Sample Category Title

Market movers today

In the US, PCE core inflation numbers for October are due to released today. Based on the CPI index, we expect PCE numbers to come in at 0.2% m/m and -1.9 y/y, which is just below the Fed's 2% target. FOMC meeting minutes are also due today and will be scrutinised in light of the Powell comments last night.

In Germany, inflation numbers are due out today ahead of the eurozone-wide data tomorrow. In Scandinavia, we have Q3 GDP numbers in Sweden and business confidence in Denmark.

Selected market news

Last night, Fed Chair Powell said that the Fed funds rate is 'just below' the neutral rate. Considering the comments from October where he said that the Fed funds rate was a 'long way' from the neutral rate, this was perceived quite dovishly by markets and risky assets performed strongly with tighter credit spreads, stronger equity markets, a weaker US dollar and lower yields as the market priced out the probability of a second rate hike in 2019. The market is now priced for a December hike and one hike next year. It could be discussed how the comment should be interpreted, but for risky assets it is important because it underlines that the Fed has increasingly become data dependent and is no longer on auto-pilot. If the weaker global economy or the trade dispute with China starts to impact the US economy, the Fed is ready to change course. Investors might even think that the Greenspan put is back.

However, the market might over interpret the comments. What Powell actually said was that the Fed funds rate is 'just below the broad range ' (our emphasis) of estimates of the neutral rate, which was 2.50-3.00% in the latest FOMC projection. And remember, the upper target range is 2.25% at the moment. Of course, it is different from his comment in October but that comment also seemed odd at the time, both compared to other Fed comments and due to the fact that the projections are exactly the same (last update was in September). We still believe the Fed is keen on getting to neutral and stick to our call that it is going to hike next month and in March and June, where the Fed funds rate would then be 3.00%. A final hike on top of that cannot be ruled out.

Both the government and Bank of England released their estimates of the economic implications under different Brexit scenarios. Both show that the UK will be far worse off in a 'no deal' Brexit but that the costs are manageable in a 'decent Brexit'. However, we do not believe the estimates will change the dynamics in British politics, as the Brexit hardliners dismiss the calculations. Yesterday, an opinion poll showed that 52% of the voters believe May's Brexit deal is the best on the table. This is exactly why Theresa May might get her way in the end, as it is more difficult for MPs to vote against the deal if it is supported by the voters. Also, Labour's Shadow Chancellor John McDonnell suggested that Labour may end up supporting a second EU referendum if Theresa May's Brexit deal fails in the House of Commons.

General Trend:

• Equities opened higher on US Fed Chair comments, before losing some momentum by mid-day as focus shifts to G20 and US/China trade talks
• Australia Q3 private capex falls unexpectedly, AUD only slightly weaker on the news
• China and Japan car makers stronger despite US and China comments on auto tariffs
• PBOC skipped open market operations for the 25th consecutive day
• Little fresh news on Brexit ahead of Dec 11th vote in Parliament
• USD/JPY falls 0.4% to 113.35, broad dollar weakness general theme after Fed says rates are near neutral
• Several prominent figures in China are using the trade war with the US to pressure China to reform and further open up the economy - SCMP

