous beginning to the start of the week

Monday October 22: Five things the markets are talking about

Global equities remain better supported this Monday morning after Chinese stocks surged overnight on senior officials verbal intervention.

The ‘mighty’ U.S dollar has eased a tad along with treasuries, while Italian bonds have rallied.

The EUR had found some early support on the back of a ratings decision by Moody’s Investors Service late last Friday who removed the immediate threat of a downgrade to ‘junk.’ The market now awaits on S&P’s review this Friday.

Nevertheless, risks remain, from tension surrounding the Khashoggi murder and the ongoing Sino-U.S trade showdown to Italian budget fears and President Trump’s unpredictability ahead of U.S midterm elections.

On tap for this week, the Bank of Canada (BoC) is expected to increase its policy rate by +25 bps to +1.75% on Wednesday (Oct 24) despite last Friday’s disappointing inflation and retail sales readings.

Elsewhere, the European Central Bank (ECB) is expected to leave policy unchanged, but questions regarding Italy and its budget issues are expected to be front and center.

In Scandinavia, Sweden’s Riksbank and Norway’s Norges bank take center stage mid-week.

Stateside, earnings season gathers pace with notable highlights including Amazon, Alphabet, Intel, Verizon, Microsoft, Twitter, McDonald’s, and Caterpillar.

1. Stocks in the black

Japan’s Nikkei edged higher, supported by a rally in Chinese stocks on the promise of additional stimulus measures, triggering buying in firms exposed to China. The Nikkei share average rallied +0.37%, moving off a six-week low hit during last Friday’s session. The index is now down around -7.5% since hitting a 27-year high on Oct. 2. The broader Topix edged +0.15% higher.

Down-under, Aussie stocks ended lower on Monday, as political concerns rattled investors after the governing coalition looks set to lose its one-seat majority in parliament following a weekend by-election. The S&P/ASX 200 index closed -0.6% lower. In S. Korea, the Kospi stock index climbed on Monday supported by a strong Chinese market. The index rallied +0.5%.

In China, stocks surged overnight in the wake of coordinated statements of support by senior regulators, and as China prepares to overhaul its income tax law for individuals. The benchmark Shanghai Composite index was +4.2% higher, while the blue-chip CSI300 index jumped +4.4%.

The gains extended to Hong Kong, where the Hang Seng index added +2.3% and the China Enterprises Index ended +2.6% higher.

In Europe, indices trade higher across the board. Italy’s FTSE MIB outperforms after Moody’s cut the countries rating to the lowest investment grade, but put the outlook as stable, helping BTP futures rally.

U.S stocks are set to open in the ‘black’ (+0.1%).

Indices: Stoxx600 +0.22% at 362.02, FTSE +0.26% at 7,066.00, DAX +0.52% at 11,614.01, CAC-40 +0.24% at 5,096.82, IBEX-35 +0.73% at 8,957.30, FTSE MIB +0.66% at 19,205.50, SMI +0.30% at 8,892.50, S&P 500 Futures +0.18%

2. Brent oil back above $80 as Iran sanctions loom

Brent crude oil prices remain better bid as markets are expected to tighten once U.S sanctions against Iran’s crude exports come into effect in November.

Brent crude oil futures are at +$80.26 a barrel, up +48c, or +0.6%, above Friday’s close. U.S West Texas Intermediate (WTI) crude futures are at +$69.60 a barrel, up +48c, or +0.7%.

Note: The U.S sanctions on Iran, the third-largest producer in OPEC, are set to start on Nov. 4.

OPEC agreed in June to boost supply to make up for the expected shortfall in Iranian exports, however, recent data suggests that OPEC is struggling to add barrels as an increase in Saudi supply was offset by declines elsewhere.

Nevertheless, relief may come from the U.S, where offshore drillers added four oilrigs in the week to Oct. 19, bringing the total count to 873, according to Baker Hughes data on Friday. After months of stagnation, U.S crude production is expected to rise.

However, undermining sentiment is weaker China growth data and the ongoing Sino-U.S trade dispute. The full impact of the trade war is expected to hit markets early next year and provide a considerable drag on oil demand.

Ahead of the U.S open, gold prices have edged higher overnight towards their three-month peak hit last week, as the ‘big’ dollar eased and worries over rising political tensions slowing global economic growth lent support to the ‘yellow’ metal. Spot gold is up +0.1% at +$1,226.52 an ounce, while U.S. gold futures are also up +0.1% at +$1,229.50 an ounce.

3. Italian yields drops by most in 4-months on Moody’s decision

Italian sovereign yields dropped across the curve after ratings agency Moody’s kept the country’s sovereign ratings outlook ‘stable’ while delivering an expected downgrade last week. The market was worried that the outlook would be ‘negative.’

Note: S&P’s review is expected this Friday (Oct 26). It now rates the country two notches above junk at BBB.

Italy’s five-year BTP yield dropped -36 bps to a two-week low of +2.63%, while the benchmark 10-year yield was -26.5 bps lower at +3.39%, its biggest daily drop in four-months. The BTP/Bund 10-year yield spread tightened to +284 bps.

Elsewhere, the yield on the U.S 10-year note rose +1 bps to +3.20%, while Germany’s 10-year Bund yield increased + 2bps to +0.48%. In the U.K, the 10-year Gilt yield climbed +1 bps to +1.588%.

4. Dollar quiet across the board

The EUR/USD is a tad lower at €1.1515 after testing a high of €1.1550 overnight on the back of a relief rally in the 10-year BTP/Bund spread. Nevertheless, event risk persists ahead of the deadline for Italy to respond to the E.U Commission’s initial objections over the 2019 budget plan.

Expect Thursday’s ECB meeting to be closely watched, especially Draghi’s press conference, where the market is looking for more color on how the ECB would reinvest maturing QE proceeds post December this year.

GBP/USD is -0.3% lower at £1.3030 as Brexit talks again reached an impasse. However, PM Theresa May believes that +95% of the Brexit withdrawal deal is “now settled.” It’s believed that the PM is facing a rebellion by more than 40 Tory MP’s if she does not back down to fresh demands from Brexiteers’

Note: 48 votes are necessary for a leadership challenge

5. Italy says it’s ready to discuss budget with E.U authorities

The Italian government is ready to sit and discuss its budget targets with E.U, Deputy Prime Minister Luigi Di Maio said this morning, restating that the “populist” coalition had no plan to leave the euro.

