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Today news, are packed in One news web pages, so readers do not have to move or change any page to read the news. You can read the economic news, news forex, EURUSD, EUR, USD, USDJPY, JPY, GBPUSD, GBP, AUD, CAD, FED, BOE, ECB, BOJ, PBOC and much more.
Wall Street higher at open, fresh earnings reports weigh
Why low interest rates are here to stay for longer than expected - View
London to become major offshore hub for renminbi trading
Loonie, Canadian bond rise as Liberal party leader wins federal election
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Ferrari to debut on Wall Street Wednesday with company valued at almost $10bn
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Ferrari shares surge in market debut, up 15% from IPO price
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Wall Street higher at open, fresh earnings reports weigh
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Why low interest rates are here to stay for longer than expected - View
Oil prices down as fresh inventories report deepens supply worries
LBMA forecasting winner: Gold to trade well below $1,100 towards 2016
Commodity-exposed currencies lower as China stocks drop
Economists support Bank of England's view there are no dangers from overseas
Yen slightly lower as Japan trade data shows weak exports
Why there is another year of capital controls for Greece
China's shrinking forex reserves drive investor concerns
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London to become major offshore hub for renminbi trading
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Loonie, Canadian bond rise as Liberal party leader wins federal election
Ferrari to debut on Wall Street Wednesday with company valued at almost $10bn
Ferrari shares surge in market debut, up 15% from IPO price
Asian shares rise, with Japan leading after trade data
Asian markets were trading broadly higher on Wednesday morning, with Japanese stocks gaining the most even after September trade figures disappointed.
Japan's benchmark Nikkei 225 index rallied 0.75% to 18,343.84 points within the first hour of trade, while Tokyo's broader Topix gauge jumped 0.73% to 1,510.21 points. Japanese exports grew at a soft pace last month, according to new data from Japan's customs office on Wednesday. Japan's trade deficit contracted from ¥569.7 billion in August to ¥114.5 billion last month, while analysts expected a trade surplus of around ¥87 billion in September.
Exports rose only 0.6% year-on-year, as manufactured goods exports tumbled 8.2% in September. The market forecast was for a 3.8% rise in exports last month. Imports tumbled 11.1% over the same period, led by a near 44% decline in petroleum imports due to lower prices.
Korea's benchmark Kospi index jumped 0.49% to 2,049.45 points on Wednesday morning in Seoul, while mainland China's benchmark Shanghai Composite traded little higher at 3,426.51 points at the opening bell.
Hong Kong markets were closed on Wednesday for the Chung Yeung Festival.
The benchmark Australian S&P/ASX 200 index shed 0.36% to trade at 5,216.60 points in Sydney, with the big banks dragging the index lower on Wednesday.
New Zealand's benchmark S&P/NZX 50 index rose 0.27% to 5,911.15 points this afternoon in Wellington.
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Fitch: Government's FSI Support Will Strengthen Aussie Banks
The Australian government's acceptance of almost all of the recommendations of the Financial System Inquiry (FSI) will lead to a strengthening of the banking system with improved resiliency to shocks, says Fitch Ratings. The decision to back the recommendations reinforces Fitch's view that bank capital requirements will rise in line with regulatory changes over the medium term.
The Australian government released its response to the FSI on 20 October, agreeing with all of the inquiry's recommendations pertaining to banking system resilience and regulation. The government stated that the Australian Prudential Regulation Authority (APRA) would implement key recommendations related to banking system stability.
This reinforces earlier policy announcements and bank capital issuance trends since the original announcement of the FSI recommendations in December 2014. Since then, APRA announced an increase in minimum mortgage risk-weights for internal ratings-based (IRB) banks in July, while each of the "Big 4" Australian banks have undertaken multi-billion dollar capital raises totaling an aggregate AUD17bn this year (see "Higher Mortgage Risk-Weights First Step to Strengthen Australian Bank Capital" and "Still Higher Aussie Bank Capital Expected from New Rules"
The government has also committed to APRA ensuring banks have an "appropriate" total loss-absorbing capacity (TLAC) in place at some point beyond 2016. A TLAC framework has been proposed by the Financial Stability Board for global systemically important banks, but this does not apply directly to Australia. Australia's commitment to implementing a TLAC requirement would be credit positive for bank Viability Ratings, and is likely to reinforce the trends towards higher capital levels.