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.8%
• (JP) Bank of Japan (BOJ) Masai: BOJ must closely look at cost and benefits of its policy from various perspectives; Must maintain current extremely easy policy to ensure positive momentum for prices is not disrupted
• (JP) Japan Business Federation (Keidanren): to plan for wage boosts next year - Japanese press
• (JP) IMF on Japan: Forecasts 2018 GDP growth at 1.1% (unchanged from prior forecast)
• (JP) Japan Investors Weekly Net Buying of Foreign Bonds: -¥736.4B v -¥140.5B prior; Foreign Buying of Japan Stocks: -¥195.0B v -¥186.1B prior
• (JP) Japan Oct Department Store, Supermarket Sales y/y: -0.8% v +0.8%e
• (JP) JAPAN OCT RETAIL SALES M/M: 1.2% V 0.4%E; RETAIL TRADE Y/Y: 3.5% V 2.7%E
• 8031.JP To acquire additional 16% stake in IHH Healthcare Berhad for ¥230B (Asia’s Largest Private Hospital Group); to raise stake to ~32.9%
• 9984.JP Hit ¥2.0T retail sales target for telecom IPO, priced at ¥1,500/shr
• 4502.JP CFO: Sees up to $10B in asset disposal after Shire deal - Nikkei
• (JP) Japan MoF sells ¥2.1T v ¥2.1T indicated in 0.10% 2-yr JGBs, avg yield: -0.134% v -0.117% prior, bid to cover 4.66x v 5.31x prior
• Looking ahead: Japan to release Oct Industrial production and Nov Tokyo CPI

Korea

• Kospi opened +1.2%
• (KR) Sec of State Pompeo: "very hopeful" for a new meeting with North Korean officials to discuss the denuclearization of the regime
• (KR) South Korea President Moon approval rating falls below 50% for the first time – Yonhap
• (KR) South Korea Oct Department Store Sales y/y: 1.2% v 4.7% prior; Discount Store Sales y/y: -14.3% v 8.1% prior
• Looking ahead: In tomorrow’s session Bank of Korea (BOK) will hold its rate decision, where it is expected that they may raise rates to 1.75% from the long held 1.5%

China/Hong Kong

• Hang Seng opened +0.8%, Shanghai Composite +0.5%
• (CN) US Trade Rep Lighthizer: China has yet to offer meaningful proposals; Chinese policies on auto tariffs are egregious
• (CN) According to Chen Zhao: Deleveraging is the wrong way to fix China’s economy, when it doesn’t have a debt problem – SCMP
• (HK) Hong Kong micro flats are priced high given cool down in property market - HK press
• (CN) China President Xi expected to offer greater market access and fewer subsidies to state firms when he speaks with President Trump this weekend – SCMP
• 763.HK Senators Marco Rubio and Chris Van Hollen tell Trump administration that ZTE used Dell hardware for Venezuela Govt surveillance system; circumventing sanctions – press (-4%)
• (CN) China mills considering using lower grade iron ore as steel decline - press
• (CN) China Oct Swift Global Payments (CNY): 1.70% v 1.89% prior
• (CN) China PBoC Open Market Operation (OMO): Skips open market operation v skipped prior (25th straight skip)
• (CN) China PBoC sets yuan reference rate: 6.9353 v 6.9500 prior
• 590.HK Reports H1 (HK$) Net 665M v 520M y/y; Rev 7.9B v 6.3B y/y (-8% to near 20-month low)
• Looking ahead: China releases official Manufacturing and Non-manufacturing PMI to be released

Australia/New Zealand

• ASX 200 opened +0.5%
• RIO.AU Approves $2.6B investment in Koodaideri iron ore mine
• (NZ) New Zealand Nov Activity Outlook: 7.6 v 7.4 prior; Business Confidence: -37.1 v -37.1 prior
• (AU) AUSTRALIA Q3 PRIVATE CAPITAL EXPENDITURE: -0.5% V +1.0%E
• (NZ) New Zealand sells NZ$250M v NZ$250M indicated in 3.00% April 2029 bonds, avg yield 2.5990% v 2.8179% prior, bid to cover 2.89x v 2.20x prior

Other

• World Semiconductor Trade Statistics (WSTS) may have cut its outlook for global chip sales to $490.1B, +2.6% (prior in Aug +5.2%) - Yonhap

