Daily FX & Market Commentary Market Recap Oct 28, 2014

Please note and carefully read the
Important Disclosure on the last page
Daily FX & Market Commentary
Oct 28, 2014
Published from Tuesday to Friday
Market Recap
• U.S. stocks rose little: S&P 500 slightly
gained 0.1% yesterday as the markets take
a breather from its best weekly gain last
week since Jan. 2013 and as Brent oil price
continue its slide to a 28-month low.
• Hong Kong stocks fell: Hang Seng Index
fell 0.7% as Hong Kong Exchanges and
Clearing said last Sunday that there is no
firm date for the launch on Shanghai and
Hong Kong Stock Connect. Hong Kong
Exchange and Clearing (388) fell 4.7% but
overall market turnover remained low at
HK$56.7bn.
• Brazil stocks fell: The Ibovespa index fell
2.8% after President Dilma Rousseff got reelected on Sunday spur some investors’
concerns about challenges down the road
for Brazil in carrying out economic reforms.
Table: Daily Market Movement (Oct 27, 2014)
Equity Market Indices
U.S.
S&P 500 Index
Dow Jones Industrial Average
NASDAQ Composite Index
Europe
Stoxx Europe 600 Index
DAX Index
Japan
TOPIX Index
Nikkei 225 Stock Average
China / Hong Kong
Hang Seng Index
Hang Seng China Enterprises
Shanghai SE Composite
Close Change
1,961.63
16,817.94
4,485.93
-2.9
+12.5
+2.2
325.10
8,902.61
-2.1
-85.2
1,254.28
15,388.72
+12.0
+97.1
23,143.23
10,311.58
-159.0
-80.1
2,290.44
-11.8
% Commodity Futures
Energy & Metals
-0.2% WTI Crude Oil (USD/bbl)
+0.1% Brent Crude (USD/bbl)
+0.0% Natural Gas (USD/MMBtu)
COMEX Gold (USD/oz)
-0.6% LME Copper (USD/MT)
-0.9% Bond Yields & CNY
U.S. Treasuries - Yields
+1.0% 3-Month - Yield (%)
+0.6% 5-Year - Yield (%)
10-Year - Yield (%)
-0.7% 30-Year - Yield (%)
-0.8% USD/CNY
-0.5% China Renminbi Spot
Close
81.00
85.83
3.56
1,229.3
%
0.0%
-0.3%
-1.7%
-0.2%
6,690.0
0.0%
Close Change
0.00
0.01
-0.01
1.49
-0.01
2.26
-0.01
3.04
Close
%
6.12
0.0%
Data Source: Bloomberg L.P.
Hot News: Markets fell after Brazil’s President Re-election
Chart: Bovespa Index
Bovespa has dropped 18% Citi analysts’ view:
from September ’s high
• With the elections behind us, a downgrade in rating
60000
is possible by the rating agencies. If the
government does not respond quickly with concrete
55000
signals of fiscal restraint, those risks increase.
50000
• Citi analysts maintain the view that the central bank
may attempt a couple more hikes to counter
45000
inflationary pressures.
• In terms of economic activity, Citi analysts forecast
40000
10/13 12/13
02/14 04/14 06/14 08/14 10/14
of 1% growth in 2015, but recognize that business
confidence needs to be closely monitored as it
Source: Bloomberg L.P., as of Oct 27, 2014
could undermine any investment recovery.
Brazilian stocks and currencies plunged :
• On currency, while the election also added some
• President Dilma Rousseff, was re-elected on Oct 26,
extra volatility, the long run direction towards
winning 52% of the vote, while Senator Aecio Neves
depreciation may continue. The BRL may reach
obtained 48%.
2.55 by end-2014 and 2.70 by end-2015.
• Brazil’s Ibovespa dropped 2.8% yesterday, after falling
• Citi analysts maintain an underweight in Brazilian
6.8% last week, on speculation that the Brazilian
equities. Citi analysts will keep both stocks
economy will remain stalled and inflation will stay
above target after Rousseff won re-election (Chart).
valuation and political/economic developments in
Brazil’s real dropped to a nine-year low.
mind in an ongoing assessment of the weighting.
