- Oil prices have climbed higher during APAC trading but are off their intraday highs. Brent is up 8.6% in September to date and WTI +9.1%. Forecasts that the market will remain in deficit over 2023, extension of output cuts to year end, falling inventories and optimism that demand is picking up given China stimulus and a likely pause in Fed tightening have continued to buoy the market.
- Equities were generally lower during the APAC session on Monday in light trading with Japan closed for a holiday. China and NZ bucked the trend though. The MSCI Asia is down 1.2%. There was little news or data today to drive direction and so markets followed the US lower. The S&P e-mini is 0.2% higher so far.
- There was a muted session across FI and FX markets, ranges were narrow with little follow through on moves.
MARKETS
US TSYS: Narrow Ranges in Asia, Cash Re-Opens In London
TYZ3 deals at 109-10+, -0-06, a 0-06 range has been observed on volume of ~40k.
- Cash tsys have been closed in Asia due to the observance of a national holiday in Japan and will reopen in Asia.
- TY has been marginally pressured this morning breaching Friday's low. The move had little follow through and Tsys dealt in a narrow range for the remainder of the session.
- Support comes in at 109-03, low from Sep 13 and bear trigger.
- There is a thin docket today. The highlight of the week's docket is Wednesday's FOMC rate decision, there is no change to policy expected.
AUSSIE BONDS: Near Sydney Session Cheaps, RBA Minutes Tomorrow, FOMC Decision On Wednesday
ACGBs (YM -7.8 & XM -10.6) sit near Sydney session cheaps. In the absence of domestic data, local participants have been on headlines and US tsys watch. Cash US tsys have been closed in Asia due to the observance of a national holiday in Japan and will reopen for the European session. TYZ3 deals at 109-10+, -0-06, with a 0-06 range observed on volume of ~40k.
- TY breached Friday's low early but has dealt in a narrow range since. Support comes in at 109-03, low from Sep 13 and bear trigger, according to the MNI technicals team.
- Cash ACGBs are 7-10bps cheaper.
- Swap rates are 6-10bps higher, with the 3s10s curve steeper.
- The bills strip is -2 to -8 cheaper, with late-whites/early-reds leading.
- RBA-dated OIS pricing is flat to 7bps firmer across meetings, with late '24 leading.
- Tomorrow the local calendar will show the RBA Minutes for the September meeting. The RBA left rates on hold in September while maintaining its tightening bias. The statement was little changed and so the minutes will be watched for any alteration in tone. Apart from the RBA bulletin on Thursday, there are no other central bank events scheduled this week.
NZGBS: Closed Near Cheaps, Tracking US Tsy Futures
NZGBs closed at or near session cheaps, with benchmark yields 5-8bps higher. Today’s local data and newsflow failed to provide a domestic impetus. Accordingly, the local market has been guided by US tsy futures in today’s Asia-Pac session. TYZ3 currently sits near session lows at 109-11, -05+ versus the NY closing level on Friday.
- Swap rates are 6-9bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing is 2-3bps firmer for meetings beyond November, with terminal OCR expectations 2bp firmer at 5.66%.
- The performance of services index fell to 47.1 in August, the lowest reading since January 2022, from a revised 48 in July.
- NZIER published quarterly consensus forecasts, with economists seeing 2023-24 annual average GDP growth slowing to +0.4% from +2.9% in 2022-23. The March survey saw +0.6% growth in 2023-24. 2024-25 GDP growth was forecast to be +1.1% versus +1.5% in March. In the current year ending March 2024, economists saw faster CPI inflation (+4.3%), faster jobs growth (+1.1%) and sustained wage pressure (+6.7%).
- NZ bonds held by foreigners rose to a 62.4% share in August from 62.2% prior.
- Tomorrow the local calendar is empty, ahead of BoP Current Account Balance (Q2) on Wednesday and GDP (Q2) on Thursday.
OIL: Crude Continues Climb Higher In A Tight Market
Oil prices have climbed higher during APAC trading but are off their intraday highs. Brent continues to move closer to $95 and is up 0.4% to $94.30/bbl after a high of $94.40. WTI is 0.5% higher at $91.26 following a high of $91.35. It did trade below $91 for a while but is now decisively above that level. The USD index is slightly lower.
- Brent is up 8.6% in September to date and WTI +9.1%. Forecasts that the market will remain in deficit over 2023, extension of output cuts to year end, falling inventories and optimism that demand is picking up given China stimulus and a likely pause in Fed tightening have continued to buoy the market. China’s refining pace was at a record in August but diesel shortages continue globally.
- The impact of the 25% rise in crude prices since the end of June is being seen in the pickup in August headline inflation in a number of countries. With many central banks now on hold, developments will be watched closely for any second-round effects. There are numerous central bank decisions this week including the Fed and the Bank of England.
- Later the Saudi energy minister Prince Abdulaziz will speak on his country’s oil policy and stance on net zero at the World Petroleum Congress. Also the NY Fed September services and NAHB housing market indices print. The ECB’s de Guindos speaks. The focus this week will be on the Fed decision on Wednesday.
