@@@@ IMPORTANT DATA AND EVENTS TO WATCH @@@@ Asian stocks edged up in early trading on Tuesday, though the upside was capped by lingering concerns about the Ukraine crisis and violence in Gaza which pressured U.S. yields and the dollar. Malaysia has reached an agreement with the leader of the separatist group to retrieve the bodies of the victims from last weeks downing of a Malaysia Airlines passenger jet as well as the planes two black boxes, Malaysian Prime Minister Najib Razak said on Tuesday. Meanwhile, in the Gaza Strip, the Palestinian death toll jumped to more than 500 and Israeli losses mounted as well, as the United States stepped up efforts to secure a ceasefire. U.S. shares slumped overnight, as the rising global tensions offset some upbeat U.S. earnings. So far this reporting period, 66 percent of S&P 500 companies have topped Wall Streets profit expectations, according to Thomson Reuters data, above the 63 percent average since 1994. The three major U.S. indexes ended well off their lows, a sign that some appetite for riskier assets remained. MSCIs broadest index of Asia-Pacific shares outside Japan was up slightly in early trade, while Japans Nikkei stock average rose 0.6 percent. Lower U.S. Treasury yields continued to weigh on the dollar, as safety-seeking investors bought U.S. government debt. Safe havens, including U.S. Treasuries and precious metals such as gold, are benefiting from the situation, strategists at Barclays wrote in a note to clients. In commodities trading, U.S. oil for August delivery added about 0.1 percent to $104.60 a barrel, bolstered by fears of escalating tension as traders covered positions ahead of the contracts expiration later on Tuesday. Spot gold was steady at $1,311.40 an ounce. 10-year U.S. Treasury yields have been offering mark-to-market portfolio insurance against geopolitical risk, they said. The yield on the benchmark 10-year U.S. Treasury note stood at 2.469 percent in Asia, not far from its U.S. close of 2.475 percent. The yield on the 30-year Treasury bond inched down to 3.262 percent from its U.S. close of 3.264 percent On Monday, when it fell as low as 3.249 percent, the lowest since June 2013. The dollar was steady on the day against its Japanese counterpart at 101.42 yen, while the euro stood at 137.23 yen, off last Fridays five-month trough of 136.71 yen. The euro was also steady at $1.3523, pulling away from a five-month low of $1.3491 touched on Friday. The dollar stood little changed and confined to a narrow range against the euro and yen on Tuesday, as currencies lost some momentum on a slight reduction in geopolitically-inspired risk aversion. But that said, markets were still unable to fully shake off geopolitical concerns as tensions in the Ukraine and Gaza remained high, limiting the rebound by the dollar and euro against the safe-haven yen. The dollar crept up 0.1 percent to 101.48 yen, having pulled back from a low of 101.09 hit late last week when a Malaysian airliner was downed over Ukraine and an Israeli ground offensive in Gaza began. The euro edged up 0.1 percent to 137.26 yen after crawling back from a five-month trough of 136.71 yen hit late last week. Against the dollar, the common currency was effectively flat at $1.3524 after recovering from a five-month trough of $1.3491 touched on Friday. Geopolitical developments channelled through higher oil prices will remain key theme this week, said Shinichiro Kadota, chief FX strategist at Barclays Bank in Tokyo. Heightened geopolitical risk accompanied by higher oil will help the yen and Swiss franc appreciate while weighing on the Australian and New Zealand dollars. Emerging market currencies from Taiwan, Singapore, Korea, Thailand and India are also vulnerable to higher oil, he said. Oil prices have risen as the threat of escalating tension between Russia and the West over the crisis in Ukraine mounted, with U.S. crude surging to a three-week high on Monday. Aside from geopolitical developments, participants kept an eye on the U.S. consumer prices data due at 1230 GMT. Focus was on whether the dollar would react if the data proved strong enough to raise expectations for accelerated monetary tightening by the Federal Reserve. The Labor Department is expected to report that U.S. inflation rose 0.3 percent in June, after rising food prices pushed the index to its biggest increase in more than a year in May. The Australian dollar was little changed at $0.9368 with Reserve Bank of Australia Governor Glenn Stevens speech at 0300 GMT being watched for comments on monetary policy and the Aussies current levels. REVIEW : Sentiments Weaker as Russia Would Face Tougher Sanctions, Forex Steady European equities were broadly lower yesterday as markets were awaiting tomorrows meeting between EU foreign ministers, where discussions on additional sanctions on Russia would be held. Russia is already facing sanctions over annexation of Crimea. Its been suggested that the missile that shot down the Malaysia Airlines flight over east Ukraine was provided by Russia. UK,, France and Germany warned Russian president Putin to establish a safe environment to recover bodies and investigate the crash, or Russia will face harder sanctions. Nonetheless, its also reported that there were divisions over the breadth and severity of the sanctions. US stock futures also point to a mildly lower open, where DOW could have a test on 17000 handle again. The Dow dropped 48 points, much better than the 125 points down from earlier in the day. All told, the Dow still had its sixth highest close ever. Things turned