Daily FX & Market Commentary

Transcription

1 Market Recap U.S. stocks declined: The S&P 500 fell 0.4% to 2,165 as results from companies including Intel disappointed. U.S. data remain positive: Initial jobless claims unexpectedly dropped by 1,000 to 253,000, the lowest in 3 months. US existing home sales rose by 5.57 million, beating market expectation of 5.48million in June. USD/JPY fell: USD/JPY fell 1% to after BoJ Governor Haruhiko Kuroda said there is no need and no possibility for helicopter money. Table: Daily Market Movement (Jul ) July Published from Tuesday to Friday Equity Market Indices Close Change % Commodity Futures U.S. Energy & Metals Close % S&P 500 Index 2, % WTI Crude Oil (USD/bbl) % Dow Jones Industrial Average 18, % Brent Crude (USD/bbl) % NASDAQ Composite Index 5, % Natural Gas (USD/MMBtu) % Europe COMEX Gold (USD/oz) 1, % Stoxx Europe 600 Index % LME Copper (USD/MT) 4, % DAX Index 10, % Bond Yields & CNY Japan U.S. Treasuries - Yields Close TOPIX Index 1, % 3-Month - Yield (%) 0.31 Nikkei 225 Stock Average 16, % 5-Year - Yield (%) 1.09 China / Hong Kong 10-Year - Yield (%) 1.56 Hang Seng Index 22, % 30-Year - Yield (%) 2.29 Hang Seng China Enterprises 9, % USD/CNY Close % Shanghai SE Composite 3, % China Renminbi Spot % Data Source: Bloomberg L.P. Hot News: Outlook on European equities after ECB stay put Change Chart: Stoxx 600 Index Resistance: Resistance: Outlook on ECB meeting in September The persistent undershooting of the inflation target requires a formal extension of the QE programme beyond Mar A 10bp cut in the main refinancing operation rate. Support: Source: Bloomberg L.P.as of July 21, 2016 What happened? The ECB left all its key rates unchanged yesterday. President Mario Draghi noted the Brexit vote was not estimated to have had a major impact so far. The reference made in June to the fact that the balance of risks has improved was removed. A new downside risk related to the sluggish pace of implementation of structural reforms was added. The ECB s estimated the potential GDP loss of between % over three years from Brexit. Outlook on European stock markets High levels of political risk make it difficult to have conviction in Europe in the near-term. But, the global policy function continues to be supportive and is also showing signs of broadening, both across the monetary tool-kit and between monetary/fiscal policy. We, therefore, see downside risk capped to recent lows. We are looking for 5% dividend growth over the next 18-months for both European and UK stocks. Index level: We raise our end Stoxx 600 target to 330 (from 310) and mid-2017 to 350 (from 325). On technically analysis, the Stoxx 600 Index may see resistance at and Support may be found at Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 1

2 FX & Commodity Technical Corner CCY FX Rate Source: Bloomberg L.P. (cut off time is NY Time 5:00pm) JPY rebounded: BoJ s Kuroda said no need and no possibility for helicopter cash. EUR recovered: ECB s Draghi said recovery to continue at moderate pace and euro area financial markets weathered Brexit fallout. NZD dropped: The RBNZ said further policy easing will be required given the low inflation and high currency rate. Canada retail sales: The Fort McMurray, Alberta wildfires probably depressed May retail sales. Nominal sales may fall by 0.1%. The wildfires may cut at least 1½% from 2Q real GDP growth. Daily FX Focus EUR/USD may range trade between : (fibo 0.618) YESTERDAY PERFORMANCE FX TREND TECHNICAL Citi Foreign Exchange Forecast: Close Price Day High Day Low Short Term Support Resistance Comment Months Months USD Neutral EUR/USD Bearish USD/JPY Neutral GBP/USD Bearish USD/CAD Neutral AUD/USD Neutral NZD/USD Neutral USD/CHF Neutral USD/CNY Bullish USD/CNH Bullish USD/SGD Neutral GOLD Bullish $1,303 $1, EUR Outlook: ECB s wait-and-see mode: ECB's Draghi said euro area financial markets weathered Brexit fallout and new forecasts will help ECB access underlying condition (fibo 0.236) Downside risk remains: In the statement, the balance of risks has improved was removed and sluggish pace of implementation of structural reforms was added. More easing measures in Sep: We expect the ECB may announce a extension of the QE program beyond Mar-17, and a 10bp cut in the Technical Analysis: MRO rate, which may be negative for EUR. EUR/USD edged lower after being capped below (fibo 0.618). We expect the pair may trade inside with downside bias. Source: Bloomberg L.P., data as of Jul 22, 2016 NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 2

