Risk aversion is still the name of the game during the Asian session, as traders catch up to the previous session’s bearish moves.
- U.K.’s RICS house price balance slips to -2% vs. 2% expected, 1% previous
- Japan’s bank lending (y/y) up by 2.3% vs. 2.1% expected, 2.2% previous
- Japan’s PPI (y/y) gains 3.0% vs. 2.9% expected, 3.0% previous
- AU MI inflation expectations stay at 4.0% in September
China moves to discourage more capital outflow
A Reuters report cited “three executives at fund management companies” and said that China is suspending approvals for some niche overseas investment products. Not only that, it’s also urging license holders to be “low profile” in marketing said products.
For newbies out there, know that the Qualified Domestic Limited Partnership (QDLP) and Qualified Domestic Institutional Investor (QDII) schemes permit China-based local and foreign funds to raise money from domestic investors for offshore investments.
Word around is that China’s foreign exchange regulator hasn’t issued fresh quotas under the QDII, while the Shanghai Municipal Financial Service Office (FSO), which oversees QDLP, asked license holders to be “tight-lipped” about its business to the media and the public.
Not surprisingly, the news inspired concerns that the government is more worried about the yuan’s depreciation and capital outflow than we’re led to believe.
Overall risk aversion
With no fresh catalyst to price in, Asian session market players focused on catching up to the previous sessions’ bearish themes.
If you recall, the U.S. equities took heavy hits as tightening expectations for the Fed and the continued rise of U.S. bond yields sapped demand for riskier assets such as equities.
It also didn’t help that International Monetary Fund (IMF) managing director Christine Lagarde supported a gloomy report published earlier this week by warning against an escalation in global trade tensions. She advised:
“De-escalate. Fix the system. Don’t break it.”
- Nikkei is down by 4.16% to 22,529.0
- A SX 200 is down by 0.52% to 5,889.5
- Shanghai index is down by 4.34% to 2,607.444
- Hang Seng is down by 3.76% to 25,207.0
Commodity benchmarks also didn’t catch a break. Gold slipped a bit as positive U.S. reports supported more Fed rate hikes (and a stronger dollar).
Meanwhile, crude oil prices extended their declines after the American Petroleum Institute reported higher-than-expected U.S. crude stockpiles last week.
- Gold is down by 0.10% to $1,193.07 per troy ounce
- Brent crude oil is down by 1.48% to $81.40 per barrel
- U.S. WTI is down by 1.06% to $71.84 per barrel
Major Market Mover(s):
The Greenback continued to lose pips across the board following heavy losses in the U.S. equities. Of course, it also doesn’t help that the POTUS is upping the pressure on the Fed by calling it “crazy” for its interest rate hikes.
USD/JPY is down by 9 pips (-0.08%) to 112.19; USD/CHF is down by 40 pips (-0.40%) to .9862; EUR/USD is up by 49 pips (+0.42%) to 1.1566, and GBP/USD is up by 38 pips (+0.29%) to 1.3226.
Whether it’s due to profit-taking, a short squeeze, or flight away from Japanese equities, the low-yielding yen took a break from its weekly gains and took hits against most of its major counterparts.
AUD/JPY is up by 25 pips (+0.31%) to 79.38; CHF/JPY is up by 38 pips (+0.33%) to 113.75; GBP/JPY is up by 34 pips (+0.23%) to 148.38; NZD/JPY is up by 32 pips (+0.44%) to 72.67, and CAD/JPY is up by 9 pips (+0.10%) to 86.00.
The common currency re-activated its safe-haven status in the euro region as traders got spooked from falling equities prices.
EUR/JPY is up by 44 pips (+0.34%) to 129.76; EUR/GBP is up by 14 pips (+0.15%) to .8745; EUR/AUD is up by 24 pips (+0.15%) to 1.6345, and EUR/CAD is up by 38 pips (+0.26%) to 1.5088.
The oil-related Loonie took more hits as a bearish U.S. crude stockpiles report and word that Saudi Arabia will boost its oil shipments to India to cover for Iran’s shortfall dragged oil prices lower.
EUR/CAD is up by 38 pips (+0.26%) to 1.5088; AUD/CAD is up by 17 pips (+0.18%) to .9231; GBP/CAD is up by 19 pips (+0.11%) to 1.7253; CAD/CHF is down by 17 pips (-0.23%) to .7560, and NZD/CAD is up by 29 pips (+0.35%) to .8450.
Watch Out For:
- 6:45 am GMT: France’s final CPI expected to maintain -0.2% reading
- 8:30 am GMT: BOE’s credit conditions survey
- 9:00 am GMT: BOE Gov Mark Carney to give a speech in Bali
- 10:45 am GMT: BOE MPC member Gertjan Vlieghe to give a speech in Brussels
- 11:30 am GMT: ECB monetary policy meeting accounts