OVERNIGHT DATA & HEADLINES
• On easing US Chinese tensions and improved US data, the tone was upbeat on Wall Street to end a positive week for US stocks. Dow Jones climbed 37.07 points (+0.1%) at 27,219.52 while the S&P 500 fell 2.18 points (-0.1%) to 3,007.39, and the Nasdaq moved back by 17.75 points (-0.2%). The Dow and S&P are just 0.5% from their record highs while the Nasdaq is 1.9% from its all-time closing high.
• U.S. retail Sales impressed, beating expectations at 0.4% month-on-month gain vs. the 0.2% consensus expectation and 4.1% year on year making for the sixth straight month of positive growth. Manufacturing may be weakening, but the consumer sector remains as firm as ever. Rising wages and employment mean households have the confidence and the cash flow to keep spending. It also means that the Fed will stick with its "mid-cycle adjustment" line when cutting rates 25bp next week’.
• University of Michigan's Consumer Confidence Index improved to 92 in September from 89.8 in August.
• China's stock and bond markets, foreign exchange and commodity futures markets were closed on Friday for the Mid-Autumn Festival holiday.
• China will exempt some agricultural products from additional tariffs on U.S. goods, including pork and soybeans, China's official Xinhua News Agency said Friday, in the latest sign of easing Sino-U.S. tensions before a new round of talks aimed at curbing a bruising trade war. The U.S. and China have both made conciliatory gestures, with China renewing purchases of U.S. farm goods and U.S. President Donald Trump delaying a tariff increase on certain Chinese goods. China had imposed three rounds of additional tariffs on U.S. pork, including 25% increases in April and July 2018 and a 10% bump this month, raising the total duty from 12% to 72%. For soybeans, additional tariffs of 25% in July 2018 and 5% this month lifted the total duty from 3% to 33%.
• UK PM Boris Johnson believes that he can strike an EU deal within weeks. He heads to Luxembourg for his first face to face meeting with European Commission President Jean-Claude Juncker on Monday. Johnson has stated that he passionately believes that he can strike an EU deal within weeks, giving the clearest indication yet that an agreement is close. Says he wants to “get this thing done” so that Britain can emerge from Brexit “on a brighter, more cheerful, more confident and global path”.
• The attack on Saudi Arabia's oil facilities on Saturday that has threatened global oil supplies came from the direction of Iran, and cruise missiles may have been used, according to a senior U.S. official. The attack on plants in the heartland of Saudi Arabia's oil industry, including the world's biggest petroleum-processing facility, was expected to send oil prices up $5 to 10 per barrel on Monday as tensions rise in the Middle East.
• U.S. Treasury yields climbed to multi-week peaks, as trade tensions between the U.S. and China eased further after more conciliatory measures, with U.S. recession risks continuing to diminish after stronger-than-expected retail sales data. U.S. 2-year yields had their highest weekly increase since June 2009 (1.80%). After inverting in August, the U.S. yield curve steepened a bit more on Friday, a sign that recession worries are abating. The spread between U.S. 2-year note and 10-year note yields widened to as much as nearly 11 basis points, the steepest curve in four weeks.
• U.S. benchmark 10-year note yields rose to 1.90% from 1.79%, hitting a six-week high of 1.903%. 30-year yields had their biggest weekly increase since President Trump's election in November 2016.
• Germany's 10-year yield rose 10 bps to -0.45% and was set for its biggest weekly jump since June 2017.
• Gold prices eased (third straight weekly fall), as positive U.S. retail sales data and positive trade tensions lifted equities and yields to multi-week highs. Spot gold fell 0.5% to $1,491.41 per ounce.
• Copper hit the highest in 1-1/2 months as investors hoped an easing of trade tensions might eventually boost metals demand. LME copper gained 2.5% to $5,975 a tonne, the highest since July 30.
• Oil prices edged lower and posted weekly losses, as concerns about slower global economic growth outweighed hints of progress in the U.S.-China trade dispute. Brent crude futures fell 16 cents to settle at $60.22 a barrel. U.S. West Texas Intermediate (WTI) crude futures delivery fell 24 cents to end at $54.85 a barrel.
• DXY index lower towards 98.20 (has seen a drop this morning towards 97.95 on weekend oil news)
• EUR saw gains for a second day after the ECB exempted euro zone banks from a penalty charge. EUR up 0.12% to 1.1074 (fell as low as 1.0925 last Thursday).
• AUD hovered near six-week highs after making another valiant jump towards 0.6890 highs. AUD settled lower towards 0.6865 on the close.
• GBP is clinging to multi week highs after another fresh top was made at 1.2509 early Monday morning.
• USD/JPY rose on Friday for the fifth consecutive day. It peaked at 108.25 and the pulled back toward 108.00 (fell lower to 107.65 this morning)
AUD thoughts :
AUD stretched again to a fresh daily high of 0.6890 over the Friday session as trade optimism helped AUD gather strength overnight. The latest headlines surrounding the US-China trade conflict and a weakening USD helped AUD preserve its bullish momentum with China’s State Council announcing they have decided to exclude some agricultural products including soybeans and pork from retaliatory tariffs on US imports. Additional comments claimed the administration was planning to offer an interim trade deal to China to secure additional purchases of agricultural products in exchange for delaying tariffs. US President Trump said that he would rather have a complete trade deal with China rather than an interim one. Later in the day, the data from the US revealed that retail sales in August rose 0.4% to beat the market expectation of 0.2%. The US DXY failed to make a meaningful recovery despite the upbeat data and was last down 0.17% on a daily basis at 98.20.
No Australian Economic data releases today.
Technical outlook :
AUD pressured by AUD/JPY selling as market is "risk-off" this morning. AUD/JPY down 0.70% this morning in knee-jerk reaction to Saudi Arabia news.
Reaction to be expected in thin Asian markets before other markets open. In reality - Japan more negatively impacted by oil shock than Australia. Besides likely oil rise, tensions in region may result in military response. AUD support @ 10-day MA @ 0.6842 & if broken targets 0.6815 (the 38.2% retracement of 0.6687/0.6895).
AUD is trading in a bear trend below the 100 and 200-day simple moving averages (SMAs). However the market has been rebounding sharply in September to challenge.