JASPER’S MARKET SQUAWK 18-08-2023
Yields Weigh on Risk Appetite
Stock markets worldwide finished in the red, with the US yield curve moving towards de-inversion as the long-end rose due to short liquidity. Higher borrowing costs weighed on the tech sector.
Chart: EURUSD
Key Factors for Today
- Global Stock Markets Finish in the Red on US Yields
- Philadelphia Fed Survey Shows Promising Results
- Japan’s Inflation Sparks Concerns for BOJ, Drives Yen Reversal
- WTI Supported by Intervention as PBOC Steps to Strengthen Yuan
- EUR/USD Records 5th Straight Decline After ECB Hawk Downplays Hike
- China Evergrande Files for US Bankruptcy
US Business Outlook Turns Positive for First Time in a Year
The August Philadelphia Fed business outlook survey jumped to +12 from -10 prior, with new orders advancing 16 from -16. In a sign that inflation might still be an issue for the economy, prices paid rose 20.8 vs 9.5 prior. Similarly, Manheim wholesale used vehicle index returned to positive at 0.1% month-over-month. Gold continued to fall, but this around, it recoiled near $1890/oz pending pullbacks should $1900/oz gives way. Otherwise, the door to $1860/oz will remain widely open.
Japan’s Inflation Stayed Elevated, Drives Yen Reversal
July headline inflation in Japan remained at 3.3% as expected, with the core rate falling to 3.1% as expected, down from the 3.3% prior. The core-core figure advanced to 4.3% from 4.2%, also as anticipated, keeping the pressure on the BOJ to step back from its easing policy. USD/JPY ended a series of eight winning sessions at 146.60, clearing the path to 145.00 and lower while trading under 148.84.
WTI Supported by Yuan Intervention, Forms $80/oz Support
Reports circulated that the PBOC had instructed major banks to step up sales of USD to support the yuan – seen reversing at 7.35. This was followed by the Chinese central bank setting the reference rate for a stronger yuan in the largest bias on record. The PBOC said it would “fend off systemic financial risks”. Commodities staged a rebound after the reports, with WTI breaking its recent declines under $80/bbl, forming strong support at the round level. $81.20/bbl and $82.40/bbl are expected resistance levels ahead.
EUR/USD Records 5th Straight Decline, Now Under $1.09
Noted ECB hawk Martins Kazaks (Latvia) said that any additional rate hikes would be small after emphasising that inflation is coming down. But he did clarify that he would have to see the next staff projections before deciding on hikes. EUR/USD closed in the red for the 5th session, with bulls failing to defend $1.09 and bringing $1.0850 in focus.
China Evergrande Files for Chapter 15 Protection in the US
The heavily indebted Chinese developer that was the face of the collapse of the real estate market in China last year filed for creditor protection in a US court as it works through its restructuring process. The news comes amid news of China’s largest developer, Country Garden, missed payments on its debt and faces a September 7 deadline to make good on the payment before falling into default. The Hang Seng index was seen 2% lower to 18k early Friday.
On The Docket
- UK Retail Sales
- EA Inflation Rate
- China FDI
- Spain Consumer Confidence
FX 1-Day Relative Performance (USD)
- Aussie 0.16% lower, Kiwi down by 0.09%
- Euro up by 0.04%, while Pound 0.06% down
- Yen up by 0.32%, Swissy 0.11% lower
- Loonie 0.07% lower down
- Gold 0.31% higher, Silver up by 0.59%
- Crude and Brent 0.11% and 0.18% lower
- Natural gas down by 0.08%
