Hot News from Asia and UK
Asia traded relatively mixed in the wake of the subdued Wall St, where stocks pulled back slightly from last week’s record highs, amid light news flow and summer-quietened trade. The Nikkei 225 (+0.2%) was marginally higher as it continued to benefit from continued JPY weakness, while ASX 200 (+0.1%) was led by financials with ANZ shares gaining as much as 3% amid earnings. Chinese markets are mixed with choppy trade seen in Shanghai Comp (+0.1%) and the Hang Seng (-0.3%) mildly negative following inflation data which suggested weaker demand with CPI at a 6-month low and PPI contracted for a 53rd consecutive month. The 10yr JGBs traded higher on a rebound from recent losses, while today’s 30yr auction saw mixed results, in which the b/c increased and tail in price narrowed, but the lowest accepted price and average price fell from last month.
- Chinese CPI Y/Y (Jul) 1.80% vs. Exp. 1.80% (Prev. 1.90%)
-PPI Y/Y (Jul) -1.70% vs. Exp. -2.00% (Prev. -2.60%).
China is not likely to inject liquidity into the market on a mass scale as policy makers have promised a neutral monetary environment for supply-side reforms. (China Economic Net)
Europe and the United Kingdom
BoE's Mc Cafferty (dove) said that the bank rate can be reduced further closer to zero and that quantitative easing can be increased. However, Mc Cafferty also commented that the central bank should have a gradual approach due to difficulties determining the right amount of stimulus.
- UK BRC Sales Like-For-Like (Jul) Y/Y 1.10% vs. Exp. -0.70% (Prev. -0.50%).
GBP/USD was pressured and broke below 1.3000 with some pinning the move to a delayed reaction to comments from BoE’s Mc Cafferty that interest rates could approach closer to 0% and that further easing may be needed. The weakness in GBP also pressured GBP/JPY which broke below 133.00, while USD/JPY was relatively quiet with JPY failing to mount a significant recovery from yesterday’s losses. Commodity linked currencies pared most of their oil-inspired gains with AUD underperforming following subdued Chinese inflation figures and while NAB also stated that it sees further RBA rate cuts to 1% next year and possible unconventional monetary policy.
- Indian Reserve Repo Rate (Aug-09) 6.00% vs. Exp. 6.00% (Prev. 6.00%)
- Indian Repo Rate (Aug-09) 6.50% vs. Exp. 6.50% (Prev. 6.50%)
- Indian Cash Reserve Ratio (Aug-09) 4.00% vs. Exp. 4.00% (Prev. 4.00%)
The RBI added that risks remain for the central bank hitting their 5% inflation target by March.
HSBC says GBP/USD could decline to 1.10 by the end of next year.
WTI crude futures continued to pare some of the 3% gains seen yesterday with prices further being pushed away from the USD 43/bbl level. Gold (-0.1%) traded sideways overnight as the mild gains seen in the region dampened demand for the safe-haven. Elsewhere, copper was confined to its lows amid subdued trade across commodities.
Venezuelan Oil Minister Del Pino has stated that Venezuela is looking for a meeting between OPEC and Non-OPEC producers.
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