Italy has sent a letter to the commission explaining its reasons for sticking to the +2.4% goal, and that the government was ready to “sit at the table”.

Note: Italy wants to hike its budget deficit to +2.4% from this year’s +1.8%. Last week, the E.U Commission labeled Italy’s 2019 draft budget an “unprecedented breach of EU fiscal rules.”

Forex heatmap

Desperately seeking stability

US  Markets

From sandstorms in Riyadh to headwinds in Rome, escalating risk has effectively capped the recent swell in US Treasury yields, while the combination of Federal Reserve policy tightening and increasing debt supply should keep the trapdoor from giving way. But none the less, market participants will jostle between US growth momentum and the ever-threatening and escalating geopolitical risk, that could trigger a more significant flight to safe-haven currencies and assets.

US equity markets struggled across the finish line on Friday as investors contiued to take profits after morning gains gave way when a report showed U.S. home sales fell for the sixth month in a row. US housing growth continues to disappoint on familiar themes and remains one of the few red lights and the most significant drag on the US economy.

China Markets

Although local Asia sentiment remains poor, the SHCOMP staged an impressive reversal of Friday after China rolled out a series of speakers and rule changes to stabilise markets, but the pace of reversion does suggest it was aided on by state-owned funds to add some vim.  But Chinese markets remain under pressure from every economic angle leaving more than a few investors extremely sceptical Friday’s recovery will have lasting legs.

Oil Markets 

It should be a hectic week ahead in oil markets anticipating colossal participation amidst escalating headline risk this week . Bullish sentiment is clearly under pressure as oil traders search for  the next equilibrium.

Brent crude oil probed back above the $80 per barrel on Friday after China reported record refinery throughput for September.Reuters But the critical benchmark still closed below that technically essential and psychologically significant level. ($80 per barrel)

West Texas Intermediate crude oil followed stronger performances in the Brent market, but like Brent, closed below a key level, $70 per barrel, which is a significant fail for bullish sentiment

In China, higher seasonal demand and suspected stockpiling are occurring, while similarly the US and the OECD continue building stockpiles ahead of potential supply disruptions this winter. But China demand is also surging due to Beijing ‘s enormous infrastructure projects and spends which are being used to stimulate the economy and is beefing up Oil demand.

However, concerns about demand growth slow down along with the prospect of more barrels  coming online has triggered a sizable reduction in bullish markets structures, the difference between bets on higher prices and wagers on falling priced — dropped  14 per cent to 242,855 futures and options in the week ended Oct. 16, according to the U.S. Commodity Futures Trading Commission.

But there’s a loud level of headline noise that seems to pop up like clockwork, where on the one hand views suggest OPEC can quickly cover the Iran shortfall while conspicuously well-timed documents continue to surfacing claiming that OPEC and its allies are having difficulty boosting production by 1 million bpd as it had promised in June. Sifting through the market noise will present its challenges none the less.

From various industry insider reports, Iran exports have fallen from 2.2- a million barrels per day (m b/d) in 1H’18 down to an expected 1.5-m b/d in October. Saudi Arabia has reportedly ramped production to 10.7-m b/d though. They could go to 11-m b/d and draw down 0.5-m b/d from inventories or even more if needed. (3-m b/d just boosted Saudi export capacity at Aramco’s Red Sea Yanbu terminal. Ras Tanura capacity is well above current export levels.) And Russia still has ~0.2-m b/d spare capacity to reach 11.5-m b/d.

According to industry reports, Canada’s crude production was ~4.6-m b/d in August, with Jan-Aug growing ~280-k b/d y/y, even with Syncrude upgrader problems, which has since recovered. Oversupply and US refinery maintenance have put WCS and Syncrude into a massive   discount WTI  pipeline bottlenecks meaning more and more WSC needs to be shipped by rail with new longer-term rail shipping contracts agreeing to at ~$20/bbl to the USGC

And with Trump’s acknowledging that Saudi Arabia’s findings behind the Khashoggi death were credible, this could offer more opportunity for the US administration to pressure the kingdom to tap its spare capacity resources before the Iran sanctions take effect in November. So, there will be an intense focus on the Saudi Royal family’s relations with the Whitehouse this week, while US Congress will face increasing pressures to block all arms sales and deliveries. All the while  global business leaders continue to shun “Davos in the Desert.”

US-Saudi relationships are vital to maintaining peace in the middle east and must continue, however, the Khashoggi case will give the US leverage and which will likely cause Saudi Arabia to increase oil production if possible. But you know this is not going to leave the headlines anytime soon as most everyone considers the official Saudi explanation as a complete fabrication.

While the supply-demand equilibrium remains fragile, the anticipated impact from Iran sanctions is diminishing as prompt Brent remains in good short-term supply despite growing uncertainty about supply disruptions continue to build down the road.

Gold Markets

Investor sentiment is much-improved from even a week ago on increased portfolio hedges against more sustained equity market drawdown which over the short term,  should give rise to haven demand and boost Gold prices.

But China has rolled out some rule changes to stabilise markets. And while the longer-term effects from these changes amount to little more than putting a band-aid on a broken leg, the generally usually work and have some influence over the short term. Since  China equities are deep in oversold territory, there is lots of room for a bounce in local markets which has clipped momentum in Gold markets as even headlines around Brexit, and the Italian budget was more positive heading into the weekend. heading into the weekend although most traders remain a bit cynical on those fronts

While the upcoming US election will offer up many challenges on US political risk front and support Gold, ultimately however past Nov 6 USD and Fed hiking cycle are likely back in the driver’s seat for bullion pricing. While mainly priced in, the USD could strengthen ahead of December rate as higher US interest rates and a stronger USD could discourage gold investors from pushing the envelope higher unless of course, the equity market rout continues.

Currency Markets

From sandstorms in Riyadh to headwinds in Rome, escalating risk has effectively capped the recent swell in the US in Treasury yields, while the combination of Federal Reserve policy tightening and increasing debt supply should keep the bottom from giving way. But none the less we will bond, and currency traders are left to jostle between US growth momentum and tightening global risk, that should trigger a more significant flight to safe-haven currencies and assets.

Last weeks FOMC minutes reaffirmed the Fed’s hawkish lean and should keep the dollar supported. Markets remain in pins and needles of the Italy budget and Brexit stalemate, but with equity markets volatility on the rise, traders will continue to assess China policy adjustments on Friday to see if the moves will have a sticky effect.

