Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD lifted slightly overnight, mainly against the JPY.  The US September services ISM surged to the highest level since August 2005. U.S. 10‑year Treasury yields increased by 1bps to 2.33%.
  • The muted reaction by the USD and yields to the ISM may reflect speculation that the next FOMC chair might be Jerome Powell.   Powell is currently a Governor on the FOMC and is perceived to be slightly dovish.  According to Bloomberg, Trump’s advisers have given him a final list of people they are recommending as candidates to lead the Federal Reserve and have ended the search.  Yellen, Cohn, Warsh and Powell and possibly Kashkari are reportedly on the list.
  • AUD/USD traded in a tight range overnight.  Chinese markets, including commodity markets, are still closed or have thin trading conditions because of the national day and mid‑autumn festivals.  Today, Australian August retail sales and the international trade balance are released (11.30am Sydney).  We expect a firm lift in retail sales of 0.4% (consensus: 0.3%) following last month’s flat result. We expect the trade surplus to expand to $1.2 billion because of firmer exports. Outside of a big miss, we do not expect AUD to react much to today’s economic data.

 

Overnight Data:

  • The US ISM non‑manufacturing PMI rose from 55.3 to 59.8 in September, the highest level since August 2005.  The ADP private sector employment gauge rose by 135,000 (forecast +125,000).  Mortgage applications fell by 0.4% over the previous week.

 

Global Equity Markets:                                                                                                                  

  • European share markets were mixed on Wednesday. Germany’s DAX index reached record highs, boosted by automakers.  Spanish stocks declined sharply by 2.9% on rising political uncertainty in Catalonia.  The STOXX 600 fell 0.2%, the German Dax increased 0.5% to record highs and the UK FTSE was flat. In London trade, shares in Rio Tinto rose by 0.6% while BHP rose by 0.9%.
  • US share markets edged higher to fresh record highs on Wednesday supported by strong services sector economic data.  US Secretary of State Rex Tillerson allayed market concerns that he considered resigning from the Trump Administration.  The Dow Jones index rose by 20 points or 0.1%, the S&P 500 was up by 0.1% and the Nasdaq was up by 3 points.

 

Commodities:                                                                                         

  • US oil prices fell on Wednesday after a surprising increase in US crude exports in the previous week to a record two million barrels per day, fanned investor concerns about global oversupply.  Brent crude fell by US20 cents or 0.4% to US$55.80 a barrel.  US Nymex crude fell by US44 cents or 0.9% to US$49.98 a barrel.
  • Base metal prices were mixed.  Zinc was the strongest performer on the London Metals Exchange, remaining near 10‑year highs on tight supplies. Global diversified miner Glencore recently announced plans to increase its stake in Peru’s top zinc miner, Volcan Cia. Lead partly reversed its prior day gains.
  • The December Comex gold futures price rose by US$2.20 or 0.2% to US$1,276.80 per ounce.  The spot gold price was trading around US$1,275 an ounce in late US trade. Iron ore was unchanged at US$61.50 a tonne.

 

Ahead:

  • In Australia, international trade and retail sales data are released.
  • In the US, international trade, factory orders and Challenger job layoffs data are out.

 

Indicative Rates (Bank to Sell):

AUD / USD 0.7814 AUD / CAD 0.9667 USD / JPY 112.75
AUD / JPY 87.71 AUD / THB 25.28 GBP / USD 1.3243
AUD / EUR 0.6627 AUD / HKD 6.0386 NZD / USD 0.7163
AUD / GBP 0.5874 AUD / SGD 1.0624 NZD / EUR 0.6091
AUD / NZD 1.0890 AUD / FJD 1.5952 AUD / CNY 5.2008
AUD / CHF 0.7468 AUD / PGK 2.4685 All Ordinaries 5719.65
AUD / DKK 4.9216 EUR / USD 1.1610 Gold $US/oz 1275.08
AUD / SEK 6.3108 EUR / GBP 0.8880 Oil WTC $/b 49.95

 

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