Asia Summary and Highlights 5 August
Nikkei extending decline to 8%
Asia Session
After the bloodbath on Friday, Nikkei continues to search for new lows as risk averse sentiment grasp the market after softer Friday NFP. In the first opening hours, Nikkei has dropped more than 6% and has essentially erased the gains since beginning of the year. While the move is widely triggered by global risk off sentiment, the tightening steps that is too hawkish from the BoJ cannot be neglected. The Nikkei has extended its losses to 8% after struggling to stand in the Asia session. U.S. three major equity indexes are also in the red, led by the 3% losses in NASDQ while regional equities in China and Hong Kong fared better with the Chinese equities squeezing out a free pips of gains. Both the U.S. Treasury and JGB yields sunk. USD/JPY is now trading 2.25% lower at 143.18 with session low at 142.15.
Despite regional equities are faring better, the USD is preferred in times of broad risk off atmosphere. The Australian private inflation survey also shows inflation expectation to continue to tread lower which may push back RBA's stance in late easing. The AUD/USD is down 0.3% at 0.6492, NZD/USD also slipped 0.26% to 0.5941 while USD/CAD is up 7 pips with oil down more than a dollar. Else, EUR/USD opened more than 10 pips higher and is still 0.21% while GBP/USD down 0.1%.
North American session
July’s non-farm payroll was weaker than expected with a 114k rise overall, 97k in the private sector, with weak details across the board, 29k in net negative revisions, a 0.2% rise in average hourly earnings, a lower workweek and a surprisingly sharp rise in unemployment, to 4.3% from 4.1%.
UST yields plunged and the USD instantly sold off, led by USD/JPY which fell from near 149 to near 146.50. EUR/USD rose above 1.09 from 1.0835 and GBP/USD rose above 1.28 from 1.2750. EUR/GBP extended gains to .8520 but EUR/CHF fell to .9375 and EUR/JPY saw lows below 160 from near 161.50 before the US data. With equities falling sharply the commodity currencies struggled to hold on to their initial gains, with USD/CAD and AUD/USD ending little changed.