Traders will soon factor in US midterm elections where the tail risk clearly, is a Democratic sweep. Mind you; its anyone’s guess just how economically active GOP tax cuts will be in 2019 while facing a massively ballooning debt. But it is while is more clear-cut that  a Blue Wave tsunami would dent market sentiment and likely push the dollar lower

The Euro

So far ECB policymakers have remained somewhat mute on Brexit, but one would think this divorce will not play out pretty for either the EU or UK economies which might influence ECB policy guidance. But EURUSD is back above 1.1500, reflecting quietening in alarm bells over equities & Italy. Moody’s finally cut Italy’s ratings to Baa3 as expected. Italy’s banks are vulnerable because of the high proportion of the country’s bonds they own, but this was widely expected so no major surprise.

The Canadian Dollar

The CAD miss on CPI has overwhelmed whatever remnants of bullishness I had in the CAD. The shocking miss on the CPI has shattered my confidence on next week’s BoC. Given there are no significant data releases between now and the BoC meeting, its time to stop being so unabashedly bullish on the loonie.

Australian Dollar
There were around $A10B of Australian government bonds redemption on October 21 and given much better yields away, unless so governed to buy Australian Bonds, most of those maturing investments likely funnelled into US or other much higher yielding bonds. Thus, the AUD is holding up well despite a lot of selling pressure last week and could outperform this week provided China volatility continues to ease after mainland regulators policy tweaks on Friday.
Been avoiding trading AUD vs the USD like the plague but given shifting sentiment on BoC policy next week, the long AUDCAD trade could see some appeal early this week.

On the energy front, multiple news sources have confirmed that Australia’s colossal and much delayed Ichthys liquefied natural gas (LNG) plant has started shipments in recent weeks. But comes at a favourable time and could offer some much-needed respite to Australia’s dwindling heavy sweet crude oil production.

The Malaysian Ringgit

It still feels like risk off but with a less weak Yuan and the monetary policy easing story in China playing out well on the SHCOMP. While the mainland equity recovery was positive on the surface, other regional bourses barley blinked as the China market reversal was little more than it a short covering.

In what could best be described as hope for the best but prepare for the worst. Malaysia slashed its economic growth targets and deserted its plans to balance its budget by 2020, not exactly a ringing endorsement for the financial in Malaysia. And with capital gains taxes and other consumption taxes on the horizon, it’s not to difficult to figure out why Malaysia equity markets remain under pressure.

The combination of macro risk off as well as on-shore danger around the upcoming budget will keep the Ringgit trading defensively.

The leak on oil prices notwithstanding, regional risk sentiment remains ever so fragile as any sliver of optimism from US earnings gave way to that reality that trade tension and geopolitical unrest continues to gurgle. There were around $A10B of Australian government bonds redemption on October 21 and given much better yields away, unless so governed to buy Australian Bonds, most of those maturing investments likely funnelled into US or other much higher yielding bonds. Thus, the AUD is holding up well despite a lot of selling pressure last week and could outperform this week provided China volatility continues to ease after mainland regulators policy tweaks on Friday.
Been avoiding trading AUD vs the USD like the plague but given shifting sentiment on BoC policy next week, the long AUDCAD trade could see some appeal early this week.

US Growth in Q3 to Guide Dollar

The US dollar is mixed on Friday. Investor’s appetite for risk rose and safe haven currencies (JPY and CHF) fell while positive China and Brexit news saw the NZD, EUR, GBP and AUD advance against the USD. The Canadian dollar was dragged down in the last trading day of the week after softer than expected retail sales and inflation data. Next week’s Bank of Canada (BoC) monetary policy meeting is anticipated to bring a 25 basis point rate hike. Despite the miss inflation has been above the central bank’s target and businesses are optimistic about strong sales.

  • BoC expected to hike interest rate to 1.75%
  • German Business Climate to cool down
  • US first estimate of Q3 GDP to confirm solid growth

Euro Caught Between Brexit and Italian Budget

The EUR/USD fell 0.41 percent in the last five days. The single currency is trading at 1.1510 after rising on Friday due to a combination of softer US housing data and positive Brexit News. The gradual pace of rate lifts by the U.S. Federal Reserve had a negative impact on previously owned homes in September.



The euro rallied on Friday after a report that Theresa May’s government is ready to drop the time limit demand on the Irish border. The EU and the UK are said to be close to a deal, 90 percent by the estimate of the EU’s top negotiator, but the final 10 has proven hard to agree on.

Italian budget issues continue to drag on the euro. The threat of a downgrade of Italian debt does not seem to faze local politicians that are ready to square off against Brussels.

The European Central Bank (ECB) will publish its main refinancing rate and host a press conference on Thursday, October 25. No changes are expected, but investors need to be aware of the tone of the press conference as Mario Draghi could push a more dovish rhetoric.

Loonie to get BoC Rate Hike Boost

The USD/CAD fell 0.74 percent in a weekly basis. The currency pair is trading at 1.3117 and will look at the Bank of Canada (BoC) for support. The central bank is highly anticipated to announce a 25 basis points interest rate hike. The central bank has lifted rates twice in 2018 and rising inflation is forcing the hand of the BoC.


Canadian dollar weekly graph October 15, 2018

The rate decision has been priced in for some time, but the fundamental picture has worsened reducing the probabilities of a rate hike while still at near 80 percent. The NAFTA renegotiation was a big risk keeping the BoC awake at night, and with the USMCA some of that risk is lifted.

With inflation data lower than forecasted it now validates the gradual approach of the BoC and unless there is hawkish rhetoric from Governor Poloz, the loonie will continue to underperform against the USD.

Oil Drops as US Weekly Buildup Pressures Prices

West Texas Intermediate lost 0.95 percent this week. WTI is trading at $69.36 after staring a rebound on Friday due to surging Chinese demand. Supply concerns continue to guide daily price action. The US weekly inventories showed a buildup last week and pushed prices lower. Iranian exports have been cut ahead of the start of US sanctions, but there are reports that OPEC and other major producers are already closing the gap.



Saudi Arabia is embroiled in a diplomatic scandal and is quickly losing the goodwill it gained for having engineered price stability with the production cut agreement. The OPEC and major producers agreed to limit output to stop the free fall in energy prices and have extended the agreement to this year.

Trade war concerns eased on Friday as China and the US have agreed to meet during the sidelines of the G20 meeting in Buenos Aires. The leaders of the two nations will fly in a day ahead of the event to try and mend the trade relationship.