65000
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1
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Important Disclosure on the last page
Daily FX & Market Commentary
FX & Commodity Technical Corner
YESTERDAY PERFORMANCE
FX TREND
TECHNICAL
CCY
USD
EUR/USD
USD/JPY
GBP/USD
USD/CAD
AUD/USD
NZD/USD
USD/CHF
USD/SGD
GOLD
Close Price
Day High
Day Low
85.50
1.2698
107.82
1.6120
1.1247
0.8802
0.7894
0.9496
1.2745
1226.55
85.72
1.2723
108.38
1.6147
1.1255
0.8825
0.7903
0.9521
1.2764
1232.20
85.41
1.2666
107.61
1.6079
1.1213
0.8789
0.7846
0.9477
1.2739
1225.45
Short Term
Comment
Neutral
Bearish
Bullish
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Support
Resistance
82.67
1.2501
106.55
1.5875
1.1082
0.8579
0.7709
0.9156
1.2590
$1,182
87.59
1.2910
110.09
1.6227
1.1500
0.8899
0.8052
0.9839
1.2860
$1,273
Citi Foreign Exchange
Forecast:
0-3
Months
87.59
1.23
109.00
1.60
1.15
0.86
0.77
0.98
1.28
1200
6-12
Months
92.65
1.15
115.00
1.51
1.18
0.80
0.72
1.05
1.30
1240
FX Rate Source: Bloomberg L.P. (cut off time is NY Time 5:00pm)
• USD fell: U.S. Markit Service PMI fell from 58.9 to 57.3 in Oct, trailed market expectations.
• USD/JPY dropped on dollar’s weakness yesterday due to the weak U.S. service and composite PMI.
• EUR pared gains: German IFO Business Climate Index plunged from 104.7 to 103.2 in Oct, trailed estimates.
Daily FX Focus
EUR/USD may test lower to 1.2501:
1.2800-1.2910
(downtrend
channel top &
55MA)
1.2501 (Oct low)
Source: Bloomberg L.P., data as of Oct 28, 2014
EUR Outlook:
• Concern over weakening German economy may
restrain the EUR. In fact, Citi’s Economic Surprise
Index in Europe fell to -40.5, the lowest among
other major nations.
• The ECB and EBA announced the result of
Comprehensive Assessment (CA). As of the
balance sheet snapshot date of 31 December 2013,
25 banks failed the CA, with aggregate capital
shortfalls of €24.6bn.
• The end of the CA and recent ECB easing
measures may modestly boost financial conditions
in coming months, but their effect may be limited in
the face of falling business sentiment, high private
debt levels and an uncertain economic outlook.
• The small amount of capital needs also suggests
that lack of bank capital is not the major constraint
for growth, highlighting that other policy measures
are still needed to boost demand, notably ECB QE.
Technical Analysis:
• In the short term, EUR/USD may remain range-trading as RSI stays at neutral level. However, the pair
upside may be restrained by 1.2800-1.2910 and may resume downtrend to 1.2501 upon consolidation.
NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD.
© 2014 Citibank
Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited
2
Please note and carefully read the
Important Disclosure on the last page
Daily FX & Market Commentary
EUR/GBP may test lower to 0.7767:
0.8066 (Sep top)
Recap:
• EUR/GBP stayed flat yesterday
despite the weaker-than-expected
German Ifo survey.
EUR/GBP Outlook:
• The weak German Ifo survey may fuel
concerns that the slowdown in
German economic growth may drag
down the EU economy.
• The ECB will likely add more QE
measures in late 2014 or early 2015
to support the economy, which may
pressure the EUR.
• GBP may outperform as the strong
U.K. economy may raise expectation
of early rate hike by the BoE.
