EQUITIES
Shares in Asia-Pacific were higher in Wednesday trade. In Japan, the Nikkei 225 rose 0.77%, and in mainland China, the Shanghai composite gained 0.56% while the Hong Kong’s Hang Seng index traded 0.71% higher.
South Korea’s KOSPI advanced 0.76%, the Singapore’s Straits Times index added 0.89%, and the S&P BSE Sensex in India gained 0.45%. Over in Australia, the S&P/ASX 200 rose fractionally.
Overnight on Wall Street, stocks fell after retail sales came in below expectations and valuations become increasingly stretched. The Dow Jones Industrial Average fell 0.79%, snapping a 5-day winning streak. The S&P 500 lost 0.71% after posting a new record high on Monday, and the Nasdaq Composite dropped 0.93%.
OIL
Crude oil steadies after 4-day slump, as investors sought bargains and on expectations that major producers will not boost supply soon, though the escalating concern of Delta coronavirus variant spread is setting back the recovery in key economies.
The Brent last traded at $69.09 per barrel, while U.S. crude futures traded at $66.67 per barrel.
Overnight, the Brent settled at $69.03 a barrel, and the WTI ends at $66.59 per barrel.
CURRENCIES
Treasuries were steady ahead of the release of the latest Fed minutes later today and the outlook for yields remains highly uncertain. Traders are evaluating whether elevated inflation will prove transitory, while also monitoring the impact of the Delta virus variant and the prospect of reduced stimulus support.
The yield on benchmark 10-year Treasury notes was 1.2627%, little changed on the day, after earlier falling as low as 1.217%.
Risk aversion among investors was seen in the dollar, which gained for the second straight session. The U.S. dollar index rose to 93.088.
The New Zealand's central bank held off on a widely expected decision to raise interest rates after the discovery of a Delta variant case sent the country into lockdown. Following that decision, the New Zealand dollar declined to $0.6896, following a drop from above $0.696 yesterday.
GOLD
Gold prices were steady on Wednesday, gained support from safe-haven demand amid rising Delta variant cases offset pressure from a firmer dollar. Spot gold advanced at $1,790.30 per ounce, while the U.S. gold futures added 0.26% to $1,792.50.
Silver rose 0.51% to $23.78 per ounce. Platinum and palladium jumped more than 1% each to held at $1,004.50 and $2,621.00.
ECONOMIC OUTLOOK
Asian shares bounced back on Wednesday, advanced by gains mostly in defensive stocks, while fears about an uneven economic recovery and the continuing spread of the Delta coronavirus variant kept many investors on guard.
Further weighing on investor optimism were also the new restrictions from China on its technology sector, as Beijing tightens its grip on internet platforms. Chinese equities listed in the U.S. tumbled again after Beijing ramped up a regulatory crackdown, with Alibaba Group Holding Ltd., Baidu Inc. and JD.com Inc. among those suffering.
Adding to a string of soft data, U.S. retail sales fell in July by more than forecast, reflecting a steady shift in spending toward services and indicating consumers may be growing more price conscious as inflation picks up.
Going forward, the U.S. Federal Reserve will give investors fresh fodder to consider on Wednesday when it releases minutes from its July policy-setting meeting. Markets will be looking for indications of how quickly the Fed will move to step back its unprecedented stimulus as it eyes job gains and inflation.
TECHNICAL OUTLOOK
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 109.775 and 109.991.
- Support line of 109.075 and 108.859.
Commentary/ Reason:
The Japanese yen traded at 109.659 per dollar, eased than levels below 109.5 seen against the greenback overnight.
The dollar posted moderate gains as the yen weakened after the Japanese government extended its pandemic state of emergency in seven prefectures, including Tokyo, until September 12.
The dollar also garnered some support following several Fed officials’ statement that said they are nearing agreement on scaling back asset purchases in about three months if the economic recovery continues.
The dollar could rally this week if minutes of the Federal Reserve's last policy meeting confirm a hawkish shift on tapering.
The safe-haven yen meanwhile held on to gains as disappointing economic data from China, the spreading Delta variant of the coronavirus and political tension in Afghanistan weighed on risk appetite.
The USD/JPY reacted mildly to the latest Japan trade numbers. Data by the country’s trade agency said that exports rose for the fifth straight month. Exports rose by 37% year-on-year, which was slightly below the median estimate of 39%.
The USDJPY pair is testing a key support level at the 109.07 price line which represents the lower bound of a trading range established since late June. A break would be significant but also unfounded.
Buying activity has already risen in the Asian trading session. The pair has bounced slightly and if the bounce sustains, we may expect a rise to 109.99.