Gold Rises for Third Week Straight

Gold rose 0.6 percent last week. The yellow metal is trading at $1,229.40 despite gradual rate hike talk by Fed members and the minutes form the September FOMC. The rebound of the stock market correlated with the rise of the yellow metal. Safe haven appetite in gold holdings has returned and in a market with no shortage of geopolitical risk for the remainder of the year the yellow metal is set to continue on its rise.



Market events to watch this week:

Wednesday, October 24
10:00am CAD BOC Monetary Policy Report
10:00am CAD BOC Rate Statement
10:00am CAD Overnight Rate
11:15am CAD BOC Press Conference
Thursday, October 25
7:45am EUR Main Refinancing Rate
8:30am EUR ECB Press Conference
8:30am USD Core Durable Goods Orders m/m
Friday, October 26
8:30am USD Advance GDP q/q

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

CAD plummets on disappointing retail sales and weak inflation

Canadian inflation slowed significantly last month as temporary factors that lifted the cost of gas and air travel dissipated.

Canada’s CPI climbed +2.2% y/y, following a +2.8% increase in August and a +3% climb in July.

The market was looking for a solid +2.7% gain in September.

On a month-over-month basis, CPI declined -0.4%.

Digging deeper, the Bank of Canada (BoC) three preferred measures supporting inflation also weakened - core-inflation prices rose in a range from +1.9% to +2.1% for an average of +2.0%, down from the previous month’s +2.1% average.

Despite this morning miss, the headline annual inflation rate in Canada has come in +2%+ for eight consecutive month.

Canada retail sales miss

Canadian retail sales fell unexpectedly in August, led mostly by gas stations receipts declines.

Canada retail sales fell -0.1% in August, m/m, to a seasonally adjusted +C$50.76B. The market was looking for a +0.3% rise.

In volume terms, retail sales declined by a steeper -0.3% in August.

The previous month’s data were revised downward, and indicated receipts rose +0.2% vs. +0.3% estimate.

On the release, the CAD came under immense, trading at C$1.3030 before the headlines to C$1.3116.

Next up, the BoC monetary policy announcement is next Wednesday (Oct 24). Despite a weaker retail sales and inflation, the market is currently pricing in another +25 bps hike by Governor Poloz.

Global markets are enveloped in a classic case of risk aversion.

Global markets are enveloped in a classic case of risk aversion.

Global markets are enveloped in a classic case of risk aversion with all the main risk off hallmarks showing up in virtually every corner of the market. The S&P is down below the 200d moving average, FX carry is very wobbly, and  US 10y yields have corrected lower. Taking their cue from Asia markets North American traders read negatively into the USTR’s focus on China rather than the fact the report didn’t step on anyone’s tail. But the painfully raw price action from BTP-Bund spreads widening to a five-year high  triggered the latest  freefall  as risk assets virtually melted across the board

This week’s US earning inspired equity markets rebound is but a fleeting memory and has given way to the  lurking reality of bubbling trade-tension, geopolitical unrest, Italy risk and a hawkish fed narrative.

I guess when the Charmian of the world most powerful Central Bank views the US economy in the context of ‘remarkably positive outlook’ it’s probably not a great idea to assume the FOMC will walk back any hawkish interpretation.

While the US markets have been somewhat insulated from China equity market meltdowns this year, that strong historical correlation that “when China sneezes the rest of the world catches the flu” is starting to take hold. But things could get worse as the Yuan depreciation train could be arriving at the station anytime soon. Indeed, USDCNH warrants a high degree of attention as the test of the vaunted seven level looks increasingly inevitable as based on current price action more CNY/CNH depreciation is in the tea leaves.

And for good measure, not that I’m overly superstitious, but for the Chinese, number 7 can also be considered an unlucky number since the 7th month (July) is a “ghost month” and homophonous with death.

Yuan

Are markets prepared for the destabilising effects of a rapidly weakening Yuan as we draw ever so ominously near another leg of RMB depreciation?

In the wake of a few dubious Yuan fixings of late, the Pboc are indicating a more lenient stance towards RMB depreciation.

The CFETS index has broken the 2017 low of 92, which may suggest more CFETS depreciation is necessary given further tariff threats, but the lack of capital inflow is what telling which is naturally weighing on support for the RMB, all of which is suggesting the depreciation train is nearing the station.

Oil Markets

EIA Weekly Petroleum Status Report was a complete shocker sending Oil markets spiralling lower amidst some concerning development for Oil bulls.

With risk sentiment going into the tank and investors rehearsing worst-case scenarios around the asynchronous global growth sinkhole. Compounded by China contagion fears, there was hardly a bid to be found in New York markets. This significant price action and discovery suggests traders are no longer concerned about how high price will go but rather how quickly they will fall, as for today at least the bid on dip mentality has run for cover.

With any notion that  Riyadh would cut output and push oil prices higher a distant memory, Tanker Trackers data showing that Iran’s oil exports in the first two weeks of October were 10% higher than September averages compounded by massive worldwide inventory builds as the so-called ‘ hoarding effect” intensifies  Not to mention increasing chatter that Saudi Arabia will increase production. What appeared to be a ” sure-fire bet” for supply shortfalls when Iranian oil exports drop significantly in November, it’s has morphed into a bit of a white-knuckler of a trade.

On the bright side, however, since I remain unabashedly bullish on oil markets. So, after an 11 % fall and subsequent shake out in a mere two week, positions are much cleaner, and the fear of getting caught up in the crowded trade mentally heading for the exits has receded considerably. So it could be time to step back up to the plate. You know the old saying, no pain no gain!

Gold Markets

Gold prices are for the time being are held back by the stronger USD. But the enormity of the significant tail risks around the US midterm elections, and escalating pockets of geopolitical angst still make gold appeal a favourable tail hedge against these escalations. Despite the FOMC minutes cementing the Feds rate hike view, the US midterm elections to pose a significant headwind for both the USD and US equity markets as such Gold should remain a favourable hedge over the short term.

Currency Markets

Nothing else matters but the RMB (Rinse and Repeat yesterday currency view)

Chinese authorities are a lot more sensitive about the RMB on a trade-weighted basis rather than on a bilateral basis against the United States, and with the markets trading at the bottom end of the CFETS basket range, there will be more focus on the basket after two specifically odd fixes towards the end of last week. So, the debate rages if last week is a signal for a shift in policy. If authorities decide to let this CFETS level go, it will open a massive can of worms that should see USDCNH rocket higher and will have a positive knock-on effect for the USD.

