MKS PAMP Group - Daily Asia Wrap

Range Asian Hours (from Globex open) 

  
MACRO: U.S. equity indices closed narrowly lower as the market endured yet another post FOMC hangover with investors digesting sluggish U.S 3rd quarter growth, another raft of corporate earnings (Time Warner, Mastercard,  and a handful of mega M&A deals.. The Dow Jones Industrial Average fell -23.72 points, or -0.13% to 17,755.80, the S&P500 inched down -0.94 of a point, or -0.04% to 2,089.41 and the Nasdaq declined -21.416 points, or -0.42%, to 5,074.274. Losses in utilities (-0.6%), financials (-0.4%) and tech (-0.3%) countered wins in healthcare (+0.4%), energy (-0.3%) and discretionary (+0.3%). European stocks edged lower also, weighed primarily by the banking sector following under-whelming news from Deutsche Bank (-6.9%, axeing 35,000 jobs + scrapped dividend payout for 2015 & 2016) and Barclays (-6.3%, poor 3Q and concerns over future earnings outlook). The FTSE Euro First 300 index slid -0.04% to 1,484.28, the DAX shed -0.29% to 10,800.84, the FTSE100 gave up -0.65% to 6,395.80 and the CAC40 dipped -0.1% to 4,885.82. The likelihood of a potential December interest rate increase continued to drive investors out of treasuries and sent the yield on the benchmark 10y note to a 1 month high. The 2y note yield rose +2.1bps to 0.724% and the 10y bond yield rallied +7bps to 2.171%. The USD ended mostly lower on Thursday versus G10 peers, as markets saw a lack of follow through from yesterday’s dollar strength post FOMC. EUR has continued to squeeze off the lows, bouncing briefly on the in-line U.S. GDP print and continuing its squeeze higher, with month-end flows as well as the selloff in bunds likely helping to keep EURUSD elevated. After selling-off following better IP numbers, USDJPY actually regained its topside momentum back to post-Fed levels and spot continues to drift higher ahead of the BOJ today. In EM space, big mover was USDCNH, where agent banks selling pushed USDCNH towards onshore spot according to Goldman Sachs. 

The main focus on the data calendar overnight was U.S. economic growth, which slowed over the 3rd quarter. GDP over this quarter grew at a seasonally adjusted rate of +1.5% (+1.6% expected), a marked deceleration from growth in the 2nd quarter which clocked in at +3.9%. The slowdown primarily reflected inventory levels, which subtracted 1.44% from overall growth, the largest since the Q4’12 according to JP Morgan. Business accumulated $56.8bln of inventory, the smallest since Q1’14, and down sharply from $113.5bln in Q2, while there were declines across manufacturing, wholesale and retail inventories. Consumer spending rose at a 3.2% rate and a measure of private domestic demand, which excludes trade, inventories and government spending, also rose at a solid +3.2% pace. Business investment grew +2.1%, while construction spending declined but investments in equipment increased. Exports increased +1.9% while imports climbed +1.8%. Government spending grew at a +1.7% pace where spending at the state and local level offset a pullback in defense outlays. U.S. pending home sales declined during September with the National Association of Realtors (NAR) reporting a decline of -2.3% (+1.0% expected) to a seasonally adjusted reading of 106.8. The NAR attributed the decline to a shortage of home listings that have limited buyer options, particularly at the lower end of the market, as well as recent stock-market volatility that may have rattled prospective buyers. U.S. initial jobless claims rose +1k to 260k (265k expected) in the week leading up to Oct 24, pushing the 4 week moving average down -4k to 259k – a fresh post-1973 low. Jobless claims continue to signal solid non-farm payrolls growth and further declines in the unemployment rate. In Europe, German CPI recorded a +0.2% yoy rise (0.0% expected) in October. Labour market conditions also remained robust with the number of unemployed people declining -5k in October (-4k expected) and the unemployment rate stable at 6.4%. Still, it should be noted that the inflationary environment in the euro area more generally remains weak amid significant excess capacity. 
  
PRECIOUS: Gold traded down to its lowest level in nearly a month overnight and broke key $1150 support, as the fallout from Wednesday's FOMC continued to weigh on investor sentiment. In Asia buying was expected on the open considering the price was below the previous $1162-63 support level and this was the case in early trade. After opening at $1156.50 it was a slow grind higher throughout the morning up until the time the SGE came in. Once the Chinese market opened we did see Chinese buying, although the premium was around USD $1.50-2.50 which was not as strong as most were expecting. Just after the open the yellow metal popped through $1160 and tested $1162 but ran into some technical selling there. Later in the afternoon we did try a little higher, but that $1162-63 resistance zone remained heavy touching an intra-day peak of $1162.70 before London based selling took hold. The SGE also turned into a discount as we approached the PM close which prompted gold to push back below $1160. Late in London the losses extended further despite the EUR grinding higher with early NYK traders joining in and looking to sell into the weakness, as they have for most of the week. After the NYK open is was virtually one way traffic in a steady grind lower through $1150 support all the way to $1145, rebounding slightly right at the end of the session to close around $1146.50. The close below $1150 will be of concern for gold bulls in the short term with the extended weak longs likely to look to liquidate. We see next resistance $1150 with immediate support between $1139-41, which is where the 50 & 100 day moving averages intersect, as well as the previous short term downtrend line dating back to August 24. Silver finally broke through $15.80 overnight, with the grey metal falling to a low of $15.58 and not really bouncing from there.     
      
ASIA TODAY: It was another quiet day in Asia despite the much lower prices yet again. Ecomex opened about $1 higher from the $1146.50 close and pushed up initially to $1148 before some heavy offers appeared on the exchange. Over the course of the morning we moved between $1145-48 on moderate volumes with light bids from physical customers being weighed on from spec longs looking to liquidate. The SGE opened at a decent premium of around $2.00-2.50 USD over Loco London metal and there was Chinese buying apparent although it was nothing huge despite the technical break lower. Over the course of the day we held the $1145-48 range comfortably, although there were good offers scaled on the run up to $1150 which suggest we may test lower to next support at $1139-41 soon. On the data front the BoJ was in focus today, with the market divided about what they would do - the majority believing they would leave easing on hold. This was the case which disappointed some and as a result the USDJPY fell about 30 pips initially to 120.32, but quickly recovered to trade all the way back through the 200 dma and currently sits at 121.33. Kuroda's address is expected within the hour and may prompt more JPY volatility. Elsewhere, equity markets were mixed the Nikkei +1.2% rallying following the BoJ, the Shanghai Composite currently +0.1%, Hang Seng -0.2% and ASX200 -0.5%. Ahead today on the data calendar look out for German retail sales, Euro-zone CPI, U.S. personal income and spending, Chicago PMI and University of Michigan sentiment index. Have a great weekend.