OIL: Oil Continues to Fall
- Oil is set to finish down for the week as concerns that this weekend's OPEC+ meeting could result in further supply drove oil lower overnight.
- Russian deputy PM Novak added to the pressure suggesting that OPEC+ will 'look at the situation as a whole before making a decision.'
- Adding to the downward pressure was data showing US crude inventories have risen to the highest in several months, suggesting that buying may be curtailed in the third quarter.
- Goldman Sach's analysts suggest that Brent could reach low $50s over the next year according to reports published by BBG.
- WTI is down in the Asia trading day by -0.22% to be at US$63.34. Since the 2025 high of US$80.04 in mid-January, WTI is now lower by over 20% and has no technical support below it, with all major moving averages above.
- For the week, WTI is lower by -1.03%
- Brent is down -0.16% at US$66.88 as it too has broken below all major moving averages.
- For the week, Brent is lower by -1.81%.
- Oil investors will have one eye on Non Farm payrolls tonight for clues as to the next Fed moves on rates.
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ASIA STOCKS: Trump Takes Aim at Pharma
Some of Asia's pharma stocks took a hit today as President Trump aimed his tariff sights firmly in their direction. Pharma shares in Australia, Japan, South Korea and India are down by 2-3% after Trump said in an interview that he will be putting tariffs on Pharmaceuticals.
Following yesterday's better than expected GDP, Indonesia's Jakarta Composite has consolidated above 7,500 over 25% off the March lows.
A government initiative to provide free preschool education has given Chinese childcare related stocks a boost with rises of +2-4% .
- The Hang Seng posted modest gains of +0.18% as it attempts to trade above 29,500. The CSI 300 is up +0.18%, Shanghai Comp is up +0.27% and Shenzhen up +0.55%.
- The Nikkei has had a strong day rising +0.60% after Tuesday's gains of +0.64%.
- The TAIEX in Taiwan is the worst regional performer, down -0.77%
- The KOSPI followed the TAIEX down by -0.18%.
- Malaysia's FTSE KLCI couldn't follow up on yesterday's gains of +0.76% and is lower by -0.16%.
- The Jakarta Composite is one of the best performers in July but could only rise marginally today by +0.08%.
- The FTSE Straits Times is down -0.07% and the PSEi in the Philippines up +0.62%.
- The NIFTY 50 in India declined -0.30% yesterday and has opened marginally lower this morning.
FOREX: Asia FX Wrap - USD Drifts Lower
The BBDXY has had a range of 1208.77 - 1210.24 in the Asia-Pac session, it is currently trading around 1208, -0.10%. The USD, with a huge rejection of the 1220/1230 area on Friday, had a knee-jerk reaction lower to the outsized move in US rates as the market's view on growth and interest rate cuts is re-evaluated. The USD is consolidating just above its 1205 support, as the market contemplates the increasing headwinds to risk and what that means for the USD. The market is still very quick to jump onto opportunities to sell the USD, a sustained move back above the 1230 area would be needed to put pressure on the bears.
- EUR/USD - Asian range 1.1564 - 1.1585, Asia is currently trading 1.1585. The pair has bounced nicely off the important 1.1300/1.1400 area. The market is consolidating just ahead of its first resistance towards the 1.1650/1.1700 area.
- GBP/USD - Asian range 1.3292 - 1.3313, Asia is currently dealing around 1.3310. The pair bounced nicely off the 1.3100/1.3200 support area. I would suspect sellers would be around on a bounce back towards 1.3400 initially.
- USD/CNH - Asian range 7.1880 - 7.1955, the USD/CNY fix printed 7.1409, Asia is currently dealing around 7.1920. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
- Cross asset : SPX +0.25%, Gold $3375, US 10-Year 4.222%, BBDXY 1208, Crude Oil $65.58
- Data/Events : France Private Sector Payroll, Italy Industrial Production, Germany Factory Orders/HCOB Construction, EZ Retail sales
Fig 1: GBP/USD Spot 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
BONDS: NZGBS: Closed At Worst Levels But Only Modestly Cheaper
NZGBs closed 3bps cheaper across benchmarks, with the NZ-US 10-year yield differential little changed on the day.
- Cash US tsys are flat to 2bps cheaper, with a steepening bias, in today's Asia-Pac session after yesterday's twist-flattener. Today’s US calendar will see BA Mortgage Applications.
- NZ employment was weaker in Q2 than the RBNZ projected in May declining 0.1% q/q and 0.9% y/y, in line with consensus, after a downwardly-revised 0.0% q/q & -0.7% y/y in Q1. The unemployment rate rose 0.1pp to 5.2%, highest since Covid-impacted Q3 2020, but as the RBNZ forecast. The next rate decision is on August 20 and will include an updated outlook. With job shedding continuing and activity indicators remaining lacklustre and inflation in the band, another 25bp rate cut is likely.
- Swap rates closed 1-2bps higher, with the 2s10s curve little changed.
- RBNZ dated OIS pricing closed slightly firmer across meetings. 23ps of easing is priced for August, with a cumulative 41bps by November 2025.
- Tomorrow, the local calendar will see RBNZ Inflation Expectations data.
- The NZ Treasury also plans to sell NZ$225mn of the 4.50% May-30 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.