Implementation of the FSI recommendations will include reducing implicit government guarantees and implementing a bank resolution regime in line with evolving international practice. Fitch maintains that developing a stronger resolution framework would be likely to result in the removal of the sovereign Support Rating Floor for the banking system. Support Ratings for the largest Australian banks are at '1', indicating a high level of government support. But, as a resolution regime is implemented, Fitch would expect Support Ratings and Support Rating Floors to migrate to '5' and 'No Floor', respectively.
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New Malaysia Capital Rules to Affect Most Big Bank Groups
Malaysia's extension of Basel III capital adequacy requirements to financial holding companies (FHCs) - originally applicable only to licensed bank entities - will affect most of its major banking groups, says Fitch Ratings. The measures will strengthen the capital framework for FHCs, and address regulatory arbitrage between parent and subsidiary capital. That said, these rules may lead to shifts in the issuance strategies and structures of some banking groups. In any event, Fitch expects a continued focus on core equity capital by banks and FHCs in the years ahead in light of these new regulations.
The new rules were finalised by Bank Negara Malaysia last week, and are broadly in line with initial proposals from a Discussion Paper published in late 2014. The new FHC capital-adequacy requirements will apply from 1 January 2019, and will affect banking groups headed by FHCs such as CIMB Group, RHB Capital, Hong Leong Financial Group and AmBank Group, among others. The minimum capital adequacy ratio (CAR) for FHCs will be the same as those for banks. These will include an 8.0% total capital ratio; a 2.5% capital conservation buffer; and when required, a counter-cyclical capital buffer.
FHCs have gained popularity partly due to their capital efficient structure, as prudential regulation - including strictly-enforced capital adequacy rules - has typically focused on licensed bank and insurance entities so far. This is changing, with heightened awareness of potential contagion risk between FHCs and their subsidiary entities. FHCs in Malaysia have improved their capital positions and reduced their leverage in recent years.
Under the new rules, additional Tier 1 (AT1) and Tier 2 (T2) instruments issued by fully consolidated subsidiaries can be included as consolidated parent bank/FHC capital, but only if they contain additional loss-absorbency clauses referencing the parent/FHC. This feature will ensure that capital issued by a subsidiary can be used to help recapitalise the group or parent when it fails. As such, it is consistent with the spirit of moves internationally to improve bank resolvability.
This is a potentially significant regulatory change, as many banking groups in Malaysia are headed by FHCs with bank operating subsidiaries. Basel III capital issuance has thus far been largely at the bank entity level. In order to count as consolidated, FHC regulatory capital, subsidiary capital issuance will need to include parent-level triggers. Such securities may incur a higher risk premium compared with existing instruments issued by bank entities, which typically do not incorporate dual-entity triggers.
Cross-entity triggers are not common in Asia, so there are uncertainties as to how banking groups in Malaysia will address the new regulations and how the market will receive instruments which contain such triggers.
FHCs will need to strike a balance between potentially lower-cost issuance by the bank entity, versus the inefficiency of entity capital if it does not count towards capital of the consolidated group. One option for banking groups to address this issue is to place a banking entity at the apex and minimise inefficient subsidiary bank capital. Notably, RHB Capital is already in the middle of such a process.
Groups with bank entities as the ultimate parent, such as Maybank and Public Bank, will be less affected for now. The parent banks are already subject to Bank Negara's regulatory requirements, and the majority of issuance still originates from the parent. However, this issue may become more relevant for Maybank as it prepares to locally incorporate its Singapore business and expand its Indonesian subsidiaries, particularly as these subsidiaries issue capital securities to meet regulatory requirements of their own.
