
Good Morning,
Market Headlines
US equity markets posted third consecutive day of losses, amid rising European Covid cases, US fiscal stimulus stalemate, and a rise in jobless claims data. US 2yr treasury yields remained around 0.14%, while the 10yr yield roundtripped from 0.72% to 0.69% to 0.73%.Australian 3yr government bond yields (futures) consolidated yesterday’s 3bp decline, trading between 0.16% and 0.18%, while the 10yr yield found a low at 0.71% (for a total fall of 13bp after yesterday’s dovish RBA Governor speech) before bouncing to 0.75%. Commodities, Brent crude oil futures fell 0.9% to $42.95, copper rose 1.3%, iron ore fell 0.8% to $118.50, and gold rose 0.2%.
Currency
AUD/USD: 0.7057 – 0.7129
EUR/USD: 1.1689 – 1.1754
GBP/USD: 1.2891 – 1.3018
USD/JPY: 105.17 – 105.44
USD/CAD: 1.3154 – 1.3259
NZD/USD: 0.6577– 0.6648
AUD/JPY: 74.22 – 75.05
AUD/NZD: 1.0704 – 1.0755
AUD Thoughts
The AUD was the weakest currency out of majors on Thursday, down 1% in the afternoon, trading at around 0.7080.
During the Asian session, Australian labor market data came out better than expected, although still worrisome. The employment change for September dropped to -29,500 (from 111,000 previously), so the Australian economy lost 29,500 jobs in September. 20k of those were full-time. The unemployment rate worsened to 6.9% from 6.8% previously. The Australian dollar was down 50 pips, or 0.65%, after the numbers.
Moreover, Chinese CPI fell notably to 1.7% year-on-year, down from 2.4% previously. The PPI also worsened to -2.1%. Both data are for September and suggest the Chinese central bank might lose monetary policy further.
Later in the day, data showed that 898,000 Americans filed for first-time jobless claims last week, well above the previous week's 845,000 (and much worse than the 825,000 expected). This is the biggest rise in claims in 8 weeks.
It looks like the Aussie will test the September lows near 0.70. If this level is broken to the upside, the medium-term trend could change to bearish, targeting 0.6950 in the initial reaction.
Event Risk Data Today
New Zealand: The partial return to lockdown in August brought down the manufacturing PMI to 50.7. Ahead, business conditions should improve as restrictions ease. The NZ General Election will be held on Saturday, with polls to close at 7pm NZ time.
Europe: Final CPI numbers for September should again highlight the continued absence of underlying inflationary pressures (prior: -0.3%yr, market f/c: 0.1%yr). The European Summit held in Brussels will continue, with COVID-19 and Brexit to be discussed.
US: Growth in retail sales should normalise in September after a strong rebound from lows (prior: 0.6%, market f/c: 0.8%). Gains in both industrial production (prior: 0.4%, market f/c: 0.6%) and business inventories (prior: 0.1%, market f/c: 0.4%) are expected to rise. On the consumer front, Uni of Michigan sentiment is expected to improve modestly to 80.5. The FOMC’s Bullard (00:35 AEST) and Williams (00:45 AEST) will speak.
AU: Preliminary Final Tigers v Power (f/c Tigers by 4 points)