European Open: RBNZ Hike Rates by 25 bps
Matt Simpson October 6, 2021 4:57 PM
The trouble was that it surprised nobody, so at the time of writing NZD is trading lower for the day. Still, it’s RBNZ’s first hike in 7 years so it's worth mentioning.
- Australia's ASX 200 index fell by -45.6 points (-0.63%) and currently trades at 7,202.80
- Japan's Nikkei 225 index has fallen by -458.48 points (-1.65%) and currently trades at 27,363.64
- Hong Kong's Hang Seng index has fallen by -111.16 points (-0.46%) and currently trades at 23,992.99
UK and Europe:
- UK's FTSE 100 futures are currently down -45.5 points (-0.65%), the cash market is currently estimated to open at 7,031.60
- Euro STOXX 50 futures are currently down -34 points (-0.84%), the cash market is currently estimated to open at 4,031.43
- Germany's DAX futures are currently down -107 points (-0.7%), the cash market is currently estimated to open at 15,087.49
- DJI futures are currently up 311.75 points (0.92%)
- S&P 500 futures are currently down -81 points (-0.55%)
- Nasdaq 100 futures are currently down -19 points (-0.44%)
Asian equities (ex-China) turn lower
We didn’t see the rebound we had hoped for during Asian trade for equity markets overall. The ASX 200 stalled at yesterday’s high and quickly reversed and is not on track for a bearish outside day. Japan’s equity markets continued to slide and were some of the weakest of the session. Although China’s share markets remained buoyant with the CSI 300 the strongest of the session.
Rising oil prices remains a concern across the region, and a hike by RBNZ also signalled there could be other hikes (from other central banks) should inflation not actually be transitory at all. But there is also the general feeling that the fallout from Evergrande will sting overseas investors, whilst any intervention from Beijing will cushion the blow of onshore investors. (Well, it has happened before so it can happen again).
FTSE 350: Market Internals
FTSE 350: 4059.89 (0.94%) 05 October 2021
- 215 (61.25%) stocks advanced and 126 (35.90%) declined
- 8 stocks rose to a new 52-week high, 14 fell to new lows
- 57.26% of stocks closed above their 200-day average
- 41.88% of stocks closed above their 50-day average
- 9.12% of stocks closed above their 20-day average
- + 11.1%-Greggs PLC(GRG.L)
- + 6.33%-Darktrace PLC(DARK.L)
- + 5.40%-Restaurant Group PLC(RTN.L)
- ·-4.00%-Elementis PLC(ELM.L)
- ·-3.55%-Endeavour Mining PLC(EDV.L)
- ·-3.48%-Babcock International Group PLC(BAB.L)
RBNZ hiked by 25 bps, a first for the central bank since 2014. Their outlook was positive for the medium-term which points to further hikes from here. Markets are currently pricing in another hike next month but (personally) do not see it as a given. In today’s statement, they said of their awareness of the impact the latest lockdowns had on many businesses. Moreover, their forecast rate from the August MPS (Monetary Policy Statement) is 0.6% by December, below the 0.75% expected by November by some. I’m not saying it will not happen, but we saw RBNZ hold off-from an ‘all-but-given’ hike the day prior to their September meeting. And these points likely help explain why NZD is weaker following the event. Basically, the situation is fluid.
German industrial orders at 07:00 BST, construction PMI at 08:30 and UK PMI’s at 09:30 are the main economic data sets in today’s European session. Although the highlight of the day is likely to be September’s ADP employment set at 13:15. It will be taken as an early proxy for Friday’s highly anticipated NFP report, which itself is a proxy as to whether the Fed will taper at their next meeting or not. Should it come in weaker than expected we would expect the US dollar to take a knock and make our 112 target for USD/JPY seem a little further away.
Should sentiment remain buoyant and oil prices continue to rally, CAD/JPY remains of interest for bullish setups. The daily chart shows it has broken above a retracement line on the daily chart, after twice failing to break below 85.00. A minor retracement last week confirmed the broken retracement line as support and momentum points higher. The daily trend remains bullish above 87.18 although we’d be keen to see any volatility dips towards 88.00 as part of a larger move north.
WTI is coiling up in a nice bull flag on the hourly chart, and momentum suggests traders want to take it to $80. But with it being such a round psychological number then it’s a likely area for traders to book profits and bearish momentum shows its face (even if only temporarily).
Silver is trying to turn lower after printing a small inside day / hanging man reversal candle. A break of 22.29 confirms a near-term reversal although $22 could provide support initially. Should prices continue to chop around ahead of NFP (plausible) then we’d consider bearish setups below $23.
Up Next (Times in BST)
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.