Regardless of which direction the USDCNH moves the RMB will remain at the epicentre of currency markets and will drive the near-term direction of the dollar.

So, for local ASEAN currencies, I suspect they too will be held hostage to the RMB moves.

The Euro 

The Euro is worth noting as  EURUSD was dragged down on broader USD sentiment, but events of its own made it worse. Troubling Italian news hit one hour into the London close causing a calamitous meltdown in EU risk

Media

Join me on Channel News Asia this morning at 7:30 AM SGT to review last nights price action Channel News Asia

Risk Aversion Lingers

Risk Aversion Lingers

It was a shaky day for US equities, but the broader indexes did manage to claw back from the depths of despair but still ended the day slightly lower only 24 hours after the most substantial gains in 6 months and reminding us just how fragile investor confidence is.

Risk aversion continues to permeant across global markets. While Oil prices were leaking everywhere (blame inventories), industrial metals also trade on a soft note. While there isn’t one reason, but there’s a sense of foreboding in the air. that the next US equity correction could be the ” big one.”

President has gone  postal 

But I’m looking no further than the President ratcheting up the rhetoric by ” going postal ” on China. Indeed US-China tensions are back on the radar, particularly with NYT suggesting Trump’s next target will be China’s cheap postage services. But the headlines aren’t much better in Europe which is intensifying investor jitters. There is zero expectation for a Brexit divorce agreement coming out of EU Summit while Italy budget is widely expected to be rejected by the EU. Late NY headlines from Reuters say that EU leaders are dropping plans to hold a November 17-18 summit for now – they are ready to meet again “if and when” the EU’s chief negotiation reports that decisive progress has been made in negotiations. An amicable Breixt divorce has certainly taken another significant hit.

The Greenback 

The USD rallied Wednesday, reflecting two forces: unwind of the prior two sessions of US weakness as USD haven flow picked up, and FOMC minutes which confirmed the Feds would continue to normalise rates for the foreseeable future.  This was the tail risk going into the minutes as some market participants thought the FOMC would walk back some of the markets more hawkish interpretation of Jay Powell post rate hike presser.

US Treasury FX Report 

Though released a little later than expected, the US Treasury’s semi-annual report on currencies was mainly in line with what was leaked to the press late last week: once again, no trading partner was named a currency manipulator. Moreover, the same countries – China, Japan, Korea, India, Germany, and Switzerland – were on the Treasury’s monitoring list.

Though China was not explicitly named this time, this report however materially escalated its language against China – in four significant ways.

1) The executive summary focuses on China’s history of unfair trade practices
2) China had their section while everyone else was grouped into another
3) The Treasury will review the RMB in 6 months
4) But the one major caveat is, and something the markets were suspecting all along. ” “as a further measure, this Administration will add and retain on the Monitoring List any major trading partner that accounts for a large and disproportionate share of the overall U.S. trade deficit even if that economy has not met two of the three criteria from the 2015 Act”.

The report comes out in line with market expectation and gives the markets another six months of breathing room. Hopefully, US-China can make some headways on the trade front. But giving China their section in the report suggests that the US Administration is ready for more punitive response China should discussions between Trump and Xi fail to yield results at next months G20

I guess we can breathe, at least for now, a temporary sigh of relief as we await the President who no doubt chime in on the US Treasury findings.

Oil Markets

A sizable shocker into this week more definitive EIA Weekly Petroleum Status Report which has sent Oil markets spiralling lower  amidst some concerning development for Oil bulls

The DOE data for last week significantly more bearish than Tuesday’s American Petroleum Institute report, with crude stocks increasing 6.5 million barrels per day. This is particularly dispiriting on two fronts: (1) markets had positioned for last weeks bumper inventory report to retrace (2) API on Tuesday suggested we would see a draw.

However, Petroleum prices were testing the downside in London and early New York before the inventory data even after a Tuesday report from the American Petroleum Institute. The de-escalation in US-Saudi tension suggested the market was very prone to a downside correction on any inventory build.

So, for today at least it could be a case of how low prices will go rather than how high.

But given the Iran sanctions and uncertainty around the spare capacity debate $80 Brent should provide solid support, but oil bulls have considerably less breathing room than they had yesterday.

Gold Markets

The US dollar refuses to stay down for the count which saw gold prices fall to the bottom of recent ranges. But the enormity of the significant tail risks around the US midterm elections, and escalating pockets of geopolitical angst still make gold appeal a favourable tail hedge against these escalations. Despite the FOMC minutes cementing the Feds rate hike view, the US midterm elections to pose a significant headwind for both the USD and US equity markets as such Gold should remain a favourable hedge over the short term

Currency Markets

Nothing else matters but the RMB

Chinese authorities are a lot more sensitive about the RMB on a trade-weighted basis rather than on a bilateral basis against the United States, and with the markets trading at the bottom end of the CFETS basket range, there will be more focus on the basket after two specifically odd fixes towards the end of last week. So, the debate rages if last week is a signal for a shift in policy. If authorities decide to let this CFETS level go, it will open a massive can of worms that should see USDCNH rocket higher and will have a positive knock-on effect for the USD.

Regardless of which direction the USDCNH moves the RMB will remain at the epicentre of currency markets and will drive the near-term direction of the dollar.

So, for local ASEAN currencies, I suspect they too will be held hostage to the RMB moves.

Canada: Monthly Survey of Manufacturing, August 2018

Manufacturing sales fell 0.4% to $58.6 billion in August, following three consecutive monthly increases.

The decline was mainly due to lower motor vehicle sales. Excluding this industry, manufacturing sales rose 0.4% in August.

After taking price changes into account, the volume of sales in the manufacturing sector edged down 0.3% in August.

Motor vehicle industry posts the largest decrease

Sales of motor vehicles fell 8.3% to $4.9 billion in August, following two consecutive monthly increases. The decline was mostly attributable to lower production due to atypical shutdowns in some assembly plants in August. In constant dollars, motor vehicle sales fell 8.4%, which shows that the decrease in current dollars mainly reflected a drop in sales volumes rather than lower prices in the industry.

Primary metal industry sales fell 2.9% to $4.4 billion in August, a third consecutive monthy decline. The decrease in August reflected lower sales in the non-ferrous metal (except aluminum) production and processing industry. Conversely, seasonally adjusted sales in the iron and steel mills and ferro-alloy manufacturing, steel product manufacturing, and alumina and aluminum production and processing industries grew in August.

