Morning Report

Friday, 8 June 2018

Asian shares are set for a soft start on Friday as global risk appetite deteriorated on worries the European Central Bank was ready to start tapering its massive stimulus, although trade was expected to be cautious ahead of big diplomatic meetings.

The ECB will debate next week whether to end bond purchases later this year, the bank’s chief economist said on Wednesday, a hawkish message that sent the euro to a three-week top, hit emerging market currencies, and spurred demand for safe-haven bonds.

In emerging market currencies, the South African rand , Brazil’s real and the Mexican peso were the worst hit overnight. It is likely to have an impact on USD/INR today where a gap up opening is expected with a upward bias.

U.S. 10 year Treasury yields fell sharply on Thursday to 2.942 while Indian 10 year yield jumped to 7.993.

Risk appetite also waned after U.S. jobless claims pointed to a further tightening in labor market conditions, cementing expectations the Federal Reserve will raise benchmark U.S. rates next week and twice again later in the year.

The U.S. dollar .DXY held near three-week lows against a basket of currencies despite the positive jobless numbers. The People’s Bank of China (PBOC) set the Yuan reference rate at 6.3919 vs previous day’s fix of 6.4040.

Oil prices were boosted by from worries over a steep drop in exports from crisis-plagued Venezuela, which faces the threat of U.S. sanctions. U.S. crude rose 6 cents to $66.01 a barrel, while Brent settled at $77.32.

Source : Reuters