3 AUD/USD may trade inside : (fibo 0.236) AUD Outlook: Rate cut expectation: Given the dovish RBA minutes, the interest rate future market showed the rate cut expectation in Aug rose from 45% to 63% (fibo 0.764) Yield advantage: AUD may still maintain its yield advantage as other major central bank may also reduce rates. Rally in coal price: Newcastle coal price rallied from Apr s low at $48.5/t to as high as Source: Bloomberg L.P., data as of Jul 22, 2016 $64.8/t, which may ease concerns about Australian export income. Technical Analysis: The RSI is now in neutral territory, despite early decline after being capped below AUD/USD may trade inside range in short term. USD/JPY may trade inside : ( Apr low) JPY Outlook: JPY rebounded as BoJ s Kuroda said no need and no possibility for helicopter cash, although JPY once fell on news that the Japanese government is considering 20 trillion yen stimulus (Jun & 8 Jul lows) Since the BoJ s operations to buy JGBs is not materially different from helicopter money, the government is unlikely to let the BoJ directly finance fiscal spending. Source: Bloomberg L.P., data as of Jul 22, 2016 Technical Analysis: 1) RSI: turning down; 2) The pair fell after failure to penetrate We expect the pair may trade inside with downside bias in short term. Helicopter money is prohibited by current law: The administration have to change the law if they wants a money-financed fiscal stimulus. NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 3

4 Important Economic Data (July 18, 2016 July 22, 2016) Time Importance Event Period Actual Survey Prior Monday 07/18/ :45 NZ!! CPI QoQ 2Q 0.40% 0.50% 0.20% 07/18/ :30 CA! Int'l Securities Transactions May 14.73b b Tuesday 07/19/ :00 US! Total Net TIC Flows May -$11.0b -- $93.1b 07/19/ :30 AU!! RBA July Meeting Minutes Jul 07/19/ :30 UK!! CPI YoY Jun 0.50% 0.40% 0.30% 07/19/ :00 GE! ZEW Survey Expectations Jul /19/ :30 US!! Housing Starts MoM Jun 4.80% 0.20% -1.70% 07/19/ :30 US!! Building Permits MoM Jun 1.50% 1.20% 0.50% Wednesday 07/20/ :00 EC! ECB Current Account SA May 30.8b b 07/20/ :30 UK!! Weekly Earnings ex Bonus 3M/YoY May 2.20% 2.40% 2.30% 07/20/ :30 UK!! ILO Unemployment Rate 3Mths May 4.90% 5.00% 5.00% Thursday 07/21/ :30 AU! NAB Business Confidence 2Q /21/ :30 UK!! Retail Sales Ex Auto Fuel YoY Jun 3.90% 4.80% 5.20% 07/21/ :30 UK!! Retail Sales Inc Auto Fuel YoY Jun 4.30% 5.00% 5.70% 07/21/ :45 EC!!! ECB Main Refinancing Rate Jul 0.00% 0.00% 0.00% 07/21/ :30 US!! Initial Jobless Claims Jul 253k 265k 254k 07/21/ :00 US!! Existing Home Sales MoM Jun 1.10% -0.90% 1.50% 07/21/ :00 US! Leading Index Jun 0.30% 0.20% -0.20% Friday 07/22/ :00 EC!! Markit Eurozone Manufacturing PMI Jul /22/ :30 CA! Retail Sales MoM May % 0.90% 07/22/ :30 CA! Retail Sales Ex Auto MoM May % 1.30% 07/22/ :30 CA!! CPI YoY Jun % 1.50% 07/22/ :30 CA!! CPI Core YoY Jun % 2.10% Source: Source: Bloomberg L.P. (K = Thousand, M = Million, B = Billion) 4

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6 Important Disclosure Risk relating to RMB If you choose RMB as the base currency or the alternate currency, you should also note the following: RMB is currently not freely convertible through banks in Hong Kong. Due to exchange controls and/or restrictions imposed on the convertibility, utilisation or transferability of RMB (if any) which in turn is affected by, amongst other things, the PRC government's control, there is no guarantee that disruption in the transferability, convertibility or liquidity of RMB will not occur. There is thus a likelihood that you may not be able to convert RMB received into other freely convertible currencies. CNH exchange rates and CNY exchange rates are currently quoted in different markets with different exchange rates, whereby their exchange rate movements may not be in the same direction or magnitude. Therefore, the CNH exchange rate may be different from the CNY exchange rate. 5