DAILY EUROPEAN OPENING NEWS
The RBA cut rates by 25bps as expected with analysts believing the door remains open to further reductions, subsequently sending AUD/USD below 0.7500
The RBA cut rates by 25bps as expected with analysts believing the door remains open to further reductions, subsequently sending AUD/USD below 0.7500Asian equities traded mostly lower amid the negative lead from Wall Street while Japanese participants await details of the nation’s stimulus packageLooking ahead, highlights include US Consumer Spending, PCE Deflator, API Crude Oil Inventories, earnings from BMW, AIG, P&G and Pfizer
ASIA
Asia traded mostly lower amid initial cautiousness ahead of the RBA rate decision and following the weakness seen in Wall St., where declines in energy to bear market territory and discouraging data dampened sentiment. This saw Nikkei 225 (-0.7%)underperform as participants also await Japan’s stimulus announcement which is expected to be around JPY 28trl, which some analysts feel may not be enough to have a sustained impact. ASX 200 (-0.6%) traded subdued with a widely expected RBA rate cut failing to provide counterbalance the commodities led weakness. Shanghai Comp (0.0%) saw indecisive amid mixed earnings, while Hong Kong markets remained closed due to a typhoon. 10yr JGBs continued to feel the repercussions from last week’s BoJ disappointment with prices down nearly a point while a poor 10yr auction, which saw the b/c and lowest accepted price decline from prior and a wider tail-in-price, further exacerbated losses in the paper.
Some details from the stimulus draft are said to have been released and include JPY 13.5trl of fiscal measures. (Nikkei)
Japan forecasts a 1.3% boost to their GDP within the next few years, according to the Nikkei. (Newswires)
Japanese govt is said to be doubtful that BoJ will achieve its 2% inflation goal and forecast inflation rising to 1.4%. (Newswires)
PBoC injected CNY 60bln in 7-day reverse repos.
PBoC set CNY mid-point at 6.6451 (Prev. 6.6277); 1st time the PBoC has weakened the reference rate for 6 sessions. (Newswires)
EUROPE/UK
Former BoE MPC member Barker has suggested that a rate cut by the bank would be a mistake as it would hamper bank profits and fail to boost household or business spending. (Times)
FX
Commodity linked currencies languished near yesterday’s lows after weakness in oil prices saw WTI crude futures briefly dip below USD 40/bbl. AUD/USD largely dismissed poor Building Approvals and Trade Balance figures as focus remained on the RBA, who cut rates by 25bps to a new record low of 1.50% as expected and resulted in AUD/USD declining to below 0.7500. USD/JPY and JPY crosses attempted to reclaim some of its recent slump, which coincided with comments from Japanese Finance Minister Aso that FX moves must be carefully monitored and FX stability is important.
RBA cut rates by 25bps to new record low of 1.50% as expected. RBA reiterated that a firmer AUD could complicate an economic transition and that there is a reduced risk of low rates overheating the housing market. (Newswires) Furthermore, given that inflation was cited as a key factor in cutting rates, many believe the door remains open to further rate reductions.
DBRS downgraded Brazil to BB with trend negative. (Newswires)
COMMODITIES
WTI crude futures saw sideways trade overnight, trading above USD 40/bbl after falling 20% from its June highs. Gold () was pressured at the open of markets in China with the precious metal down by over 3 bucks, with a lack of participants in Hong Kong attributed to the downside. Elsewhere, copper remains subdued with prices remaining near yesterday’s lows amid the cautious tone in the region.
BP's Whiting refinery is to slow down the reformer due to an operational problem, according to sources. (Newswires)
Marathon Petroleum have reportedly had an unexpected shut down of their crude unit at the Robinson, Illinois refinery, which produces 210,000bpd, according to sources. (Newswires)
US
UST’s initially came under pressure ahead of the open on Wall Street yet foun
d some relief after the initial volatility. Screen volume was below average as participants look ahead to the two risk events of the week in the form of the BoE rate decision and NFPs at the end of the week. The curve ended up steeper as a result with the 10y Sep’16 future settling at 132.25+, lower by 8 ticks where as some of the downside was also linked to a new USD 19.25bln debt offering from Microsoft, being the third biggest corporate debt deal of 2016, or the fifth largest of all time.
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