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No one is happier with the Fed in limbo than home builders
No one is happier with the Fed in limbo - and 10Y Treasury yields back at 2.05% - than home builders. The NAHB index of builder sentiment is now up to 64, its highest since October 2005, three months after the peak of the housing bubble. Does that mean housing is headed over the cliff again? Probably not.
The cycle is more like a 4-stroke engine than a 2-stroke one and today's strong sentiment more reflects the long, cool fuel intake phase than the leveraged compression phase that ultimately ends with a bang. If you don't know your 2-strokes from 4, don't worry - builders are happy because they're enjoying a long stable recovery that, while not fast, seems sustainable for that very reason. Permits may have slipped 5% between September and August but the 4% growth trend remains very much intact and given they are still running 60% below 2005 levels, there still seems to be lots of room for expansion / catch-up.
The trouble is, interest rates are a two-edged sword. Fifteen-year mortgage rates are currently at 2.86%, just about their lowest of the crisis, save for a brief couple of months in mid-2013. If the Fed ever does get around to hiking rates, mortgage rates will go with them. No one knows how sensitive housing will be to that move but no one should the direction of the impact. Housing is surely the key risk the Fed has to watch out for when normalization finally begins.
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Singapore's Q3 GDP advance estimate narrowly avoids technical recession
Q3 GDP of Singapore grew marginally, expanding 0.1% q/q saar and 1.4% y/y, better than expected. In addition, the Ministry of Trade and Industry (MTI) revised the country's Q1 growth 20bp lower, to 2.6% y/y, and Q2 growth 20bp higher, to 2.0% y/y. The better-than-expected Q3 performance was driven by marginally stronger activity in services sectors (Q3: 0.8% q/q saar; Q2: 0.2%), mitigating weakness from manufacturing (Q3: -3.6% q/q saar; Q2: -17.4%) and construction (Q3: -0.8% q/q saar; Q2: 12.4%).
The weakness in manufacturing was in line with expectations, given the soft performance seen in July and August IP, owing to output shortfalls in electronics, biomedical and transport engineering. Construction also showed some payback after a surge in activity in Q2. The growth moderation in construction was centred on private sector activity, partly offsetting support from public residential construction. Services was the silver lining in the release, despite slowing modestly on a y/y basis (Q3: 3.0% y/y; Q2: 3.6%).
The MAS noted that growth in financial services was weaker due to a slowdown in lending. However, the wholesale trade and transportationsectors were supported by an upturn in oil-related activities in early Q3. All in, the Q3 GDP growth of the economy is expected to be adjusted modestly lower - towards our forecast of -0.4% q/q saar - in the final release (released on 18 November), although it is believed to be accompanied by few job losses, says Barclays.
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Healthy Swiss trade balance to prop up currency – USD/CHF to extend dips
Switzerland has postede good set of trade balance numbers today, it is increased from previous 2.86B to the current 3.05B to beat the forecasts at 2.51B. The country exported 141.5 tons of gold in September, which is just shy of 19% less than in the previous month, as data from the customs authorities show.
There were also some more striking changes: exports to India for instance plunged by two thirds to just 23 tons, whereas exports to China climbed by 28% to a six-month high of 21.7 tons.
Swiss National Bank leaves monetary policy unchanged, the SNB is leaving the target range for the three-month Libor unchanged at between -1.25% and - 0.25%. The interest rate on sight deposits with the SNB remains at - 0.75%.
Technical Roundup:
It has been a losing streak for dollar against Swiss franc about one and half months or so. The current prices on weekly chart have fallen below moving average curve, this would signal us that the prevailing bearish trend to prevail for some more weeks.
While RSI has been converging these price slumps, the current RSI on weekly chart is trending at 48.0405.
To confirm this bearish view, %D crossover on slow stochastic curves has maintaining above 75 levels which is again signals us selling pressures are intensified. On daily charts, even though these curves have bottomed below oversold zone, there no clues of %K crossover. So on daily terms bears have been well leading the show.
