OVERNIGHT DATA AND HEADLINES
• Wall Street stocks were lower overnight, an attempt to rebound thwarted late in the sessions from a sharp selloff linked to coronavirus worries. Other financial markets felt nagging pressure from concerns over how the disease will affect the global economy.
• U.S. stocks attempted a recovery after a rocky start to the week that shaved off more than 6% from the main indexes - Dow Jones down 0.41% at 26,971, S&P 500 lower 0.25% at 3,120, Nasdaq up 0.65% at 8,892.
• The U.S. DXY rebounded from a two-week low hit in the previous session – DXY was 0.13% higher at 99.14 however closed 0.03% higher at 98.99.
• China's CNY opened at 7.0250 and was changing hands at 7.0214 on the NY close.
• EUR continued to make small gains overnight, jumping up from 1.0853 low to just shy of 1.0900.
• GBP fell aggressively overnight, down 0.75% from 1.3000 to 1.2900.
• AUD saw another night of selling interest from the mounting economic toll of the coronavirus – down 0.70% from 0.6590 towards 0.6550.
• NZD also found selling interest, down from 0.6320 towards 0.6290 lows.
• AUDEUR also taken lower on a stronger EUR, weaker AUD – from 0.6070 down to 0.6010 lows.
• AUDNZD drifted from 1.0440 highs down towards 1.0405 lows.
• U.S. bonds rallied overnight, pushing the benchmark 10-year Treasury yield to a record low for the second consecutive day, as traders adjusted portfolios against risks the spreading coronavirus epidemic would have a significant economic impact.
• The 10-year yield was down 2.5 basis points at 1.305%, after hitting 1.3072% on Tuesday. Earlier in the session 10-year Treasury yields were as high as 1.382%.
• The two-year U.S. Treasury yield was down 5.2 basis points at 1.14%.
• Euro zone money markets started to fully price in a December ECB interest rate cut. The 10-year Bund yield rose 4 basis points to -0.47%, bouncing off 4-1/2 month lows hit earlier on coronavirus-linked concerns.
• Spot gold was up 0.79% at $1,647 per ounce having earlier jumped to 1654.68.
• Steel futures in China slipped on worries that the fast-spreading coronavirus outbreak would inevitably turn into a global pandemic. Iron ore the Dalian Commodity Exchange fell 2.8%, pulling back further after a 10-session rally. Benchmark 62% iron ore's spot price settled at $91.50 a tonne.
• Copper prices slid to three-week lows. Benchmark LME copper ended down 0.3% at $5,670 a tonne. Prices had earlier touched $5,623.5, the lowest since Feb. 4.
• Oil prices fell more than 1% after hundreds of new coronavirus cases reported in Asia, Europe and the Middle East stoked fears that energy demand would decline. Brent crude was down 94 cents, or 1.7%, to $54.01 a barrel. U.S. WTI crude shed 53 cents, or 1.1%, $49.37 a barrel.
ECONOMIC DATA TODAY
• Australian Economic data today - Q4 private capital expenditure (last –0.2%, forecast 0.5%). Led lower by a further fall in equipment spend (f/c –0.5%).
• Australian 2019/20 capex plans, AUDbn (last 116.7). Est 5 may be a little less positive than Est 4. 2020/21 capex plans, AUDbn. Mining strength, services mixed.
• New Zealand - Jan trade balance $m (last 547, forecast –565). Imports expected to rebound from a weak December. NZ Feb ANZ business confidence - Some of last year's improvement is likely to reverse.
• Europe - Jan M3 money supply %yr 5.0% 5.2% – Credit data also due. Feb economic confidence (last 102.8, forecast 101.5). Looks to be forming a base; well off 2018 highs. Feb consumer confidence (last –6.6). Households benefitting from labour market.
• US - Q4 GDP (last 2.1%, forecast 2.2%). Incremental upward revision expected in 2nd estimate. US Jan durable goods orders (last 2.4%, forecast –1.5%). Core orders continues to point to weak investment.
• Initial jobless claims 210k – Rate of firing remains very low. Jan pending home sales (last –4.9%, forecast 2.0%). Supply remains major issue for established market.
• Feb Kansas City Fed index –1 –2 – Not expected to show gains of other regional surveys. Fedspeak – – – Fed's Evans Speaks in Mexico City
No signs of AUD buying interest overnight as even an initial bounce in U.S. equity markets and global bond yields failed to prevent another leg lower.
AUD struggled to climb up over 0.6600 yesterday and fell lower towards 0.6550 under the weight of a stronger USD and selling interest in key crosses AUDEUR (down 0.82%) and AUDJPY (0.60%).
Australia's economy remains a bearish driver, with Q4 construction work dropping sharply and bolstering short-term rates markets that still foresee an RBA rate cut. Commodities are trading poorly as potential coronavirus negative economic effects hurt investor sentiment. Technicals are also worrying. AUD/USD's Feb. 21-25 consolidation phase resolved today with a break to a new 11-year low. Falling daily and monthly RSIs bolster bearish technicals by implying downside momentum remains intact.
Today we have Australian Q4 CAPEX data due, surprises to the downside may suggest businesses are reluctant to spend, which could lead to slower economic growth.
Expect a further broadly flat result, a forecast -0.2%. As to equipment spending, the uptrend evident over 2017 and 2018 faltered in the second half of 2019. The risk is that capex plans for 2020/21 are uneven. Strength is likely in mining, with an emerging uptrend underway. Services could be mixed - flat overall, with gains in building & structures (led by commercial) but softness in equipment (given a weak and uncertain outlook).
Risk-sensitive AUD continues to suffer on the coronavirus spread - bids may emerge near 0.6550 and 0.6500 if AUD extends lower.
AUD - No floor in sight yet - despite upbeat risk sentiment AUD slides lower, 0.6550 neared
RSIs continue to imply bearish momentum remains; rally selling to persist. Daily lows from mid-March 2009 in the 0.6512-0.6566 zone are immediate support for the AUD but they look vulnerable.
Any bounce in the AUD to be met with selling interest around resistance 0.6610 followed by 0.6650 (10 day moving average).
AUD longs side lined, AU Q$ CAPEX due today helps keep them quiet. Bearish factors have shorts targeting the 0.6400/15 zone.