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Markets Update: Asia-Pacific Stocks Trade Higher on Mining and Real Estate Strength, Despite Disappointing Chinese PMI; Nikkei 225 Leads Gains; DXY Range-bound, AUD and USD Lacklustre Ahead of FOMC Announcement.
Economic Calendar
Global Markets Roundup: 1 Nov 2023
Asia-Pacific stocks traded predominantly higher on Wednesday, although upside was capped as the region digested disappointing Chinese Caixin Manufacturing PMI data. The Chinese Caixin Manufacturing PMI Final (October) came in at 49.5, below the expected 50.8 and the previous reading of 50.6.
This suggests that China's manufacturing sector contracted further in October, adding to concerns about the slowdown in the world's second-largest economy. Despite the weak Chinese PMI data, European equity futures are indicative of a slightly higher open, with the Euro Stoxx 50 up 0.4% after cash markets closed up by 0.8% yesterday. This suggests that European investors are more optimistic about the outlook for the region's economy. The US Dollar is contained following yesterday's gains, while the Japanese Yen is attempting to claw back lost ground. However, USD/JPY remains north of 151.00.
The ASX 200 was the biggest gainer, shrugging off a surprise contraction in building approvals data. The Nikkei 225 was also strong, supported by reports that Japan's new economic package will total around JPY 17 trillion and by recent currency weakness. The Hang Seng and Shanghai Composite were more cautious, following suit with the recent deterioration seen in the Chinese Caixin Manufacturing PMI data.
FX: The US Dollar was rangebound on Wednesday, taking a breather following the previous day's gains on the back of strong data releases. The Employment Cost Index topped forecasts and Consumer Confidence was also better than expected, putting the spotlight on the upcoming FOMC announcement. EUR/USD was constrained alongside the dollar strength and was also not helped by the recent soft EU data. GBP/USD lacked direction after whipsawing yesterday, with momentum thwarted by resistance at 1.2200.
USD/JPY sat above the 151.00 level following the BoJ tweak and with MOF data showing there was no FX intervention between late September to late October. This spurred a renewal of the familiar jawboning from Japanese officials, with top currency diplomat Kanda saying that speculative FX moves cannot be explained by fundamentals and that he is concerned about the negative impact of one-sided, sharp FX moves on the economy. Chief Cabinet Secretary Matsuno also said that it is important for FX to move stably reflecting economic fundamentals and that rapid FX moves are undesirable, while he won't rule out any steps to respond to disorderly FX moves. The AUD and NZD were lacklustre following weak data releases, including the surprise contraction in Australian Building Approvals and softer-than-expected New Zealand Employment and Labour Cost data.
Fixed Income
10-year US Treasury futures were subdued on Wednesday after yields climbed following the firmer-than-expected Employment Cost data from the US. The moves were sustained through to month-end and heading into the FOMC meeting.
Bund futures remained stuck near this week's worst levels following yesterday's capitulation.
10-year Japanese Government Bond (JGB) futures tracked the losses in peers but are off intraday lows after the BoJ's unscheduled purchases.
Commodities Crude oil futures were lacklustre on Wednesday amid headwinds from a firmer US Dollar and increased OPEC output. The latest private sector inventory data showed a build in headline crude stockpiles which was in line with expectations. US Private Energy Inventories (bbls):
Crude +1.3mln (exp. +1.3mln)
Gasoline -0.4mln (exp. -0.8mln)
Distillates -2.5mln (exp. -1.5mln)
Cushing +0.4mln
Iraqi Oil Minister said investment in gas needs years and the plan for Iraq is to be a gas exporter within 5 or 6 years from now, according to Iraqi channel Al-Sharqiya.
Spot gold extended on the prior day's lows after recent dollar strength and ahead of the FOMC meeting.
Copper futures were contained with demand hampered by disappointing Chinese Caixin PMI data.
Looking ahead, the key highlights for Wednesday include:
US ADP, ISM Manufacturing, Construction Spending, and JOLTS data releases
BCB Policy Announcement
FOMC Policy Announcement and Chair Powell press conference
US Treasury Quarterly Refunding Announcement
Speech from SNB's Jordan
Supply from the UK and Germany
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team