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Poland unemployment rate to have declined slightly in September
Poland unemployment data fro September is due tomorrow. According to the Polish labour ministry, 126,000 job offers were reported in September which denotes growth of 8.6% yoy.
"The unemployment rate to have decreased from 10.0% in August to 9.9% in September. The seasonally adjusted (SA) unemployment rate should be close to 10.2%. Our forecast is in line with market consensus and labour ministry data of 9.9%", estimates Societe Generale.
Moreover, the number of registered unemployed people (1.54m) came in 22,600 lower than in August and remains at its lowest level since 2008. The unemployment rate of the country is expected to be below but close to 10.0% at the end of 2015, added SocGen.
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Fed may hike bank rates in 2016 and 2017
Investors have markedly shifted their assessment of the likelihood of the Fed hiking rates this year and the extent of tightening in the next two years, as concerns about China's growth prospects erupted in early August.
Thus, rates markets are now pricing in a 30% probability that the Fed hikes rates in December, down from more than 70% in early August, and that the Fed will hike by less than 50 bp in both 2016 and 2017, says Nordea Bank.
The sharp repricing of the outlook for Fed interest rates has been amplified by the fact that recent US economic data including employment data have generally disappointed compared to consensus expectations.
Two months of weak jobs reports, stagnation in manufacturing and major dips in the stock market have many investors and analysts worried about the state of the U.S. economy.
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FX Recap
EUR/USD: The euro has recovered from a 10-day low against the dollar, after ECB governing council member Christian Noyer said 'no need for more easing' and pointed out the need to look for further ways to stimulate a still struggling euro zone economy. The euro gained just over 0.1 percent on the day to $1.1343, after dropping as low as $1.1306 on Monday. Earlier in the session, German PPI indices fell short of expectations, when the monthly change for September came out at -0.4%, up from -0.5%, while the year-on-year number printed -2.1%, well down from -1.7% previously. Moreover, the current account in the euro zone for August dropped notably, from an upwardly revised €25.6 billion to €17.7 billion. It made intraday high at 1.1384 and low at 1.1322 levels. Initial support is seen around at 1.1015 and resistance at 1.1560 levels. Option expiries are at 1.1300 (528M), 1.1500 (1.6BLN).
USD/JPY: The Japanese yen continued its narrow range trading on Tuesday, and even though weak Chinese data added to the USD strength in the previous session, the currency pair seemed to lack a clear direction on Tuesday. The currency pair will most likely wait for further direction coming from the Bank of Japan rate decision on October 30. Moreover, the focus remains on the Federal Reserve's (Fed) rate hike timing, with the next Federal Open Market Committee meeting scheduled for October 29. Pair made intraday high at 119.77 and low at 119.41 levels. Initial resistance is seen at 123.20 and support is seen at 118.42 levels. Option expiries are at 119.00 (420M), 120.00 (250M).
GBP/USD: Sterling was trading near a 3-week high against the euro and rising past $1.55 against the dollar with investors awaiting cues from BoE policymakers scheduled to speak in coming days. Against the dollar, sterling was up 0.2 percent at $1.5495, having risen to a high of $1.5506 earlier in the day. The euro was slightly lower at 73.19 pence, having dropped to 73.10 pence on Monday. The BOE policymaker noted that the credit conditions for the business sector in the UK have eased and this calls for a rate-hike sooner rather than later. While BOE Governor Carney's testimony on the Bank of England (BOE) Bill before the Treasury Select Committee turned out to be a non-event, as the central bank chief didn't touch upon the monetary policy. Pair made intraday high at 1.5506 and low at 1.5454 levels. Initial support is seen at 1.5107 and resistance is seen around 1.5725 levels. Option expiries are at 1.5400 (170M), 1.5540 (193M).
