Morning Update – 07/07/2017 – by Arjun Lakhanpal

Morning all.. Wall St closed lower as US and global bond yields rally with S&P down 0.94% and NASDAQ down 1%. This negative sentiment spilled into Asian markets with the Nikkei down 0.38% despite a rise in USDJPY and the BoJ increasing its bond purchases overnight. USDJPY was the biggest mover up 0.4%, with JPY weakening to an 8 week low after the BoJ surprised the market by announcing it would increase purchases of 5-10 year JGBs to an unlimited amount at a fixed rate auction of 11bps. Japan May Wages: Real Wages +0.1% y/y vs 0.0% prev (first annual gain in 5m); Base Wages +0.9% y/y vs +0.4% in Apr (biggest annual gain since March 2000); Japan May Leading Indicator: +0.5 vs -1.5 prev. The USD strengthened marginally against most other currencies although speeches from Fed chairs Mester and Fischer left no notable impact to the FX market, the USD index was 0.1% stronger at 95.874. Equities and bonds continued to drive lower overnight, yield on the Australian 10 year rose 8bps to 2.716% and yields on the German Bund rose to an 18 month high on Thursday as the market still excepts the ECB to start tapering. JGB yields feel in contrast to other government bonds, reacting to the BoJ purchasing announcement. Oil prices drove lower despite API data showing US inventories fell last week, crude fell by 6.3m barrels the largest dip in 1 month. WTI down 0.7%. The G20 summit is at the forefront of the markets mind with all eyes on Donald Trump and his meetings with Vladimir Putin and Xi Jinping. Donald Trump rejected suggestions that he had abandoned hope that Xi Jinping could help him deal with the North Korean nuclear threat. EUR held gains above 1.1400 but was in a tight range along with Cable. This morning we get UK Industrial Production data and trade balance but little else with al eyes on the US Non-farm payrolls data this afternoon. Good luck.