Sales in the wood product (-3.4%) and food (-0.6%) industries also fell in August.

These decreases in current dollars were partially offset by increases in the aerospace product and parts (+13.5%), plastic and rubber product (+3.8%), machinery (+2.0%) and chemical product (+1.1%) industries.

Sales down in three provinces

Sales were down in three provinces in August, with Ontario posting the largest dollar decrease.

After two straight monthly increases, sales in Ontario fell 2.0% to $26.6 billion. The decline was mainly attributable to lower sales in the motor vehicle (-8.9%), primary metal (-8.4%) and motor vehicle parts (-1.8%) industries.

In Alberta, sales fell 0.8% to $6.6 billion, following three consecutive monthly increases. Most of the decrease stemmed from lower sales in the petroleum and coal products (-3.5%), electrical equipment, appliance and component (-24.6%) and primary metal (-9.2%) industries.

The largest monthly increase was in Quebec, where sales rose 1.3% to $14.2 billion. The gain was mainly attributable to an 18.9% increase in the aerospace product and parts industry and, to a lesser extent, gains in the plastic and rubber product (+8.6%), computer and electronic product (+12.2%) and petroleum and coal product (+3.4%) industries.

Inventory levels rise

Inventory levels rose 1.1% to $83.9 billion in August. Inventory increased in 14 of 21 industries, with the largest gains in transportation equipment (+3.4%), food (+1.9%) and plastic and rubber product (+5.6%).

These increases were partially offset by lower inventory levels in the primary metal (-1.4%) and wood products (-2.3%) industries.

The inventory-to-sales ratio rose from 1.41 in July to 1.43 in August. The ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Unfilled orders increase

In August, unfilled orders rose 0.8% to $94.8 billion, after edging down 0.2% in July. Most of the gain came from a 0.8% increase in the aerospace product and parts industry. Unfilled orders were also up in the computer and electronic product and the fabricated metal product industries.

After two consecutive monthly decreases, new orders were up 1.1% to $59.3 billion in August. An increase in new orders in the aerospace product and parts and machinery industries were behind this gain.

The capacity utilization rate edges up

The capacity utilization rate (not seasonally adjusted) of the manufacturing sector edged up 0.7 percentage points, from 79.5% in July to 80.2% in August. Following a 14.6 percentage point decline in July, the capacity utilization rate for the transportation industry increased from 73.4% in July to 81.5% in August. Shutdowns at several auto manufacturing plants were responsible for the decrease in July.

The capacity utilization rate of food manufacturers fell 2.2 percentage points to 81.0% in August. This decrease was attributable to lower production in most food industries.

The capacity utilization rate of the primary metal industry, which includes aluminum and steel, edged down 0.3 percentage points to 77.8% in August.

StatsCanada

You just know that something good is going to happen

Cloudbusting: you  just know that something good is going to happen

 

US markets

In the span of a mere 24 hours two of my most pressing question may have been answered, correctly, can the anomalously robust US equity market hang on in the face of mounting global risks? And are we entering a period of drawn-out USD selling?

Mind you, with many distractions on the radar, there are two not so subtle, under-the-radar distractions sending global trading floors abuzz this morning. Specifically, the astonishing outperformance in both US equities and emerging markets.

US equities markets soared to their biggest gain in six months following strong earnings and uplifting reports on the economy.

The Labor Department reported that U.S. employers posted the most jobs in two decades in August as expectations around hiring continued to outpace while US industrial pace and the Federal Reserve said output by U.S. factories, mines and utilities climbed in September despite the effects of Hurricane Florence.

Equity investors took their cue from the industrial production report which indicated inflation isn’t picking up, triggering another Goldilocks economy rally. But whatever signal convinces investors the Fed will not move interest rates up quicker than expected will be latched on to the big time especially in the face of robust US data. 

But let’s take this move in context, sure +2 % gain on the S&P is astonishing in anyone’s book, but significant indexes are still broadly lower for the month following last week 2-day meltdown as investors fretted over a fast pace of Fed policy normalisation.

However, it is the best of both worlds for US equity markets, with the economy in full swing but nary a sign of inflation as Goldilocks returns for yet another day. Which is providing a much need diversion from trade tensions and concerns about global growth downtrend. Also, the dollar fell overnight as traders are contemplating the Greenback fate ahead of the US midterm elections.

Nothing like a robust US market and a  USD lacking any momentum to trigger the Asian market into action!

Oil Markets

The American Petroleum Institute figures for the week ended October 12 showed an unexpected 2.1 million barrels per day decline in US crude oil inventories even as stocks at the Cushing, Oklahoma delivery point for NYMEX WTI futures increased by another 1.5 million barrels per day. But the headline did catch momentum speculators wrong-footed who were expecting another build.

Prices were also bolstered by rising US stock market providing a welcome distraction from trade tensions and concerns about global growth as investors are back focusing on tighter global supply due to Iran sanctions. It’s widely expected that Iranian exports, which are already dropping, will fall quite sharply from November onwards, and even if Saudis and other OPEC bodies have compensated the anticipated shortfall to some degree there will undoubtedly be a near-term imbalance which will pressure prompt prices

On a side note regarding a slower global growth narrative or an adverse knock demand side effect from weaker the US emerging market currencies, there’s no definitive, quantifiable data to support this view, as global energy demand remains robust by any demand-side measure.

None the less Brent prices risk is skewed higher as Venezuela, other the Middle East concerns, North and West Africa remain hotspots for supply disruptions in coming months. And with traders all too aware that we are little more than one supply disruption away from a move above $ 85 Brent, prices remain very well supported on pullbacks after reaching four-year highs last week.

Gold Markets

Given the political firestorm igniting around the US Midterms, Italy, and US-Saudi tensions, gold’s upside is looking favourable as a tail hedge against these escalations. The mid-term elections in themselves will provide more than enough political fodder to keep the flames going, not to mention the possible equity market drawdowns from a shift of power in the “house” if a Blue wave takes control.
Gold did back off from intersession highs as US equity markets rallied convincingly, which was triggered by a more robust US Industrial production data. But with inflation absent from the report, it doesn’t shift the Fed dial. This view is significant for Gold prices as it suggests without an uptick in US Inflation for the USD to tether itself to in the run you to the US election, we could see the dollar sell-off as US political headline risk is expected to escalate and should lead to Gold outperformance.

