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Asia Summary

Asian equity markets opened mixed and the Nikkei 225 has outperformed. Nikkei 225 Oct options are said to have settled at ~20,957.

Nikkei heavy component, Fast Retailing has gained over 3% following it reporting record earnings. Kobe Steel has declined by over 10% amid reports that its data falsification issue has spread to steel wire products.

Samsung Electronics guided its Q3 operating profits slightly ahead of estimates, while revenues for the quarter are seen in line. It was also reported that the company's CEO/Co-vice Chairman Kwon would step down in order to give the company a new start and younger management. Amid the company's earnings report and announced management transition, shares are slightly lower following the over 4% gains seen earlier in the week ahead of guidance.

On the macro front, China's Sept trade balance was below expectations as exports were below forecasts, while imports were higher than expected. The PBoC skipped today's open market operation (OMO) and instead confirmed a 1-year medium-term lending facility (MLF).

Singapore was the first major Asian economy to release Q3 GDP data, which showed the economy is performing better than expected. Also, the country's central bank, the Monetary Authority of Singapore (MAS), offered a slightly cautious view on the 2018 growth outlook and tweaked its policy language.

The Reserve Bank of Australia (RBA) issued its Oct Financial Stability Review in which it announced it was planning ‘top-down' stress tests for domestic banks. Currently, Australia's Prudential Regulation Authority (APRA) conducts ‘bottom-up' assessments of the banking sector.

In South Korea, the Finance Ministry said the country had extended its currency swap agreement with China for 3-years.

New Zealand's First Party Leader Peters said his party's board was expected to meet on Monday regarding the government coalition talks. Peters had previously said that he planned to make his decision regarding a coalition partner this week.

Ahead of the ECB's Oct 26th policy meeting, there has been press speculation that the central bank is said to consider cutting its QE program to €30B/month from Jan and extending it until at least Sept 2018. The current level of monthly asset purchases is €60B.

In the US, traders are focused on the later today releases of Sept CPI and Retail Sales data. HP Inc. guided the mid-point of its initial FY18 earnings view above market expectations. Later today, US financial names, including Bank of America, PNC and Wells Fargo are due to report quarterly earnings. On Thursday, Citi and JPMorgan traded lower after their respective Q3 earnings reports.

Key economic data

(CN) CHINA SEPT TRADE BALANCE: $28.5B V $38.0BE

(CN) CHINA SEPT TRADE BALANCE (CNY) 193.0B V 266.1BE

(SG) SINGAPORE Q3 ADVANCE GDP Q/Q: 6.3% V 3.7%E; Y/Y: 4.6% V 3.8%E

(SG) SINGAPORE CENTRAL BANK (MAS) SEMI-ANNUAL POLICY DECISION: KEEPS ZERO APPRECIATION PATH FOR SGD, maintains width and center of currency band

Speakers and Press

China

(CN) China Customs Official Hu comments on Sept Trade Figures: High base effects led to slowdown y/y in trade growth in Q3; Positive conditions remain for foreign trade in Q4 supported by global recovery and solid domestic recovery; However, uncertainties in global economy still linger in Q4 and higher base last year to impact Q4 trade growth; Also, says fierce global competition to cloud Q4 trade.

(CN) China Sept Retail Auto Sales 2.23M units, +1.2% y/y

Other

(AU) RBA OCT FINANCIAL STABILITY REVIEW: NO DIRECT COMMENTS ON MONETARY POLICY: DEVELOPING TOP-DOWN STRESS TEST FOR DOMESTIC BANKS

ASEAN Central Banks renew currency swap arrangement for 2-years

(EU) ECB said to consider cutting QE to €30B/month from Jan and extending it until at least Sept 2018 - financial press

(GR) There is renewed speculation that Greece may issue bonds in the first 3-months of 2018; said to seek to raise at least $3.5B – US financial press

(KR) South Korea Finance Ministry: Agrees to extend currency swap agreement with China for 3-years

(NZ) NZ First Party Leader Peters: NZ First board to meet on Monday

(US) Fed's Bostic (non-voter): Reiterates not sure if Fed will raise rates in Dec

