Fed is Not Forecasting a Boom in the US Economy

Fed is Not Forecasting a Boom in the US Economy

Fed is Not Forecasting a Boom in the US Economy

Asia equity markets shrugged off the negative lead from Wall St. and traded with mild gains as the region digested more data from China

•             Commodity-linked currencies outperformed following the gains in oil prices and encouraging Chinese inflation data

•             Looking ahead, highlights include U. of Michigan, Retail Sales and PPI and comments from Fed Chair Yellen

 

ASIA

The Asian equity markets shrugged off the negative lead from Wall St. and traded with mild gains, as the region gets to digest more data from China. ASX 200 (Unch.) and Nikkei 225 (+0.4%) were initially both higher, although weakness in mining names capped advances in Australia, while Japanese stocks traded choppy alongside JPY movements. Hang Seng (+0.6%) was supported after firmer than expected Chinese CPI and PPI figures as CPI printed a 3-month high and PPI rose for the first time in 55 months. However, Shanghai Comp. (-0.5%) failed to benefit as the firmer data along with recent measures dampened prospects of future Peoples Bank of China easing, while the central bank also conducted a net weekly drain of CNY 410bln.

Chinese CPI (Aug) Y/Y 1.9% vs. Exp. 1.6% (Prev. 1.3%); 3-month high.

Chinese PPI (Aug) Y/Y 0.1% vs. Exp. -0.3% (Prev. -0.8%); 1st increase in 55 months.

The Peoples Bank of China (PBoC) injected CNY 30bln 7-day reverse repos for a net weekly drain of CNY 410bln vs. Prev. net weekly drain of CNY 420.1bln.

The PBoC also set the mid-point at 6.7157 (Prev. 6.7296).

 

Hong Kong Exchange CEO said that the Shenzhen connect is to begin on a Monday after mid-November.

 

EUROPE/UK

EU's Tusk commented that UK's only alternative to a hard Brexit is no Brexit.

Britain is in danger of misreading the political landscape in Europe and faces the possible loss of its reserve currency status if it fails to secure full access to the European single market, Standard & Poor’s has warned.

 

FX

Commodity-linked currencies outperformed following the gains in oil prices and encouraging Chinese inflation data, which saw AUD/USD test 0.7600 to the upside and NZD/USD reclaim 0.7100. USD/JPY recovered some of yesterday’s losses amid a mild improvement in risk sentiment, while today also saw the Peoples Bank of China set a firmer fixing for the first time in 8 sessions following the recent pullback in USD. SGD was initially volatile after a miss on GDP was counterbalanced by the MAS suggesting a neutral policy stance for a prolonged period, although bears eventually dominated as the slowest Y/Y growth rate in 7 years and unexpected Q/Q contraction took the limelight.

RBA's Financial Stability Review stated that Australian banks are in a good position, but added that rising debt charges weigh on bank profit and risks regarding increased apartment supply are evident.

Monetary Authority of Singapore kept monetary policy unchanged as expected with the width, mid-point of its currency band and zero appreciation path maintained. MAS also commented that neutral policy is needed for an extended period.

Singapore GDP (Q3 A) Q/Q -4.1% vs. Exp. 0.3% (Prev. 0.3%); largest contraction since 2012.

Singapore GDP (Q3 A) Y/Y 0.6% vs. Exp. 1.7% (Prev. 2.1%); 7-year low.

 

COMMODITIES

Oil prices were relatively muted overnight with WTI crude futures holding onto yesterday’s US gains, where prices rallied despite a larger than expected DoE headline build, as a decline in US output and significant drawdowns in distillate, gasoline and Cushing inventories underpinned. Gold (-0.1%) saw minor losses amid improvement in risk sentiment while remained near yesterday’s lows alongside weakness across the metals complex.

 

U.S

Fed's Harker (Non-Voter, Neutral) stated that it may be prudent to wait for the election uncertainty to fade.

Fed's Kashkari (Non-Voter) said the Fed is not forecasting a boom in the US economy and he expects more sluggish growth. Kashkari also added that the Brexit fallout could affect Fed policy and it is unclear what will occur with the Brexit in the future.

Latest Fox News national poll showed Clinton ahead of Trump by 45% to 38% margin.

Latest Suffolk University poll showed Clinton at 45% and Trump at 43% in North Carolina.

 

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