0.7767 (Sep low)
Source: Bloomberg L.P., data as of Oct 27, 2014
Technical Analysis:
• EUR/GBP has fallen sharply after failure to penetrate resistance at 0.8066. As the RSI is falling from the overbought
region, the pair may test lower to Sep low at 0.7767, with resistance at 0.8066.
Data to be released for the next 24 hours:
• No important economic data will be released.
USD/JPY may consolidate before rising to 110.09:
110.09 (Oct 1 top)
108.38 (yesterday’s
top)
106.55 (55MA)
Source: Bloomberg L.P., data as of Oct 27, 2014
Recap:
• USD/JPY
dropped
on
dollar’s
weakness due to the weak U.S.
service and composite PMI.
JPY Outlook:
• A survey found support for Abe’s
government had fallen from 62% to
53% after the resignation of two highprofile cabinet ministers, adding more
pressure on PM Abe as he struggles
to turn around the Japanese economy.
• As PM Abe will likely raise the sale
tax again in Oct 2015, the political
pressure may prompt the BoJ to
expand its monetary policy in Jan
2015, which may pressure the JPY.
Technical Analysis:
• As the RSI is trading around the middle range, the pair may consolidate initially but 55MA at 106.55 may contain
the downside and the pair may rise again to 108.38 and then 110.09.
Data to be released for the next 24 hours:
• No important economic data will be released.
NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD.
© 2014 Citibank
Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited
3
Daily FX & Market Commentary
Important Economic Data (Oct 27, 2014 – Oct 31, 2014)
Time
Importance
Event
Period Actual
Survey
Prior
Monday
10/27/2014 17:00
GE
!!!
IFO Business Climate
Oct
103.2
104.5
104.7
10/27/2014 22:00
US
!
Pending Home Sales YoY
Sep
3.00%
2.20%
-4.10%
10/28/2014 20:30
US
!!
Durable Goods Orders
Sep
--
0.30%
-18.20%
10/28/2014 22:00
US
!
Consumer Confidence Index
Oct
--
87
86
10/29/2014 17:30
UK
!
Mortgage Approvals
Sep
--
--
64.2K
10/30/2014 02:00
US
!!!
FOMC Rate Decision
Oct
--
0.25%
0.25%
10/30/2014 04:00
NZ
!!!
RBNZ Official Cash Rate
Oct
--
3.50%
3.50%
Tuesday
Wednesday
Thursday
10/30/2014 08:00
AU
!
HIA New Home Sales MoM
Sep
--
--
3.30%
10/30/2014 20:30
US
!!
Initial Jobless Claims
Oct
--
--
--
10/30/2014 20:30
US
!!!
GDP Annualized QoQ
3Q
--
2.90%
4.60%
Friday
Bank of Japan Monetary Policy
Statement
Building Permits MoM
Oct
--
--
--
Sep
--
--
0.00%
10/31/2014
JN
!!!
10/31/2014 05:45
NZ
!
10/31/2014 07:30
JN
!!
Jobless Rate
Sep
--
3.60%
3.50%
10/31/2014 07:30
JN
!!
Natl CPI Ex Fresh Food YoY
Sep
--
2.90%
3.10%
10/31/2014 08:05
UK
!
GfK Consumer Confidence
Oct
--
--
-1
10/31/2014 18:00
EC
!
Unemployment Rate
Sep
--
--
11.50%
10/31/2014 18:00
EC
!!!
CPI Estimate YoY
Oct
--
--
--
10/31/2014 20:30
CA
!!
GDP YoY
Aug
--
--
2.50%
10/31/2014 20:30
US
!!
Personal Income
Sep
--
0.30%
0.30%
10/31/2014 20:30
US
!!
Personal Spending
Sep
--
0.10%
0.50%
10/31/2014 21:55
US
!!
Univ. of Michigan Confidence
Oct
--
86.2
86.4
For any enquiries, please call (852) 2860-0333.
Source: Source: Bloomberg L.P.
(K = Thousand, M = Million, B = Billion)
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4