(US) President Trump said to plan to end subsidy payments to insurers related to sale of Obamacare insurance coverage – US press

Asian Equity Indices/Futures (00:30ET)

Nikkei +1.2%, Hang Seng flat, Shanghai Composite +0.2%, ASX200 +0.4%, Kospi flat

Equity Futures: S&P500 flat; Nasdaq +0.1% , Dax +0.1% , FTSE100 +0.2%%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.1825-1.1852; JPY 112.02-112.32; AUD 0.7817-0.7842; NZD 0.7078-0.7146

Aug Gold +0.1% at 1,298/oz; Aug Crude Oil +0.7% at $50.94/brl; Sept Copper -0.1% at $3.119/lb

GLD SPDR Gold Trust ETF daily holdings flat at 858.5 metric tons

(CN) PBOC SETS YUAN REFERENCE RATE AT 6.5866 V 6.5808 PRIOR

(CN) PBOC offers CNY498B 1-year Medium-term Lending Facility (MLF) OPERATION AT 3.2% V 3.2% PRIOR

(CN) PBoC OMO: Does not conduct OMO v CNY20B injected with 7-day reverse repos prior

US markets on close: Dow -0.1%, S&P500 -0.2%, Nasdaq -0.2%, Russell -0.1%

Best Sector in S&P500: Real Estate +0.7%

Worst Sector in S&P500: Financials -0.8%

At the close: VIX 9.91 (+0.06pts); Treasuries: 2-yr 1.517% (-1bp), 10-yr 2.323% (-3bps), 30-yr 2.852% (-3bps)

US Market Summary

Stocks ended lower, with the S&P confined to a tight range until a moderate drop at the end of the session. Treasury yields have fallen slightly despite a hotter than expected core PPI reading ahead of tomorrow's CPI data. WTI crude futures declined but traded off the morning lows after the EIA report showed a decline in U.S crude stockpiles, while natural gas prices surged on anticipation of colder weather and in-line expectations from the EIA report. JPM weighed on the Dow post earnings along with Exxon and Chevron. Copper continued to press higher, back towards the Sep multiyear high.

US Afterhours Movers

EXFO Reports Q4 $0.02 v $0.06e, Rev $63.0M v $60.9Me (2 est); +7.4% afterhours

TSE Raises Q3 adj EBITDA $162-168M (prior $110-120M); +2.4% afterhours

NEO Reports prelim Q3 Rev $63.1M v $65.7Me, test volumes +16% y/y; Reports prelim Q3 Clinical genetic test volume 162.5K, +16% y/y; -1.4% afterhours

ECYT Registers $150M mixed securities shelf - filing (73% of market cap); -3.3% afterhours

TNDM Announces proposed underwritten public offering of common stock, Series A Warrants and Series B Warrants; -14.5% afterhours

AAOI Cuts Q3 $1.04-1.09 v $1.31e, R$88-89M v $112Me (prior $1.30-1.43, Rev $107-115M); -22% afterhours

For the 24 hours to 23:00 GMT, the EUR declined 0.3% against the USD and closed at 1.1826, after the European Central Bank (ECB) President, Mario Draghi, pledged to keep interest rates at record low for an extended period of time, and well past the end of its bond-buying programme, in order to promote solid economic growth within the Eurozone. Draghi also defended the central bank's aggressive monetary policies, noting that it has been a success.

On the macro front, the Euro-zone's seasonally adjusted industrial production rose above market expectations by 1.4% on a monthly basis in August, advancing to its highest since November 2016, thus underlining the common currency region's improving growth prospects. In the prior month, industrial production had registered a revised rise of 0.3%, while markets had anticipated for a gain of 0.6%.

Macroeconomic data indicated that first time claims for the US unemployment benefits dropped more-than-expected to a level of 243.0K in the week ended 07 October, hitting its lowest in more than a month. Markets had expected initial jobless claims to drop to a level of 250.0K, after recording a revised reading of 258.0K in the prior week. Moreover, the nation's producer price index climbed 0.4% MoM in September, meeting market expectations and compared to a rise of 0.2% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.1850, with the EUR trading 0.2% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1823, and a fall through could take it to the next support level of 1.1797. The pair is expected to find its first resistance at 1.1878, and a rise through could take it to the next resistance level of 1.1907.