NZD/USD: New Zealand's so-called kiwi bounced back above $0.68 against the US dollar on Tuesday, with fundamentals helping to drive the currency towards its highest level since June. Fonterra's Global Dairy Trade (GDT) Index has risen sharply at the last four fortnightly auctions, rebounding more than 30% from a trough in August. The next auction due to take place on Wednesday morning (NZ time) is likely to mark the fifth-consecutive rise in prices, which will continue to drive gains in the kiwi. Pair made intraday high at 0.6841 and low at 0.6783 levels. Initial support is seen at 0.6235 and resistance at 0.6896 levels.
AUD/USD: Following the release of the Reserve Bank of Australia's meeting minutes from its October 6 meeting, the Aussie rose 0.31% in Tuesday, trading around $0.7280. The Reserve Bank of Australia continues to see a period of weak economic activity ahead. The policy meeting minutes suggest the bank is not currently expecting to lower interest rates again, particularly as the economy's rebalancing evolves. Tuesday's minutes from the RBA's October meeting suggested that the bank is continuing to see the necessary economic transition take place, with the help of the lower Australian dollar. Pair made intraday high at 0.7296 levels and low around 0.7242 levels. Initial support is seen at 0.6908 and resistance at 0.7438 levels. Option expiry is at 0.7300 (508M).
Equities Recap==========
European shares dropped on Tuesday, with mining and energy stocks extending losses on China's weak data this week.
The pan-European FTSEurofirst 300 index opened flat and slipped 0.6 pct, the blue-chip Euro STOXX 50 index edged up by 0.1 pct in early deals, Germany's DAX remained flat.
China's CSI300 index closed up 1.2 pct at 3,577.70 points, HK's Hang Seng index ended down 0.4 pct at 22,989.22 points and Shanghai composite index rose up 1.1 pct at 3,425.33 points.
Commodities Recap==========
Oil prices were flat on Tuesday as traders covered short positions after a week of falls, but profits were capped by worries about oversupply and the health of the global economy. Brent crude slipped $1.85 a barrel, or 3.7 pct, on Monday and was steady at $48.61 by 0810 on Tuesday. U.S. light crude went up 20 cents at $46.09 after closing down $1.37, or 3 pct.
Gold struggled after three days of losses on Tuesday, dragged down by a stronger dollar and fears the Federal Reserve could still raise U.S. interest rates this year. Spot gold was trading at $1,171.75 an ounce by 0653 GMT, after losing about 1.2 pct in the past three sessions.
Treasuries Recap===========
US 10-year Treasury bond yeilds stood at 2.0422, while German 10-year bund yields were seen at 0.601.
JGB prices finished the day mixed, with the 7-yr to 10-yr JGBs modestly firmer (-1bp). In the early trading session, the current 20-yr and 30-yr JGBs saw unusually good two-way flows among dealers, sending yields down by 0.5bp from their intraday highs of 1.085% (+0.5bp) and 1.36% (+0.5bp), ahead of today's monthly JPY1.2tn 20-yr JGB auction.
UK Gilts opened 19 ticks higher than the settlement of 118.65, as expected, as core fixed income markets were elevated by another slide in commodity prices.
New Zealand government bonds were little changed. Australian government bond futures dropped, with the 3-yr bond contract slipping one tick at 98.210. The 10-yr contract dropped 2 ticks to 97.3550, while the 20-yr contract also shed 2 ticks to 96.8050.
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Japan to take time to achieve sustainable trade surplus
Japan's Ministry of Finance will announce trade data at 2350 GMT on Oct 20th, and analysts expect Japan's trade deficit to improve modestly in September. According to a Reuters survey, September exports are seen increasing 3.4 percent from a year earlier, after a 3.1 percent increase in August, while imports are likely to fall 11.7 percent, down for a ninth straight month and reflecting falls in energy prices.
Japan's export recovery is likely to remain weak, weighed down by modest US economic recovery and uncertainty surrounding the Chinese economy. The total trade amount seems to be growing, but this is only because most settlements are done in USD and a depreciating Yen pushes up the settlement amount.