But on a near-term break of the signification $ 1234-1236 zone and given the bearish Hedge Fund compositions and structures on the Comex will come under intense pressure and we could see $1250+ in a heartbeat if these established short positions show signs of buckling.

However, perhaps a hawkish warm-up ahead of tonight’s FOMC minutes San Francisco’s new President Daly said she does think it’s a balance between hiking too fast and getting behind the curve but her remarks on the economy are strong. On inflation, the Fed is “effectively at the 2.0% target.” For potential tailwinds, however, she does name three: financial conditions, global growth, and fiscal stimulus.

Currency markets

The Yuan

The CNH will be closely watched in Asia today after some shifting sentiments were observed in the NY market. But the latest China inflation prints were failing to highlight just how problematic higher prices are for Chinese consumers while only suggesting that producers are unable to pass on higher cost from the weaker Yuan and or tariffs impact.

The US Dollar

Traders will be watch USD housing starts intently, remembering that the housing industry has been the most disappointing segment of US data in 2018.

While the TIC data has taken on a secondary level of importance in recent years, one question mark China’s holding of US Treasuries fell for a third consecutive month in August. I don’t believe there is anything sinister in this trend other than the fact the Pboc could be building their USD war chest to intervene if the Yuan moves too quickly above 7? Or its little more than prudent reserve management policy with the markets expecting the USD to struggle in 2019

We are starting to see signs of a USD capitulation ahead of the US midterms as dollar bulls are becoming increasingly nose-ringed to the US midterms elections.

The Euro
Currency markets are cautiously busy with most of the focus on JPY and EUR in New York, but well-worn ranges held

Little has changed from last week view that was dominated by risk reduction of USD long positions. In the meantime, the EURUSD is struggling to break through a wall of offers between 1.1600 -25. None the less, when EURUSD eventually breaks it’s 1.1450 1.1750 range, it will be through the top of the range, but given the temperament and choppy nature of trading the EURUSD these days, it will require a great deal of patience.

The Japanese Yen
The USDJPY moved convincingly lower on last week US equity led meltdown. Traders are monitoring the scope of the latest US equity market recovery. But on another equity market wobble risks remain more significant to the downside for USDJPY as the midterm US elections near.

The British Pound
Sterling has been weighed down by virtually every conceivable negative Brexit headline, but there is no denying the latest employment report that is signalling ages are now growing faster than prices!! The Pound continues to grind higher even although a Bank of England rate hike is very much dependant on Brexit going through

The Malaysian Ringgit

With China trade headlines mostly absent, regional markets have been much calmer this week. But oil has been sending mixed signals but remains well bid on dips, which should be supportive of the Ringgit, But the focus will be on   the CNH today( see above)

 

The buck cannot find a bid

Tuesday October 16: Five things the markets are talking about

The ‘big’ dollar came under pressure yesterday and is finding it difficult to gain much traction this morning as investors taking profit on U.S assets outweighs concerns about Italy, Brexit and a Sino-U.S trade war. Furthermore, twin U.S deficits and prospects of a halt in Fed’s rate hike cycle are also weighing on the dollar.

Elsewhere, it has been mixed picture across regional stock markets overnight as investors await the next wave of corporate earnings and further developments across the aforementioned geopolitical issues.

Note: Any hint of a slowdown or stronger growth could affect the pace of Fed’s rate hikes.

Oil prices continue to fluctuate within striking distance of recent highs amid tensions between Saudi Arabia and the U.S over the disappearance of Jamal Khashoggi, a prominent journalist with U.S citizenship, while the precious ‘yellow’ metal holds its gains.

On tap: FOMC minutes are due Wednesday (02:00 pm EDT), with investors focused on projections for further interest rate rises.

1. Stocks mixed results

In Japan, the Nikkei rebounded overnight, supported by short covering in index heavyweights (automakers and SoftBank), but retailers came under pressure on worries about domestic personal consumption and slowing demand from China. The Nikkei share average closed +1.3% higher, after tumbling -1.8% yesterday. The broader Topix rallied +0.7%.

Down-under, Aussie shares rebounded overnight, as mining and financials bounced back from Monday’s -1% drop and six-month low, but rising tensions between Saudi Arabia and the West and weaker PPI data in China capped broader market gains. The S&P/ASX 200 index rose +0.6%. In S. Korea, the Kospi stock index closed flat on Tuesday as global uncertainties capped gains during the day.

In China, stocks ended lower overnight, after data showed factory-gate inflation had cooled for a third consecutive month in September amid lean domestic demand. The blue-chip CSI300 index ended -0.8% weaker, while the Shanghai Composite Index also closed -0.8% lower. In Hong Kong, the Hang Seng was up +0.1%.

Note: Chinese inflation was boosted by food while prices were mostly subdued elsewhere. China Sept CPI y/y came in as expected at +2.5% vs. +2.5%e (a seven-month high): PPI y/y was +3.6% vs. +3.5%e.

In Europe, regional bourses trade mostly higher across the board with the Italian FTSE MIB outperforming following the submission of its draft budget to the E.C, while the U.K’s FTSE underperforms on Brexit uncertainty.

U.S stocks are set to open in the ‘black’ (+0.3%).

Indices: Stoxx600 +0.4% at 361, FTSE -0.2% at 7012, DAX +0.2% at 11638, CAC-40 +0.1% at 5099, IBEX-35 +0.9% at 9004, FTSE MIB +1.1% at 19500, SMI +0.3% at 8678, S&P 500 Futures +0.3%

2. Oil dips on expectations of higher U.S stocks, gold unchanged

Oil prices have eased a tad amid expectations of an increase in U.S crude inventories, but signs of a fall in Iranian oil exports for October are limiting losses.

Brent crude for December delivery has fallen -6c, or -0.07%, to +$80.72 per barrel, while U.S West Texas Intermediate (WTI) crude for November delivery is down -14c at +$71.64 a barrel.

U.S crude stockpiles are forecasted to have risen last week for the fourth consecutive week, by about +1.1M barrels, ahead of reports from the API (data is due at 4:30 pm today) and the U.S DoE’s EIA (will be released at 10:30 am EDT tomorrow).

In the first two weeks of October, Iran has exported +1.33M bpd of crude to countries including India, China and Turkey. That is down from +1.6M bpd during the same period in September.

Note: October exports are a sharp drop from the +2.5M bpd in April before President Trump withdrew from a multilateral nuclear deal with Iran. In May Trump ordered the re-imposition of economic sanctions on the country. The sanctions will come into force on Nov. 4.