Moving ahead, traders will eye Germany's consumer price inflation data for September, slated to release in a few hours. Moreover, investors will keenly watch the US inflation data for September, to gauge the likelihood of another Federal Reserve interest rate hike this year.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR declined 0.3% against the USD and closed at 1.1826, after the European Central Bank (ECB) President, Mario Draghi, pledged to keep interest rates at record low for an extended period of time, and well past the end of its bond-buying programme, in order to promote solid economic growth within the Eurozone. Draghi also defended the central bank's aggressive monetary policies, noting that it has been a success.

On the macro front, the Euro-zone's seasonally adjusted industrial production rose above market expectations by 1.4% on a monthly basis in August, advancing to its highest since November 2016, thus underlining the common currency region's improving growth prospects. In the prior month, industrial production had registered a revised rise of 0.3%, while markets had anticipated for a gain of 0.6%.

Macroeconomic data indicated that first time claims for the US unemployment benefits dropped more-than-expected to a level of 243.0K in the week ended 07 October, hitting its lowest in more than a month. Markets had expected initial jobless claims to drop to a level of 250.0K, after recording a revised reading of 258.0K in the prior week. Moreover, the nation's producer price index climbed 0.4% MoM in September, meeting market expectations and compared to a rise of 0.2% in the previous month.

In the Asian session, at GMT0300, the pair is trading at 1.1850, with the EUR trading 0.2% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1823, and a fall through could take it to the next support level of 1.1797. The pair is expected to find its first resistance at 1.1878, and a rise through could take it to the next resistance level of 1.1907.

Moving ahead, traders will eye Germany's consumer price inflation data for September, slated to release in a few hours. Moreover, investors will keenly watch the US inflation data for September, to gauge the likelihood of another Federal Reserve interest rate hike this year.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.24% against the USD and closed at 1.3261, after a newspaper reported that the European Union (EU) could offer Britain a two-year transitional Brexit deal.

Earlier in the session, the Pound declined against the USD, after the EU's Chief Brexit negotiator, Michel Barnier, stated that negotiations on Brexit terms with the UK were at “deadlock”.

Separately, the Bank of England's (BoE) credit conditions survey showed that British banks are planning the biggest cutback in unsecured credit in nearly 10 years over the next three months, following warnings that UK's debt mountain has risen to dangerous levels. Further, it also showed that lenders reported that consumer credit availability to households decreased in the third quarter.

In the Asian session, at GMT0300, the pair is trading at 1.3276, with the GBP trading 0.11% higher against the USD from yesterday's close.

The pair is expected to find support at 1.3168, and a fall through could take it to the next support level of 1.3061. The pair is expected to find its first resistance at 1.3337, and a rise through could take it to the next resistance level of 1.3399.

Amid a lack of macroeconomic releases in the UK today, market participants will await the release of Britain's inflation, ILO unemployment rate and retail sales data, all slated to release next week.

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

For the 24 hours to 23:00 GMT, the USD declined 0.2% against the JPY and closed at 112.27.

In the Asian session, at GMT0300, the pair is trading at 112.09, with the USD trading 0.16% lower against the JPY from yesterday’s close.

The pair is expected to find support at 111.92, and a fall through could take it to the next support level of 111.76. The pair is expected to find its first resistance at 112.35, and a rise through could take it to the next resistance level of 112.62.

Going ahead, a speech by the BoJ Governor, Haruhiko Kuroda, scheduled later next week, will be on investors’ radar.

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

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For the 24 hours to 23:00 GMT, the USD rose 0.2% against the CHF and closed at 0.9754.

In the Asian session, at GMT0300, the pair is trading at 0.9747, with the USD trading 0.07% lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9718, and a fall through could take it to the next support level of 0.9689. The pair is expected to find its first resistance at 0.977, and a rise through could take it to the next resistance level of 0.9793.