North America

• (US) FED'S POWELL: POLICY RATE IS 'JUST BELOW' ESTIMATES OF NEUTRAL; GREAT DEAL TO LIKE ABOUT THE US ECONOMY - PREPARED REMARKS AT NY ECONOMIC CLUB
• (US) Fed's Powell: estimates of neutral rate and maximum employment rate are highly uncertain - Q&A at NY Economic Club
• DGX Cuts FY18 to 'over $6.30' v $6.56e, Rev ~$7.57B v $7.70Be (prior FY18 $6.53-6.60, Rev ~$7.62B); Raises Quarterly dividend 6% to $0.53 from $0.50 (indicated yield 2.19%)
• (US) DOE CRUDE: +3.6M V +0.5ME; GASOLINE: -0.8M V 0ME; DISTILLATE: +2.6M V -0.5ME

Europe

• (UK) UK PM May said to delay announcement related to NHS funding, cites 'Brexit' rebellion forces – UK Press
• (UK) Bank of England (BOE) on Brexit Scenarios: GBP could fall 15% in disruptive and 25% in disorderly Brexit; Response to any form of Brexit takes won't be automatic, could be in either direction

Levels as of 12:50ET

• Hang Seng -0.6%; Shanghai Composite -0.3%; Kospi +0.1%; Nikkei225 +0.4%; ASX 200 +0.7%
• Equity Futures: S&P500 -0.2%; Nasdaq100 -0.3%, Dax -0.3%; FTSE100 -0.4%
• EUR 1.1267-1.1392; JPY 113.23-113.69 ; AUD 0.7295-0.7318;NZD 0.6838-0.6874
• Feb Gold +0.3% at $1,231/oz; Jan Crude Oil +0.4% at $50.52/brl; Feb Copper -0.3% at $2.80/lb

USDJPY has been facing selling interest since yesterday, diving slightly below the 20-day simple moving average (SMA) after it reached again the 114.00 psychological level. The pair still remains above the long-term ascending trend line, however, the technical indicators turned lower. The RSI is pointing south in bullish zone, while the blue %K line of the stochastic oscillator posted a bearish crossover with the red %D line.

Should negative momentum continue and the price slides below the rising trend line as well as below the 23.6% Fibonacci retracement level of the upleg from 104.60 to 114.55, around 112.30, the bears could retest the 111.40 support level, taken from the low on October 26. Moving lower, the 38.2% Fibonacci of 110.75 could be a stop for the bears before slipping until the 110.35 area.

On the upside, resistance could occur around 114.20, taken from the highs on November 12. In case of a break above this hurdle, the 11-month high of 114.55 could be the next level for investors to look for. If this is also broken, resistance could run towards the 115.50 high, reached on March 2017.

In the longer-term view, USDJPY retains a bullish outlook over the last eight months. A daily close below the ascending trend line could signal a shift of the outlook to a more neutral one.

The US dollar is reversing earlier gains against the Japanese yen currency, following a dovish speech from Federal Reserve Chair Jerome Powell on Wednesday. The USDJPY pair was rejected from key trendline resistance, at 114.02, creating a bearish triple-top pattern formation. A strong move below the 113.15 level may spark technical selling towards rising trendline support.

The USDJPY pair is only bearish while trading below the 113.15 level, key support is found at the 112.60 and 112.28 levels.

If the USDJPY pair holds above the 113.15 level, key technical resistance is found at the 113.60 and 113.79 levels.

The euro has recovered earlier losses against the US dollar after Federal Reserve Chair Jerome Powell’s comments prompted a strong move lower in the greenback. Buyers now need to break above the 1.1400 level, to maintain bullish intraday pressure on the EURUSD pair. The recent move higher has also confirmed the creation of an inverse head and shoulder, which is a strongly bullish reversal pattern.

The EURUSD pair is bullish while trading above the 1.1382 level, key technical resistance is found at the 1.1400 and 1.1470 levels.

If the EURUSD pair trades below the 1.1330 level, key technical support is found at the 1.1300 and 1.1270 levels.

The price of Bitcoin rose sharply in a relief rally that helped boost the value of major cryptocurrencies by more than $20 billion. While the price of Bitcoin alone rose by more than 15%, this increase was synchronized among all major cryptocurrencies.