GOLD: Extends Gains Seen Ahead Of The Weekend
Gold is +0.3% in the Asia-Pac session, after closing +0.7% at $1923.91 on Friday.
- From a technical standpoint, Friday’s high of $1930.46 cleared resistance at the 50-day EMA ($1928.0) to open up key resistance at $1939.0 (Sep 4 high), according to MNI’s technicals team. Technical forces appeared at play with a surprisingly robust gain considering only very modest weakness in the USD index on the day after Thursday’s surge and with Treasury yields climbing further.
- Lower-than-expected inflationary expectations, measured by the University Of Michigan Consumer Sentiment Survey, likely provided support for the precious metal ahead of this week’s FOMC policy decision. The market has attached a near zero per cent chance of a 25bp hike on Wednesday.
EQUITIES: China Equities Holding Up While Most Of Region Follows US Lower
Equities were generally lower during the APAC session on Monday in light trading with Japan closed for a holiday. China and NZ bucked the trend though. The MSCI Asia is down 1.2%. There was little news or data today to drive direction and so markets followed the US lower. The S&P e-mini is 0.2% higher so far.
- China’s CSE 300 is up 0.4% after reaching a year-to-date low but the Shanghai comp is flat.
- The Hang Seng was weighed down by a sharp drop in troubled China property company Evergrande after staff members were arrested on suspicion of fraud. Evergrande has recovered but the Hang Seng is still down 1% on the day.
- The ASX is 0.6% lower with tech stocks particularly hit. Whereas the NZX is up 0.4%.
- Elsewhere in northern Asia, the KOSPI is down 0.9% and the TAIEX -1.1%.
- ASEAN is outperforming most of the region with Singapore’s Straits Times down 0.3%, Malay KLCI -0.1% and SE Thai -0.4%. Indonesia and the Philippines have central bank meetings this week and ahead of those decisions Jakarta is 0.3% lower and the Philippines PSEi -0.2%.
- India’s Nifty 50 is down only 0.1% so far in trading.
FOREX: Narrow Ranges In Asia
Across G-10 FX there have been narrow ranges in Asia with little follow through on moves. Japanese markets were closed for the observance of a national holiday impacting wider liquidity.
- AUD/USD is a touch firmer, up ~0.2% last printing $0.6440/45. Technically the trend condition remains bearish, support comes in at $0.6357 (low Sep 6 and bear trigger). Resistance is at $0.6481 (high from Sep 4).
- Kiwi has firmed above the $0.59 handle, however ranges do remain narrow. The 20-Day EMA is the first upside resistance ($0.5932).
- The Yen sits little changed from opening levels on Monday, USD/JPY has observed narrow ranges with little follow through on moves. Technically the up-trend is persisting. Immediate focus for bulls is Friday's high (¥147.95), the next resistance level comes in at ¥148.40 (high from 4 Nov 2022).
- Elsewhere in G-10 EUR and GBP are ~0.1% higher.
- Cross asset wise; BBDXY is a touch lower and e-minis are ~0.2% firmer.
- There is a thin docket in Europe on Monday.
NEW ZEALAND: Polls Show Likely Nationals Win, Inflation Main Voter Concern
With less than a month to go until elections, RNZ’s poll of polls shows the incumbent Labour Party well behind the opposition National Party. Polls are generally suggesting that NZ will see a change of government.
- The latest reading for the polls of polls is showing that support for the Nationals is growing and is now up to 38.3% from 37.6% while its likely ally ACT fell 1pp to 11.5%. But together this would imply 65 seats, a majority. Support for Labour is down to 27.1% and the Greens is also lower on 11.7%. Together with Te Pati Maori, the centre-left bloc would have 51 seats. While the latest 1News-Verian poll reported that NZ First would make the 5% threshold, the poll of polls still has it on 4.5%.
- PM Hipkins and opposition leader Huxon continue to be even on 22% as preferred PM.
- In terms of issues that voters are most concerned about, there has been little change in the order over the year. Inflation/cost-of-living remain the most major concern by far on 63% followed by crime which has risen to 40%. Housing is next at 31% in line with healthcare which is down a bit and then climate change which is also lower at 23%.
RBA: RBA Dated OIS Pricing Firmer Ahead RBA Minutes Tomorrow & FOMC Decision On Wednesday
Figure 1: RBA-Dated OIS – Today Vs. Friday
Source: Bloomberg / MNI - Market News
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Flag | Country | Event |
| 18/09/2023 | 0900/1100 |  | EU | ECB's de Guindos Speaks at Event | |
| 18/09/2023 | 1215/0815 | ** |  | CA | CMHC Housing Starts |
| 18/09/2023 | 1230/0830 | * | | CA | Industrial Product and Raw Material Price Index |
| 18/09/2023 | 1400/1000 | ** |  | US | NAHB Home Builder Index |
| 18/09/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 18/09/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 13 Week Bill |
| 18/09/2023 | 2000/1600 | ** | | US | TICS |
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