Looking forward, investors would eye Switzerland’s producer and import prices for September, due to release in a few hours.

The currency pair is trading below its 20 Hr moving average and showing convergence with its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.17% against the CAD and closed at 1.2476.

Ibn economic news, Canada's new house price index climbed 0.1% on a monthly basis in August, falling short of market expectations for a rise of 0.2%. In the prior month, the index had risen 0.4%.

On the other hand, the nation's Teranet/National Bank house price index dropped 0.8% on a monthly basis in September. In the previous month, the index had registered a rise of 0.6%.

In the Asian session, at GMT0300, the pair is trading at 1.2469, with the USD trading 0.06% lower against the CAD from yesterday's close.

The pair is expected to find support at 1.2438, and a fall through could take it to the next support level of 1.2406. The pair is expected to find its first resistance at 1.2496, and a rise through could take it to the next resistance level of 1.2522.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

EURUSD

The EURUSD failed to continue its bullish momentum yesterday slipped back below 1.1850 and hit 1.1825 earlier today in Asian session. This fact keeps the bearish correction phase remains intact. The bias is bearish in nearest term testing 1.1785. A clear break below that area could trigger further bearish pressure testing 1.1670 level, which from a different technical perspective is the neckline of a potential “head and shoulders” formation as you can see on my daily chart below. On the upside, 1.1900 remains a key resistance which need to be clearly broken to the upside to resume the major bullish trend testing 1.2000 – 1.2090 region.

GBPUSD

The GBPUSD attempted to push lower yesterday slipped below 1.3150 support area but whipsawed to the upside and closed higher at 1.3258, formed a bullish pin bar as you can see on my daily chart below. The bias is bullish in nearest term testing 1.3330 key resistance. A clear break and daily/weekly close above that area would end the bearish correction phase and resume the major bullish trend retesting 1.3615 area next week. Immediate support is seen around 1.3200. A clear break below that area could lead price to neutral zone in nearest term retesting 1.3150 support level. Overall I remain bullish.

USDJPY

The USDJPY had another indecisive movement yesterday. The bias remains neutral in nearest term. The bearish pin bar printed after a false break above 113.20 as you can see on my daily chart below still suggests a potential bearish pressure testing 111.65 region. A clear break below that area would expose 111.00 – 110.65 area. On the upside, a clear break and daily/weekly close above 113.20 would expose 114.50 or higher next week. Overall I remain neutral.

USDCHF

The USDCHF had another insignificant movement yesterday but hit another new weekly low at 0.9711. The bias remains bearish in nearest term testing 0.9700 – 0.9650 region. Immediate resistance remains around 0.9765. A clear break above that area could lead price to neutral zone in nearest term testing 0.9807/36 key resistance area. On the downside, a clear break and daily/weekly close below 0.9650 would expose 0.9590 – 0.9525 region next week. Overall I remain neutral.

Dollar Treads Water as Investors Await U.S. Inflation Data. The dollar index was steady at 93.083 in early Asian session on Friday, on track for weekly losses as investors awaited U.S. inflation data to gauge the likelihood that the Federal Reserve will stick to its plan to raise interest rates again this year. PPI released on Thursday showed some signs of inflation, at least at the producer level. In the 12 months through September, the PPI jumped 2.6 percent, the biggest gain since February 2012. Traders await CPI readings later in a day that will provide guidance on further path of inflation.

Pound Reverses on Hints of 2-Year Brexit Transition Period. Sterling dipped to as low as 1.3122 on Thursday as markets saw the prospect of no deal being reached after chief Brexit negotiator Michel Barnier said negotiations between the two sides have effectively stalled and “no concessions” will be made. On the same day the pound had a reversal of fortune hitting a high of 1.3289 at the start of the U.S. session on reports the European Union are looking to offer the UK a two-year transition period.

Gold Rally Pauses Ahead of U.S. Inflation Data. Gold prices were little changed amid a steady dollar on Friday, halting a five-day rally as investors wait for key U.S. inflation data for clues on the outlook for potential hikes in U.S. interest rates. Spot gold was nearly unchanged at $1,293.76 an after gaining for five straight sessions. U.S. gold futures for December delivery were flat at $1,296.10 per ounce.