The upward movement in Bitcoin came after a week of sharp declines. Over the past week alone, the price has declined by more than 30%.

The question among traders is whether this relief rally will continue. Others are asking whether the recent decline marks the beginning of the end of cryptocurrencies. The current rally is mostly supported by technical traders and not fundamental traders. Often, investors tend to buy securities after a sharp decline because they believe the decline was an overreaction.

Even with the rally, the price of Bitcoin remains quiet cheap, after falling by more than 68% this year. The year started with a lot of optimism for cryptocurrencies with a number of analysts forecasting that the price would rise sharply to more than $1 million – but this hope was tarnished by regulation worries. At the same time, Google and Facebook announced that they would stop advertising ICOs. This was followed by crypto hacks that have seen more than $800 million worth of crypto stolen.

The BTC/USD pair is now trading at 4140, which is a major improvement from last weekend’s low of below 3500. The pair’s RSI has climbed from below 30 to the current 51. At the same time, the 30-day EMA appears to be crossing the 50-day EMA on the four-hour chart below. Therefore, while these are bullish indicators, you should be cautious about bullish trades. This is because it is likely that the pair will resume the downward trend.

US stocks ended the day higher after a speech by Federal Reserve Chairman Jerome Powell. Addressing the Economic Club of New York, he said that the country’s interest rates were near neutral. The neutral level is one that neither causes growth to accelerate nor to slow down. This led to the US stock market to have the best day since March this year. The Dow and S&P gained by more than 2%. At the same time, the US dollar index fell sharply from $97.35 to an intraday low of $96.50. During the speech, he also defended the Fed’s policy of gradual tightening but said they will continue to watch out for new economic data.

The price of crude dropped yesterday after the EIA released inventory data. Over the past week, inventories rose to 3.577 million barrels. This was higher than the consensus estimate of 0.769M but lower than last week’s 4.85 million barrels. The data came a day after the American Petroleum Institute data showed an increase of 3.45 million barrels. These numbers continue to show the amount of crude that American producers are pumping every day. In the Asian session however, the price moved up a bit as traders wait for the statement by OPEC.

The yen rose sharply against the USD. This was because of the statement by the Fed and the retail sales data from Japan. In October, the retail sales rose by 3.5%, which was better than the 2.7% that traders were expecting. It was also higher than September’s growth of 2.2% which was the sharpest growth since December last year.

EUR/USD

The EUR/USD pair rose sharply after the Fed Chairman’s statement yesterday. It rose from an intraday low of 1.1265 to a high of 1.1387. The pair is headed towards the important resistance level shown below. This is supported by the double EMA and the Bulls Power indicator as shown below. It is likely that the pair will continue moving up and possibly test the resistance of 1.1400.

USD/JPY

After a week of gains, the USD/JPY fell sharply overnight. The reversal was supported by the Fed Chair’s statement and accelerated by Japanese retail sales. It is now trading at 113.35, which is significantly lower than yesterday’s high of 114.00. The 50-day EMA and the 30-day EMA have made a bearish crossover, which is an indication that the pair could likely continue moving lower. This is supported by the RSI, which has dropped from 70 to 30 and the MACD as shown below.

XTI/USD

The price of the XTI/USD pair dropped to an intraday low of 50 after the inventory data yesterday. Overnight, the price moved up a bit as the pair struggled to trade below the 50 barrier. In the past week, the pair has been consolidating within this level, a sign that sharp movements could happen ahead or before OPEC ministers meet in Vienna. Therefore, while the pair could continue moving lower, traders should be cautious about going short.

Investors were all ears foryesterday's speech from Federal Reserve Chairman Jerome Powell at the Economic Club of New York. A couple of keywords were all that wasneeded to boost investor appetite thatsent the Dow Jones Industrial Average 617 points higher - the strongest daily rally since March.

'Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy,' said Powell.