"The Japan's trade deficit is likely to come in at ¥200bn in September 2015, which marks an improvement on the ¥962bn of September 2014. On a seasonally-adjusted basis, the trade deficit should reach ¥302bn in September, slightly better than the ¥359bn seen in August", notes Societe Generale in a research note.
The trade data due on Wednesday could provide a strong clue to whether Japan's economy will avoid recession after it shrank in the April-June quarter. BoJ Governor Haruhiko Kuroda said earlier this month in a press interview following the 7 October meeting that the slowdown in emerging economies was hurting Japan's exports, though he stressed that there was no change to his view the economy was set to continue a moderate recovery.
BoJ's latest Tankan survey confirmed that the business sentiment outlook is deteriorating. Oil prices are no longer falling and the recovery in domestic demand is likely to support import growth. There is an imminent risk that the Japanese economy will enter an economic downturn if the export recovery is delayed to a large extent. Against this backdrop, it will take some time for Japan's trade surplus to reach a sustainable level. However, Japan's trade balance is likely to continue to show improvement in the long term.
"With oil prices having fallen rapidly, terms of Japan's trade are improving, leading to a shrinking trade deficit. Exports in September are expected to have grown by 3.8% yoy (3.1% yoy in August), while imports likely shrunk by 7.1% yoy (vs -3.1% yoy in August)", estimates Societe Generale in a research report.
USD/JPY hit session highs at 119.78 earlier on the day and is currently trading at 119.62 at around 1040 GMT. The pair is seen consolidating above the hourly 200-SMA and awaits fresh cues from the upcoming US data and key trade balance figures. Key price breaks are on the horizon, technicals are supportive for an attempt higher.
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GBP/USD lower volatility to persist – play with butterfly spreads on low IVs
Since the cable's implied volatility is still perceived to be the least within next 1w-1m time frame from other major G7 pairs (at around 6-7%), and observe the price range on technical charts. So here comes a multiple leg of option strategy for regular traders of this currency cross when there is lower IV. A total of 4 legs are involved in the butterfly spreads strategy and a net debit is required to establish the position.
The trader can implement this strategy using put options now with similar maturities to deal with lower implied volatility. Construct a butterfly spreads using puts as delta risk reversal has shifted market sentiments towards slightly downwards. One should use this when expectation the exchange price of the GBPUSD to change very little or within a very tight trading range over the life of the option contracts.
So strategy goes this way, writing 2 lots of (-1%) at the money -0.49 puts and buying (1%) out the money calls and buying another (1%) in the money call for a net debit. In live scenarios use the longer maturities on longs and shorter maturities on shorts.
The highest return for this strategy is attained when the GBPUSD price remains unchanged or nearby ATM strikes at expiration. At this price, only the highest striking put expires in the money. On the flip side, maximum loss would be limited to the extent of initial debit paid to enter the trade plus brokerages.
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Gold puzzling among cyclical commodities – Collar serves long term hedging motives
Yellow metal far month contracts for December delivery on the Comex division of the NYME edged up $1.10, or 0.09%, to trade at $1,173.90 a troy ounce during European morning hours. On the back of mixed bag of US economic reports investors have been skeptic on Fed's rate decision.
Gold rallied to a four-month peak of $1,191.70 last week amid speculation the U.S. central bank will not raise rates until sometime next year, if you think the prices of this precious metal are to spike up further, then cover your underlying exposures with collars strategy. Gold futures rallied to 7 week highs today amid growing expectations that the Federal Reserve will hold off on hiking interest rates until 2016.
When above fundamental reasoning bothers your trade sentiments, this strategy is for those risky traders who have this commodity exposure at present and are concerned about a correction and wish to hedge the long spot commodity position. How do you do that? Well the hedger takes following positions constructs this strategy:
Write an OTM call option + hold an ITM put option (near month Call & mid month put). Writing OTM calls may likely to fetch certain returns since any abrupt slumps in near future may be taken care by this instrument.