Oil Edges Up as Lower U.S. Production, Inventories Point to Tighter Market. U.S. crude inventories dropped 2.7 million barrels in the week to Oct. 6, to 462.22 million barrels, the EIA said late on Thursday. Crude production slipped 81,000 barrels per day (bpd) to 9.48 million bpd, its first fall since the week to Sept. 1. With the OPEC leading a production cut, analysts said that global oil markets were on a path to rebalancing after years of oversupply. U.S. WTI crude futures CLc1 were trading at $50.72 per barrel, up 0.1 percent from their last settlement, Brent crude futures LCOc1 were at $56.35, up 0.2 percent from the previous close.

Watch Out Today for:

12:30 pm GMT: USD Consumer Price Index

12:30 pm GMT: USD Retail Sales

STOCKS

Dow (22841.01, -0.14%) may have some chances of testing 23000-23250 levels in the near term while Dax (12982.89, +0.09%) may continue to trade sideways and spend some more sessions without any actual movement.

Nikkei (21003.50, +0.23%) has made a multi-year high after breaking above crucial resistance near 21000. While the upside momentum continues, we could see a test of 22000 soon. However, we resume the exhaustion point for Nikkei on the upside is nearing and we could soon see a reversal of trend for the longer term.

Shanghai (3388.76, +0.08%) would gradually rise towards 3400-3420 in the near term. There could be some sideways consolidation within 3400-3360 levels before the price rises towards 3400 or above.

Nifty (10096.40, +1.12%) recovered sharply yesterday keeping the upside momentum intact. 9950-9980 seems to be an immediate support region and while that holds, a test of 10200 looks possible.

COMMODITIES

Gold (1295.94) may test initial resistance near 1300 which if holds could bring back the prices towards 1280; else a rise towards 1310 is possible in the near term while Silver (17.26) could be headed towards 17.50 soon.

Brent (56.49) and WTI (50.89) are trading slightly lower today. But there could be some scope of testing 57.45 in Brent and 51.50-52.00 in WTI in the near to medium term.

Copper (3.1150) is moving up as expected and could re-test levels near 3.15-3.18 in the next few sessions. Thereafter the price could pause for some time before again deciding on further movement.

FOREX

Bit of profit-taking/ consolidation in the Euro (1.1850) seen yesterday, down from 1.1878 to 1.1825, within overall uptrend targeting 1.1950+. Intra-day Support at 1.1825 and at 1.1800. Longs still preferred.

We had set a target of 92.50 on Dollar Index (92.96) yesterday, but that is possible only on break below immediate Support near the current level, which might not break easily.

Dollar-Yen (112.08) has drifted lower, trying to break below 112.00. Can see 111.80 and then 111.50, if successful. Appears ranged between 111.50-113.00 in the medium term.

Good Support near 132.50 on Euro-Yen (132.85), which can push the Cross up towards 134+, perhaps limiting the downside in Dollar-Yen to 111.80 in the near term. Let us see this.

Strong rise in the Pound (1.3275) over the last few days, coming close to our target of 1.33. Might drift into directionless sideways range in the near term now. Long-term Resistance seen in the 1.34-45 region.

Dollar-Yuan (6.5805) could come down a bit more towards 6.55 over the next few days, which might be decent levels to bounce from. Need to see if Dollar-Rupee (65.05/10) will find Support at 65.00 today or not.

INTEREST RATES

As mentioned yesterday, the German-US-10Yr Spread (-1.88%), has Support at -1.93%. Dips likely to be bought for eventual rise towards -1.85%.

Continued strong correlation between the UK-US 10 Yr Spread (-0.94%), which may have a small Resistance near the current level. Need to see how this behaves today.

The dip in Dollar-Yen (112.08) is being accompanied by a small dip in the US-Japan 10Yr Spread (2.26%), which has Support coming up near 2.22%. This could limit the downside in Dollar-Yen to 111.80-50. Suggests that the Euro-Yen could be a good Long.