1) Overnight Asia Wrap
G20 Headlines dominate the day…
Asian equities trashed to start the day, keeping pace with their counterparts on the other side of the globe. Kospi down over 5% the biggest mover. Rumors then began to circulate of a emergency press release from the G20, ” JIJI SAYS G20 TO CONFIRM COOPERATION ON EURO ZONE DEBT CRISIS IN EMERGENCY STATEMENT” This gave risk a boost as S&P futures ticked up .9% and EUR and AUD rallied 60 to 70 points to the highs of the day.
Shortly thereafter “DJN-DJ G-20 COMMUNIQUE WON’T PROMISE CONCRETE NEW MEASURES-SOURCE” hits the ticker and AUD risk is sold back off. The G20 dinner meeting ends and we spend the next few hours glued to the screens as headlines are released. It would seem every finance minister attending the meeting decided to show their solidarity in the press, however in total they said nothing new.
US OFFICIAL SAYS THERE WAS NO G20 DISCUSSION ABOUT EMERGING MARKETS CONTRIBUTING MORE RESOURCES TO IMF
U.S. OFFICIAL-G20 FINANCE MINISTERS, CENTRAL BANKERS SHOWED INCREASED CONCERN ABOUT SPILLOVER TO EMERGING MARKETS, FOCUS WAS ON NEAR-TERM RISKS
SENIOR U.S. TREASURY OFFICIAL SAYS G20 MEETING HAD HEIGHTENED SENSE OF URGENCY, OFFICIALS DESCRIBED EURO CRISIS AS ENTERING A DANGEROUS PHASE
G20 SAYS EURO ZONE NATIONS TO IMPLEMENT BY NEXT G20 MEETING NEEDED ACTIONS TO INCREASE FLEXIBILITY AND MAXIMIZE IMPACT OF EFSF
“*ECB’S COENE SAYS RATE CUT NOT RULED OUT” and “ECB’S KNOT SAYS GREEK DEFAULT CANNOT BE EXCLUDED” pushed EURUSD to its lows.
2) Orderbook & Flow
EURUSD remains sparsely populated with downside stops 1.3300 and 1.3250.
GBPUSD topside offers 1.5520-30.
USDCHF bids below collecting around the 0.8880 handle.
We were buyers of USDCNY and net sellers of USDCNH. We additionally bought some AUDUSD and sold EURUSD also.
3) USD/Asia
Fri Mid (Thurs Open) (Wed open)
USDKRW 1198.0 (1181.0) (1151.0)
USDINR 50.06 (49.03) (48.15)
USDPHP 43.94 (44.01) (43.54)
USDCNY1y 6.4225 (6.3870) (6.3325)
USDIDR 9305 (9410) (9090)
USDMYR 3.1925 (3.1580) (3.1210)
USDTWD 30.58 (30.34) (29.85)
USDSGD 1.3035 (1.2860) (1.2625)
4) Opening Levels
EUR 1.3490
GBP 1.5389
JPY 76.29
CHF 0.9074
WTI 80.3
Brent 105.8
XAU 1722.8
Silver 35.02
X-Over 761
Greece 3536
Portugal 1179
Ireland 807
Spain 437
Italy 538
UK 10y 2.15
Ger 10y 1.64
US 10y 1.72
Bund 138.56
Spain over bunds 362
Italy over bunds 399
BeBanks Index 65.77
3m Eur Xccy -104.0
5) G20 Statement
G20 Communique after meeting in Washington
WASHINGTON, Sept 22 (Reuters) – Below is the full text of the communique released by the Group of 20 finance ministers and central bankers after their meeting in Washington on Thursday.
We, the Finance Ministers and Central Bank Governors of the G20, are committed to a strong and coordinated international response to address the renewed challenges facing the global economy, notably heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment.
We are taking strong actions to maintain financial stability, restore confidence and support growth. In Europe, Euro area countries have taken major actions to ensure the sustainability of public finances, and are implementing the decisions taken by Euro area Leaders on 21 July 2011. Specifically, the euro area will have implemented by the time of our next meeting the necessary actions to increase the flexibility of the EFSF and to maximize its impact in order to address contagion.
The U.S. has put forward a significant package to strengthen growth and employment through public investments, tax incentives and targeted job measures, combined with fiscal reforms designed to restore fiscal sustainability over the medium term.
Japan is implementing substantial fiscal measures for reconstruction from the earthquake while ensuring the commitment to medium-term fiscal consolidation.
Heightened downside risks have also made the economic environment for emerging markets and developing economies more challenging and they are adjusting their macroeconomic policies accordingly to maintain stability and sustain growth. The contribution of the emerging market economies to global growth will increase as these economies as a whole move towards more domestic-led growth, including through structural reforms and enhanced exchange rate flexibility to reflect economic fundamentals. We reiterate that excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.
We are committed to supporting growth, implementing credible fiscal consolidation plans, and ensuring strong, sustainable and balanced growth. This will require a collective and bold action plan, with everyone doing their part. We are working together to put in place for the Cannes Summit such an action plan of coordinated policies with both short-term decisions and a medium-long term perspective.
We commit to take all necessary actions to preserve the stability of banking systems and financial markets as required. We will ensure that banks are adequately capitalized and have sufficient access to funding to deal with current risks and that they fully implement Basel III along the agreed timelines.
Central Banks will continue to stand ready to provide liquidity to banks as required. Monetary policies will maintain price stability and continue to support economic recovery.
HSBC Global Research