This helps as a means to hedge a long position in the underlying outrights by holding longs on protective put. Thereby, any declines in this commodity would be taken care by ITM put options since the holder of the put option will have right to sell at predetermined strike price at expiry in case of American style options.
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Significantly higher Swiss gold exports to China and Hong Kong in September
The gold price is finding it impossible to entirely ignore the weakness among cyclical commodities and is trading some of the time this morning at below $1,170 per troy ounce.
Switzerland exported 141.5 tons of gold in September, which is just shy of 19% less than in the previous month, as data from the customs authorities show. There were also some more striking changes: exports to India for instance plunged by two thirds to just 23 tons, whereas exports to China climbed by 28% to a six-month high of 21.7 tons.
"Gold exports to Hong Kong even totalled 59.8 tons in September, which is 65% more than in August and the highest monthly volume in at least 1½ years. This points to high Chinese gold imports from Hong Kong", notes Commerzbank.
The corresponding data will be published by the Census and Statistics Department of the Hong Kong government in the next few days.
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Brent oil price drops by almost 4%
Oil prices were under considerable selling pressure yesterday. Brent shed nearly 4% and closed trading well below $49 per barrel. WTI fell by 3% to just shy of $46 per barrel. There was no real trigger for yesterday's price slide, which was probably due to a variety of factors that prompted the sell-off, such as weak Chinese data, declining crack spreads for oil products, the prospect of growing oil production from Iran and speculative sales.
The latter is suggested by the fact that speculative net long positions in Brent were significantly expanded by 17,700 to 207,100 contracts in the week to 13 October, putting them at their highest level in nearly three months. The increase in the price of Brent to a six-week high of $54 per barrel was thus driven to a major extent by speculation, and is now evidently being corrected. The 9% price rise in the reporting week has at least been largely reversed again in the meantime.
"The oil price should stabilize in the absence of any new bearish news. A renewed steep rise in US crude oil stocks should no longer come as a negative surprise in view of the lower rate of crude oil processing for seasonal reasons", suggests Commerzbank.
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U.S. GDP growth: down but not out
The latest ISM indices are consistent with a 3%+ trend in the U.S. GDP growth as the strong non-manufacturing sector continues to offset weakness in manufacturing. After all, the manufacturing sector of the economy makes up only 12% of GDP and 9% of payrolls.
"We do acknowledge that Q3 GDP growth is struggling to exceed 1%. According to our estimations, real GDP growth of the U.S. is tracking a 1½% annual rate in Q3, pulled down by an estimated ½% point drag from net exports and a big 1½% point drag from inventories", says Nordea Bank.
Domestic demand is believed to continue as the key driver of US growth, and consumers will lead the way as they have plenty of tailwind, see US Economic Outlook: Solid demand side - weak supply side.
For the overall economy, the positive impact of lower oil prices and a stronger USD on consumer spending is expected to largely offset the hit to net exports from the Emerging Market shock and the stronger USD.
The U.S. economy will expand a solid, if not spectacular, 2.5% in 2015 as a whole compared to 2014, argues Nordea Bank.
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Is tight labor market limiting U.S. job growth?
The slowdown in payrolls growth in August and September might delay the first Fed rate hike until early 2016, unless the weakness is reversed in the two remaining job reports ahead of the 15-16 December FOMC meeting. However, the disappointing payroll growth of 136k in August and 142k in September does not signal the start of sustained labour market deterioration and a weak economy, in our view.
As a matter of fact, there are some indications that the recent slowdown in job growth might be partly due to limited labour supply rather than weak demand.
The deterioration of job growth in manufacturing - a sector highly sensitive to cyclical swings and the USD - accounts for only one-fourth of the slowdown in total payrolls growth in August and September compared to the trend earlier this year.
The sharpest weakening in payrolls growth over the last two months has actually been in business services - a sector which normally is considered relatively insensitive to swings in global demand and the USD. The same goes for retail trade and education and health services, where the slowdown in employment growth also has been relatively significant.