The term 'just below' is clearly different from being 'a long way from neutral' in a statement he madeon October 3 when markets started falling from their peak and entering into correction territory later that month. While it's difficult to quantify neutral interest rates, the signal the markets got is a Fed turning dovish. While investors still believe that a December rate hike is a done deal, they now expect only one more to come in 2019 as opposed to three suggested by the Fed's projections from September's meeting.

Powell also believes that growth will remain solid with low unemployment and inflation near target. Such an environment accompanied by slower rate hikes should be supportive to risk, but given that markets are already pricing in a dovish Fed in 2019, we need to see improvement elsewhere to confirm that equity bulls are back in control.

The latest drop in Treasury bond yields was mainly attributed to the shift in the Fed's outlook. This will lower the required rate of return for equity which is good news for stocks. However, if we see further drops from here, it suggests that markets are becoming more fearful of other factors, including escalating trade tensions, expectations of weaker global and domestic economic growth, slower corporate earnings growth, and geopolitical risks.

Now it's up to Presidents Donald Trump and Xi Jinping to provide the next boost to the equities rally. A cease-fire over the weekend on the sidelines of the G20 summit to end Washington's trade disputewith Beijing will provide much-needed support. However, it's almost impossible to know what will go on in Trump's mind when he meets his Chinese counterpart.

For the 24 hours to 23:00 GMT, the EUR rose 0.66% against the USD and closed at 1.1369.

In Germany, the Gfk consumer confidence index eased to level of 10.4 in December, more than market expectations for a fall to a level of 10.5. In the prior month, the index had registered a level of 10.6.

The US dollar declined against a basket of currencies, after the Federal Reserve Chairman, Jerome Powell, signalled fewer rate hikes next year. Further, he stated that current interest rates are “just below” estimates of neutral for the economy.

In the US, data showed that the US annualised gross domestic product climbed 3.5% on a quarterly basis in 3Q 2018, at par with market consensus and confirming the preliminary figures. In the prior quarter, the GDP had advanced 4.2%. Additionally, the MBA mortgage applications rebounded 5.5% on a weekly basis in the week ended 23 November 2018, following a decline of 0.1% in the previous week. Meanwhile, the nation’s advance goods trade deficit widened to a level $77.2 billion in October, following a revised deficit of $76.3 billion in the previous month. Market participants had envisaged the deficit to expand to a level of $77.0 billion. Further, the Richmond Fed manufacturing index unexpectedly slid to a level of 14.0 in November, compared to market anticipations for a steady reading. In the previous month, the index had registered a reading of 15.0. Moreover, new home sales dropped 8.9%, on a monthly basis to a level of 544.0K in October, compared to market expectations for a reading of 575.0K. New home sales had registered a revised level of 597.0K in the prior month.

In the Asian session, at GMT0400, the pair is trading at 1.1379, with the EUR trading 0.09% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.1301, and a fall through could take it to the next support level of 1.1224. The pair is expected to find its first resistance at 1.1422, and a rise through could take it to the next resistance level of 1.1466.

Moving ahead, traders would keep an eye on the Euro-zone’s economic confidence, industrial confidence and consumer confidence, all for November along with Germany’s consumer price index and unemployment change, both for November, set to release in a few hours. Later in the day, the US FOMC November meeting minutes, followed by personal income, personal spending and pending home sales data, all for October, will keep investors on their toes. Additionally, the US initial jobless claims will pique significant amount of investors’ attention.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.67% against the USD and closed at 1.2827.

In the Asian session, at GMT0400, the pair is trading at 1.2834, with the GBP trading 0.05% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2762, and a fall through could take it to the next support level of 1.2691. The pair is expected to find its first resistance at 1.2876, and a rise through could take it to the next resistance level of 1.2919.

Going forward, traders would closely monitor UK’s net consumer credit and mortgage approvals, both for October, scheduled to release in a few hours.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.