OVERNIGHT AND MARKET HEADLINES
• Stocks in Europe and on Wall Street jumped more than 1% on strong U.S. corporate results and a possible deal to avoid a disorderly British exit from the European Union, while oil prices fell as weak China data kindled global economy fears.
• Wall Street rose 1% as strong earnings from JPMorgan, UnitedHealth and Johnson & Johnson allayed concerns about the fallout from a prolonged U.S.-China trade war on Corporate America. Dow Jones rose 237.64 points (0.89%) to 27,025, S&P 500 gained 29.49 points (0.99%) to 2,995.64 and the Nasdaq added 100.06 points (or 1.24%) to 8,148.
• Markets rallied strongly overnight as both sides of the Brexit negotiations signalling a draft deal is within reach. Early in the offshore session EU Brexit negotiator Barnier said that a deal was still possible this week with headlines suggesting the UK would make further proposals to break the deadlock.
• UK employment data was released with the results coming in short of expectations. The claimant count was steady at 3.3% in September though jobless claims rose slightly, average weekly earnings were softer than expected while the unemployment rate unexpectedly rose 0.1% to 3.9%.
• The German ZEW Survey for October printed at -25.3, down from -19.9 and worse than expectations of -23.6.
• The U.S. DXY gained for a second consecutive day as fading trade optimism USD buying interest. DXY index was up 0.13% to 98.583 and around 1% away from a near 2-1/2 year high of 99.667 hit earlier this month.
• China's yuan inched lower despite an official fixing set at a one-month high. Onshore CNY opened at 7.0670 and closed at 7.0815.
• AUD faltered once again, falling after the Australian RBA minutes signalled they were ready to cut rates if needed. AUD fell from 0.6775 towards 0.6740 lows.
• GBP was bought aggressively and traded to a high of 1.2800. Gains brought it to the last 4 trading days to +4.6%.
• EUR fell to lows of 1.0990 lows soon after the ZEW however bounced back to trade around 1.1040.
• AUDEUR made gains towards 0.6155 however the late stronger tone in EUR / weaker AUD saw it back down towards 0.6120.
• AUDNZD dropped from 1.0780 highs down towards fresh 1.0720 lows.
• U.S. Treasury yields rose to a three-week high on a report that British and European Union negotiators were close to a deal for Britain to exit the European Union, spurring an increase in risk taking and reducing demand for safe haven debt. Bloomberg News reported that negotiators were closing in on a draft deal, with hopes an agreement will be reached by midnight.
• Benchmark 10-year yields rose as high as 1.773%, the highest since Sept. 20, and up from 1.753% late Friday.
• The Federal Reserve is expected to cut rates when it meets on October 29-30 though Fed policymakers are divided on whether further cuts are needed for the economy.
• Gold fell 1% as growing risk appetite boosted investor demand for equities, while a sustained supply crunch in palladium propelled the price of that precious metal to a record high. Spot gold slipped 0.8% to $1,481.05 per ounce.
• Iron ore futures in China hit a nearly three-week low after Brazilian miner Vale SA reported higher output in the third quarter. Spot 62% iron ore benchmark which was steady at $92.50 a tonne, is still up 15% this year despite a 27% slump from its July 3 peak of $126.50 amid easing supply concerns.
• LME three-month copper shed 0.8% to finish at $5,773 a tonne on concerns about economic growth following the weak Chinese data. LME aluminium gained 0.5% to close at $1,728 a tonne.
• Oil prices were narrowly mixed, retracing early losses on optimism about a potential Brexit deal and signals from OPEC that further supply curbs are possible, but prices remained under pressure from U.S.-China trade worries and concern about swelling U.S. crude inventories. Global benchmark Brent futures lost 61 cents, or 1.0%, to settle at $58.74 a barrel, while U.S. WTI crude fell 78 cents, or 1.5%, to settle at $52.81.
• Australian Economic data today - September Westpac Leading Index (continued to point to below trend growth).
• NZ – Q3 CPI (expectations 0.6% - modest, largely seasonal price gains).
• UK – September CPI (core inflation has cooled back)
• US – September Retail Sales (market expecting 0.3% from 0.4% last month).
• US – Beige Book
• US – October NAHB Housing Market Index
• Canada – September CPI
AUD remained heavy throughout most of the overnight session, failing to make any further gains above 0.6800 and dropping back to the 0.6740 support zone.
Yesterday’s RBA minutes gave new insights into the mentality of members, discussion centred around the recent stimulus through cuts and the doubts whether this had been less effective than in the past.
A continuation in doubt over US-Sino trade news created further expectation for tension and the IMF announcement cutting 2019 global growth forecast to the slowest pace since GFC didn’t assist with overnight gains. All factors (not to mention broad based USD buying) helped AUD's slide from the Oct 11 high near the 10-day moving average.
Today we have the release of the Australian September leading index data (not market moving).
In New Zealand, Q3 CPI inflation data is due today and will be closely watched. Headline inflation to come out at 0.6%.
Overnight some volatility will be expected through key offshore data and events in Europe, U.S. & U.S. (watching September retail sales closely).
This morning, AUD opens up a tad higher around 0.6755 – caught in a 0.6740 / 0.6800 trading range for now and guided by offshore events to break either side.
AUD bears grab hold of US-Sino trade doubts – AUD heavy for most of NY as US-Sino trade progress doubted.
IMF downgrade to global growth outlook helps add weight, 10-DMA gets pierced.
AUD slips below the 21 DMA (0.6762) and sits nears 0.6750 late NY. Monthly Doji & falling daily RSI gives techs a bearish tint.
Supports remain at the 0.6740 level for now – AUD bulls need a break above 0.6810 to regain control topside towards 0.6827.