These observations suggest that a tightening labour market and difficulties in finding qualified workers might be a factor now starting to limit job growth, adding to the negative impact of the stronger USD, says Nordea Bank.
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Trendline breach, bearish candles and oscillators signal EUR/CAD to drag further dips
On both weekly and daily charts of EURCAD, we spot out Doji pattern candles formed to highlight a caution for bulls. As you can observe Doji on weekly charts has occurred exactly on a trendline breach at around 1.4909 levels which is to be considered as a caution of previous of upswings.
On daily chart, again a sharp Doji is formed at 1.4838 levels followed by a long real body bearish candle has formed to fall below moving average curve.
In addition to that leading oscillators are showing convergence with the price dips on weekly chart. RSI (14) looks healthily converging with every price declines at 59.9291; it has been showing the same indication right from overbought territory. So, RSI signifies the prevailing down streaks may sustain for some slumps.
While another leading oscillator (slow stochastic) hints us the overbought heaviness through %D crossover above 80 levels which overbought zone though the bulls don't seem to lose rallies built by healthy volumes. Hence, we could see our next targets at 1.4525 levels on south.
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MAS reduces SGD NEER policy band slope slightly
The Monetary Authority of Singapore (MAS) reduced the slope of its SGD NEER policy band slightly on 14 October - to 1% from our previous assumption of 1.5%. All other policy parameters (width of the policy band, level of the band's midpoint) of the SGD NEER were maintained. The outcome was somewhat unexpected.
Furthermore, the market reaction following the announcement was closer to the call for the MAS to leave its policy unchanged: USDSGD fell 0.6% and the SGD NEER strengthened 50bp, an unusual reaction to a proper easing move. Most importantly, the MAS maintained its stance of gradual appreciation, whereas the market expected the Authority to move to neutral (zero slope) stance.
Overall, the token easing was consistent with the view of no material deterioration in the outlook for growth and inflation amid the still-tight labour market. More importantly, it does not signal the additional policy easing in April 2016 is likely, unless there is a significant worsening in the external outlook or signs of a clear and systemic external shock, says Barclays.
Coupled with stronger-than-expected Q3 GDP growth, the MAS seemed more relaxed over the economy and maintained its 2015 growth forecast, added Barclays.
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Early guidance on banking business scope expansion possible in China
In the past five years, China banks have reduced their reliance on credit business, as demonstrated by the non-interest income contribution to total revenue for the overall sector rising to 24.6% in 2Q15 from 20.8% in 1Q11.
Nonetheless, this is still markedly lower than some banks in the US, where the proportion of non-interest income is as high as 50%. The ongoing interest rate liberalisation in China could provide more incentive for banks to diversify their sources of revenue and further improve their non-interest income contribution.
"The 13th FYP is expected to include early guidance on the scope for expansion of banking business. There are already initial signs that such activity has been tested by the regulator, for example, local media (Hexun, 17 July 2015) reported that BOCOM had been given approval by the local Jiangsu CSRC to acquire a 33% stake in Huaying Securities", says Barclays.
The two banks have not commented on this information. If the BOCOM-Huaying case were successful, it could potentially encourage more M&A activity, allowing banks to expand their business into other financial sub-sectors.
However, such a diversified business model may require these businesses to operate on a stand-alone basis (i.e. as a separate legal entity) with a separate licence and proper information barriers in place, to prevent potential risks that could threaten the stability of the overall banking system.
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China's domestic financial reforms deepening
On China's domestic financial reforms, interest rate liberalisation is likely to proceed with the removal of the cap on all deposit rates.
In parallel with this change, the PBoC is aiming to transform its monetary policy framework, as the one-year benchmark savings rate will no longer be used as a monetary policy tool after liberalisation, says Barclays.
This can be done by setting up a new policy rate (or rate corridors consisting of an overnight liquidity window and refinancing rates) and using it to guide the interbank rate.
"We expect other capital market reforms include a strengthening of financial regulation/oversight, a lowering of entry barriers for private banks and insurance sector reforms", added Barclays.
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