Equities push to new record highs in Asia

 

All is good with the world

It was a case of continuing Friday’s theme for the Asian session, though activity was muted and liquidity slightly strained due to a Japan holiday. A strong US jobs report for October, upward revisions to September and an unemployment rate that matched expectations were the catalysts to power US equities higher on Friday, with the advance extending in to today as the SPX500 and NAS100 indices both hitting record highs. The US30 index was a bit of a laggard, but still managed to reach the highest levels since July 25.

 

South Africa’s double boost

Not only did South Africa win the 2019 Rugby World Cup ) at the weekend (apparently on a 12-year cycle and deserved, says this Englishman) but ratings agency Moody’s spared the nation’s sovereign rating a downgrade to junk status late Friday. There were fears of a downgrade amid a gloomy mid-term budget statement last week, which saw the 2019 growth forecast slashed to 0.5% and government debt racing away.

Moody’s cited those two reasons for a downgrade to its outlook for the South Africa rating to negative, which is normally seen as a precursor to an actual downgrade further down the line. The South African Rand responded positively to the news, with US/ZAR falling 1.27% to 14.837 in Asia today, the biggest drop in more than three weeks as the FX pair fell to the weakest since Wednesday.

 

USD/ZAR Daily Chart

Source: OANDA fxTrade

 

Australia’s retail sales decelerate

Growth in retail sales in the land down-under slowed to +0.2% m/m in September, as expected but a slowdown from August’s +0.4% pace, which was the highest in six months. Disappointing ANZ job advertisements for October, a 1.0% drop from September, added to the lackluster tone but these two data points are unlikely to pressure the RBA to cut rates at tomorrow’s rate meeting.

Indeed, interest rate markets are pricing in almost no chance (just a 6.0% probability) of a 25 bps cut at tomorrow’s meeting, though Australian press there may be some minor changes in the wording of the policy announcement, possibly regarding the 2%-3% inflation target.

AUD/USD has been steady this morning, trading in a tight 0.6903-23 range. The 200-day moving average is at 0.6954.

 

AUD/USD Daily Chart

Source: OANDA fxTrade

 

The PMI data flow continues

After the US PMIs were released Friday, both the Markit and ISM versions, it’s now the turn for Europe to see the final readings from Markit. Germany and the Euro-zone numbers are due, with the initial readings at 41.9 and 45.7 respectively, along with the construction PMI from the UK, which had a provisional estimate of 43.3. Note, all three readings are well below the 50 contraction/expansion threshold.

The US session features October New York business conditions (an improvement to 45.8 from 42.8 is expected). Factory orders for September are also on tap and are expected to decline 0.3% m/m, a steeper drop than the -0.1% posted in August.

 

The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/

 

Week Ahead – RBA and BOE Decisions in focus as UK election campaigns begin

 

 

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Andrew Robinson

Andrew Robinson

Senior Market Analyst at MarketPulse
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.
Andrew Robinson

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