around when President Obama gave his remarks on the twin conflicts and continued to rallied from that point. The S&P 500 and Nasdaq indexes also rebounded, although they were each still off about 0.2%. President Barack Obama spoke on both crises in a statement, calling for a ceasefire in the deadly Gaza violence. On Ukraine, he said Russia was on watch as investigators seek to get to the bottom of what happened to Malaysia Airlines flight 17. We have to make sure that the truth is out and accountability exists, he said. The forex markets were relatively steady yesterday. Dollar weakened as the we started by has reversed earlier loss. The dollar index dipped to 80.42 and is now back above 80.50. Near term outlook stays cautiously bullish with 80.36 support intact. The rebound from 79.74 is expected extending higher to test trend line resistance at around 80.9. But still, it should noted again that the index is staying in range trading that started at 79.00. The zone between the trend line and 81.48 could provide strong resistance to the dollar index. Hence, wed be cautious on how the index reacts after it hits the trend line. The dollar was flat against most major currencies Monday as the effects of turmoil in Ukraine, Gaza and Iraq continue to buttress the price of the haven currency against the effects of weak U.S. housing starts data from last week, and doubts that the Federal Reserve will raise interest rates earlier than mid-2015. The yen reversed earlier gains against most major currencies, with the dollar buying ¥101.34, down a touch from ¥101.36 late Friday. The euro also slipped against the Japanese currency, trading at ¥137.04, from ¥137.12. The moves into currencies traditionally considered havens came as fighting continued in Gaza, with 96 Palestinians and 13 Israeli soldiers killed on Sunday. Tension remains high between Ukraine and Russia in the wake of the shooting down of Malaysia Airlines Flight MH17 on Thursday, killing all 298 people on board. No one has claimed responsibility for the incident, but U.S. officials over the weekend leveled allegations at Russia of involvement in the crash. In Ukraine on Monday, government forces tried to retake the rebel-held city of Donetsk and fighting raged near the city’s railway station, according to media reports. Simon Smith, chief economist at FxPro, said in a note that the crisis in Ukraine is the main point of focus for currency markets at the start of the week, but that for now “it seems that FX is treating this as a more isolated incident with limited global implications.” “But there is nothing to say that this may change should more sanctions against Russia be announced this week,” he said. The dollar rose slightly against the ruble, with the greenback buying 35.194 rubles Monday, compared with 35.159 Friday. In other currency crosses, the euro fell against the dollar to $1.3522 from $1.3529 on Friday. The pound also declined, trading at $1.7071, down from $1.7090. The ICE dollar index inched up to 80.5620 from 80.5260, while the WSJ Dollar Index advanced to 73.10 from 73.06 on Friday. Released yesterday, UK Rightmove house price dropped -0.8% mom in July, down from Junes 0.1% mom. German PPI was flat 0.0% mom and dropped -0.7% yoy in June. For the coming week, the BOE minutes due July 23 would unveil the rationale for maintaining the Bank rate at 0.5% and the size of the asset purchase program at 375B pound, despite rising inflation and pickup in economic growth. The RBNZ meeting on July 24 would likely announce another rate hike of 25 bps to 3.5%. On the dataflow, the US, Japan and Australia would release inflation data for June/2Q14. In China, the preliminary manufacturing PMI by HSBC would probably show a modest rise to 51.9 in July from 51.5 a month ago. Here are some highlights: Tuesday: UK public sector net borrowing; US CPI, existing home sales Wednesday: Australia CPI; BoE minutes; Canada retail sales Thursday: RBNZ rate decision; Japan trade balance, PMI manufacturing, China HSBC PMI manufacturing; Eurozone PMIs; UK retail sales; US jobless claims, new home sales Friday: Japan CPI; German Gfk consumer sentiment, Ifo business climate; UK GDP; US durables Tuesday, July 22nd ## Governor Stevens speaks: Reserve Bank of Australia Governor is due to speak at the Anika Foundation Luncheon, in Sydney; this speech may affect the Aussie dollar ## Great Britain Net Borrowing: According to last month’s update, public sector’s net borrowing in Great Britain rose to 11.5 billion pounds ## U.S Core Consumer Price Index: This monthly report refer to the main changes in the core consumer price index for June 2014. According to the U.S Bureau of Labor statistics, during May, the CPI rose by 0.4%; the core CPI also increased by 0.3%; this report could impact the USD and the FOMC’s monetary policy ## U.S. Existing Home Sales: This report will present the changes in U.S. existing home sales for June 2014; in the recent report regarding May, the number of homes sold increased to a seasonally adjusted annual rate of 4.89 million houses; if this trend continues, it may positively affect the U.S dollar ## Australia’s CPI for Q2 2014: This quarterly report will refer to the developments in the consumer price index. In the last report regarding the first quarter of 2014, the CPI rose to 0.6% compared to the fourth quarter and reached a growth rate of 2.9% compared to Q1 2013; this report could affect the Aussie dollar, which is correlated with commodities prices
Posted on: Tue, 22 Jul 2014 09:03:20 +0000
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