Also supporting prices is today’s comments from OPEC’s Secretary General Barkindo who said, “global spare oil capacity was shrinking,” adding “producers and companies should increase their production capacities and invest more to meet current demand.”

Ahead of the U.S open, gold prices are holding steady near yesterday’s three-month high as a number of risk-averse investors seek refuge in the metal amid rising political tensions and economic uncertainty.

Spot gold was little changed at +$1,226.71 an ounce - it touched +$1,233.26 yesterday, its highest print since mid July, as global equities slid on rising tensions between the Saudi’s and the West. U.S gold futures are flat at +$1,230.40 an ounce.

3. German Bund yields edge higher

A cautious, risk-on mood currently prevails in eurozone sovereign bond markets so far this morning, with yields of German Bunds and of other core eurozone bonds up, and Italian bond yields down.

This would suggest that market risk sentiment may be improving following last week’s sudden correction, but the balance remains a tad precarious in the current political environment. German 10-year Bund yield has backed up +1.4 bps to +0.51%.

Note: The +0.50% level in Bund yields remains pivotal and with more debt product coming to market today (Germany offers +€4B in the September 2020-dated Schatz) should be able to back up sovereign yields a tad more.

Elsewhere, the yield on 10-year Treasuries has backed up +1 bps to +3.17%, the highest in a week. In the U.K, the 10-year Gilt yield has decreased -1 bps to +1.603%, the lowest in almost two-weeks, while in Italy, the 10-year BTP yield has declined -2 bps to +3.522%.

4. G7 currency pairs are little changed

Major currencies (€, £, ¥ and C$) are relatively unchanged ahead of the U.S open.

Dealers and investors have little technical or fundamental data to work with at current levels. In fact, the market is looking for guidance, which may come in the shape of the U.S Treasury forex report, which is likely to be released this week and where the U.S could name China a currency manipulator.

If the U.S were to name China a currency manipulator it would further pressure China on trade and add to the Sino-U.S trade tensions.

EUR/USD is flat at €1.1579 and other major currency pairs are not moving by much either. GBP/USD is up slightly at £1.3163 as leaders struck a conciliatory tone a day after Brexit negotiations broke down and USD/JPY is up +0.3% at ¥112.07

Elsewhere, the performance of several petro-forex (NOK, CAD, RUB) has been held back due to various unique factors that have not translated into a growth boost for these currencies. The ruble has been driven by U.S sanctions, and the Canadian dollar has been held back by NAFTA re-negotiations.

TRY (-0.20% at $5.7865) has retreated after seven days of gains after the country released U.S pastor Andrew Brunson on Friday.

5. U.K wage growth fastest in a decade

U.K data this morning showed that wage growth quickened over the summer at the fastest pace in almost a decade, adding to signs of inflationary pressure.

The ONS said that average weekly earnings in Britain, ex-bonuses, grew +3.1% in the three-months through August.

The figures will likely reinforce market expectations that the BoE remains on course tighten monetary policy over the next 24-months to keep overall price-growth in check, assuming the U.K.’s exit from the E.U goes well.

Other data showed that U.K unemployment in the three-months through August was unchanged on the previous three-months at +4%, while the number of people in work, +32.4M, remained close to its record high.

Note: The BoE hiked interest rate in August and signalled that they expect to do so again two or more times over the next couple of years to bring inflation back to their +2% annual goal.

A weaker pound since the Brexit referendum has to push up the price of imports, squeezing U.K citizens’ purchasing power.

Forex heatmap

Asia Market update : A time out

China Data

China CPI data came out bang on market expectation while the PPI rose slightly 3.6 % versus 3.5 % but continues to trend lower despite weaker Yuan and tariff price pressures. But given the delta to expectations are negligible there isn’t much of trade to be had on the data.

Regional equity markets

Regional markets are trading more positively this morning as overall regional volatilities are falling. A weaker US dollar profile is helping to cool depreciation pressure on the Yuan as overextended shorts are getting pared. Don’t confuse this recovery with anything other than consolidation amidst a protracted downtrend in Asia equities. Traders are looking to sell upticks given that intraday volatility can ignite on the drop of a dime.

While neither new or original for that matter and with discussions centring on market uncertainties the topic of China infrastructure spending is making the rounds yet again.

Since additional monetary easing could trigger a run on the Yuan; there’s more chatter that China will move back to its old habits of pumping up infrastructure spending to boost economic growth as Beijing is preparing to pull out their old stimulus playbook.

But overall a quiet start today in the wake of an unusually quiet Monday in US market.

Oil markets

Oil bulls are latching on to falling Iran export data which showed the country’s exports fell even further during the first half of October. Which gives rise to the spare capacity ” proof is in the pudding” argument that until supplies are made quantifiably available, given Venezuela and Iran shortfalls, that squeeze in supply should be enough to support Oil prices until proven otherwise. With so much noise in the market, traders top side ambitions could temper ahead of this week’s US inventory data sets.

Currencies

The US Dollar 

Dollar bulls still fear we are little more than a Jay Powell headline away from sending the dollar into full out retreat. especially if he or this week FOMC minutes do walk back the hawkish market interpretation from the last policy meeting.

The Yuan

The USDCNH remains in a very tight range with overnight funding getting extraordinarily liquid, but the forward curve remains under pressure as traders continue to unwind some of the USD paid in forwards on a carryover from the slight de  escalation of USD-China tension on the back of Trump -Xi meeting and a softer tone for the Pboc at the IMF in Bali. However, USDCNH remains bid on dips below 6.92 despite today’s CNY  fix at 6.9119 today, -35 pips from last fixing and -151 pips from the previous closing at 6.9270 on 16:30 Beijing time. But well in line with market expectations.

With lower CNH vols comes some breathing room for local EM as the Won is making significant headway after the softer US retail sales print. In the absence of strong US economic data for the USD to anchor too, it continues to struggle but EM risk is fraught with peril, and I suspect this is more of a case positions squaring rather than bullish bets put on the table.

New Zealand Dollar

NZD CPI has overshot expectations: +0.9%QoQ for Q3 versus 0.4% prior and 0.7% expected. The RBNZ forecast stood at 0.4%. but taking the gains from energy out of the equation but with very mixed signals on the USD appetite to fade the move has been muted as dollar bulls remain nose-ringed to this weeks FOMC minutes

Risk remains on the back foot

Daily Markets Broadcast – 2018-10-16