OVERNIGHT DATA & HEADLINES
• No overnight data to report - a moderate risk-averse tone through markets overnight.
• Oil ended nearly 15% higher, with Brent logging its biggest jump in over 30 years and a record trading volumes, after an attack on Saudi Arabian crude facilities cut the kingdom's production in half and intensified concerns of retaliation in the Middle East. Brent crude futures settled at $69.02 a barrel (rising $8.80 or 14.6%), its largest one-day percentage gain since at least 1988. U.S. West Texas Intermediate futures ended at $62.90 a barrel (soaring $8.05 or 14.7%) - the biggest one-day percentage gain since December 2008. Saudi Arabia is the world's biggest oil exporter and, with its comparatively large spare capacity, has been the supplier of last resort for decades.The attack on state-owned producer Saudi Aramco's crude-processing facilities at Abqaiq and Khurais cut output by 5.7 million barrels per day and threw into question its ability to maintain oil exports. The company has not given a specific timeline for the resumption of full output.
• Energy stocks spiked while most of Wall Street fell after weekend attacks on Saudi Arabia's oil facilities added to investors' concerns about geopolitical risk and a stumbling global economy. Dow Jones fell 0.52% to end at 27,076.82 points, S&P 500 lost 0.31% to 2,997.96. The Nasdaq Composite dropped 0.28% to 8,153.54.
• U.S. 2yr treasury yields ranged between 1.74% and 1.78% (vs Friday’s close of 1.80%), the 10yr yield between 1.82% and 1.87% (vs Fri. close 1.90%)).
• Markets are pricing 22bp of easing at the 19 September Fed meeting, and a terminal rate of 1.25% (Fed funds rate currently 2.13%).
• Australian 3yr government bond yields fell to 0.87%, the 10yr yield to 1.15%. Markets are pricing 6bp of easing at the 1 October RBA meeting, and a terminal rate of 0.51% (RBA cash rate currently at 1.0%).
• Market pricing for RBNZ is for 3bp of easing on 25 September, with a terminal rate of 0.64%.
• Gold up 1% after oil attacks in Saudi Arabia fuelled concerns of a further escalation in Middle East tensions – drive toward safe-haven assets. Spot gold climbed 1% to $1,503.31.
• Chinese steel futures hit 1-1/2-month highs as investors hoped that Beijing would roll out more stimulus measures after latest economic indicators showed deepening slowdown in China. Benchmark spot 62% iron ore for delivery to China settled at $95.50 a tonne.
• Copper slipped after weak Chinese data fuelled worries about demand, but lead and zinc hit multi-months peaks after a mine suspension. Three-month LME copper slipped 1.8% to $5,870 a tonne in final open-outcry trading after hitting a 1-1/2-month high in the previous session.
• Oil ended nearly 15% higher on Monday, with Brent logging its biggest jump in over 30 years and a record trading volumes.
• The USD rose against a basket of currencies – DXY index was up 0.39% at 98.641. It touched its lowest level since Aug. 27 on Friday.
• The CNY held a firm tone after a holiday weekend, with markets cheered by signs of progress in U.S.-China trade negotiations though weak economic data at home and turmoil in oil markets curbed gains. Onshore CNY finished domestic trading 0.21% higher at 7.064
• AUD hovered near six-week highs – it was last up 0.2% at 0.6870
• EUR fell from 1.1080 to 1.0994
• USD/JPY rose from 107.70 to 108.10.
• NZD performed poorly, falling from 0.6390 to 0.6342.
• AUD/NZD extended a month-old rally, from 1.0760 to 1.0829 – the highest level since Nov 2018.
• AUDEUR saw a slow grind higher from 0.6200 up towards 0.6240
EVENT RISK TODAY
• Australian Economic data today : RBA minutes of the 3 Sep policy meeting will be closely watched – leave room for an October cut?
• NZ – Q3 consumer confidence (Westpac).
• Europe - German ZEW economic expectations are at a nine-year low and in contractionary territory.
• US August industrial production is expected to have risen 0.2% in August. There’s also NAHB homebuilder sentiment to keep an eye on.
AUD thoughts :
AUD slid to session lows around 0.6850 overnight as the risk-off mood seemed to benefit the USD and drove flows away from riskier currencies.
AUD failed to capitalise on its early uptick towards 0.6885 and once again, for the fourth consecutive session, failed ahead of the 0.6900 handle amid resurgent USD demand.
Against the back of escalating geopolitical tensions in the Middle East, the prevailing risk-off mood was seen benefitting the USD’s relative safe-haven status and driving flows away from perceived riskier currencies - like the AUD.
Today – markets look forward to Tuesday’s RBA meeting minutes for some impetus ahead of the FOMC.
Technical outlook : AUD longs at-risk but key support remains intact.
Saudi oil facility attack keeps risk sentiment soured, USD broadly bid. Stocks, commodities, bond yields sink, safe haven yen gains, AUD/JPY falls.
Consolidation of recent gains persist, monthly doji suggests indecision. Fed risk looms, AUD longs need a dovish Fed for rally to resume.