Category Archive: 4.) Marc to Market

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The Chagrin of Beijing and the Problem of Time

2021-12-19

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2021-12-19

The central bank meeting cycle is over. Most of the important high-frequency data has been released until early January. The US debt ceiling has been lifted, avoiding an improbable default. A year ago, there was a sense of optimism, with a couple of vaccines being announced and monetary and fiscal stimulus boosting risk-appetites. Populism, which had been in the ascendancy after the Great Financial Crisis, seemed to be retreating in Europe and the...

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Bulls Shrug Off Bout of Profit-Taking, Leaving the Greenback Poised to Rally into Year-End

2021-12-19

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2021-12-19

(The regular analysis will resume after the New Year.  In the meantime, look for several occasional thematic posts over the next couple of weeks.  Here is to a healthy and happy New Year!).  The dollar recovered from the bout of profit-taking seen after the FOMC largely confirmed market expectations to post a weekly advance against all the major and most emerging market currencies.  The omicron variant continues to sweep across the world, and...

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The Week Winds Down with Equities under Pressure and the Dollar Mostly Firmer

2021-12-17

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2021-12-17

Overview: The combination of the volatility and a large number of central bank meetings have exhausted market participants, and the holiday phase appears to have begun. Equities are under pressure following the sell-off yesterday in the US. Japan, China, and Hong Kong suffered more than 1.2% losses, while Australia, South Korea, and Taiwan posted minor gains. It was the fifth loss in the past six sessions for the MSCI Asia Pacific Index. Europe's...

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Fed Unleashes Animal Spirits

2021-12-16

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2021-12-16

Overview:  The Fed's hawkish pivot came a few weeks before yesterday's FOMC meeting, which confirmed more or less what the market had already largely anticipated. Buy the (dollar) on rumors (of tapering and more aggressive stance on rates) and sell the fact unfolded, and unleashed the risk-appetites which rippled through the capital markets. US stocks rallied yesterday, and the futures point to a gap higher opening today. Large Asia Pacific...

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FOMC Sets New Course

2021-12-15

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2021-12-15

The Fed delivered what it was expected to do:  double the pace of tapering and project a more aggressive interest rate response with its individual forecasts.  The dollar initially rallied on the headlines, and new sessions highs were recorded, but the price action was a bit of a head-fake, as it were. The greenback's gains were quickly pared,  though it remained above JPY114 ahead of Chair Powell's press conference. The market had already...

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Has the Market Carried the Fed’s Water? Is the Dollar Vulnerable to Buy the Rumor and Sell the Fact?

2021-12-15

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2021-12-15

Overview: The US dollar is trading with a bit of heavier bias against most of the major currencies as the focus turns to today's FOMC meeting, where a clear consensus has emerged in favor of faster tapering and a dot plot pointing to a steeper pace rate hikes.  Emerging market currencies led by Turkey and South Africa are mostly lower. The JP Morgan Emerging Market Currency Index is lower for the third straight session.  The US 10-year Treasury...

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No Turnaround Tuesday for Equities?

2021-12-14

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2021-12-14

Overview:  Activity in the capital markets is subdued today, ahead of tomorrow's FOMC meeting conclusion and the ECB meeting on Thursday.  The MSCI Asia Pacific equity index fell for the third consecutive session.  European bourses are heavy after the Stoxx 600 posted an outside down day yesterday. Today would be the fifth consecutive decline. Selling pressure on the US futures indices continues after yesterday's losses.  Australia and New Zealand...

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Dollar Starts the Week Bid ahead of the FOMC

2021-12-13

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2021-12-13

Overview: Equities, bonds, and the dollar begin the new week on a firm note.  Japanese, Chinese, Australian, and New Zealand equities advanced in the Asia Pacific region.  Europe's Stoxx 600 is snapping a three-day decline, and US futures are 0.25%-0.35% higher.  The US 10-year yield is a little softer at 1.48%. European benchmark yields are mostly 1-2 bp lower, and near 0.71%, the UK Gilt's yield is at a three-month low.  The dollar is rising...

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Can Dollar Bears Resist the Fed? Can Yuan Bulls Shrug-Off the PBOC?

2021-12-12

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2021-12-12

US yields and the dollar softened after the release of the November CPI figures before the weekend.  The data were in line with expectations showing the headline rate accelerated to 6.8% and the core rate to 4.9%.  The price action likely reflected positioning rather than a reassessment of the outlook for next week's FOMC meeting.  Nearly everyone recognizes the likelihood that the pace of tapering is quickened, and the individual forecasts reflect...

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Central Bank Fest

2021-12-11

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2021-12-11

Next week is the last big week of the year, and what a week it will be:  Five major central banks meet and at least nine from emerging market countries.  Norway's Norges Bank is the most likely major central bank to hike its key (deposit) rate (December 16).  It would be the second hike of the year.  The economy is enjoying a solid recovery, and headline inflation rose to 4.6% in November, its fastest pace since 2008.  The underlying rate, which...

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Yuan Rises Despite China’s Move and the Fed’s Course is Set Regardless of Today’s CPI

2021-12-10

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2021-12-10

Overview:  After US equity indices posted their first loss of the week,  Asia Pacific and European equities fell.  While the MSCI Asia Pacific Index fell for the first time since Monday, Europe's Stoxx 600 is posting its third consecutive decline.  US futures are trading slightly firmer.  The US 10-year Treasury yield is up about 1.5 bp to 1.51%, which is about eight basis points higher than it settled last week when the sharp drop in equities saw...

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Markets Turn Cautious Ahead of Tomorrow’s US CPI

2021-12-09

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2021-12-09

Overview: The euro has come back offered after its seemingly inexplicable advance yesterday.  The dollar is firmer against most major currencies today, with the yen an exception after JPY114.00 held on yesterday's advance.  Most emerging market currencies are also softer, with a handful of smaller Asian currencies proving a bit resilient.  Most large bourses advance in the Asia Pacific region, except Japan and Australia.  Europe's Stoxx 600 is...

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Markets Calmer, Awaiting Fresh Incentives

2021-12-08

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2021-12-08

Overview:  The capital markets are calmer today, and the fear that was evident at the end of last week remains mostly scar tissue. Led by gains in Japan, China, Australia, New Zealand, and India, the MSCI Asia Pacific Index extended yesterday's gains.  Europe's Stoxx and US futures are firm.  The US 10-year yield is softer, around 1.43%, while European yields are mostly 1-2 bp lower.  The Norwegian krone and euro lead major currencies higher...

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Animal Spirits Roar Back

2021-12-07

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2021-12-07

Overview:  A return of risk appetites can be seen through the capital markets today, arguably encouraged by ideas that Omicron is manageable and China's stimulus.  Led by Hong Kong and Japan, the MSCI Asia Pacific rose by the most in three months, while Europe's Stoxx 600 gapped higher, leaving a potentially bullish island bottom in its wake.  US futures point to a gap higher opening when the local session begins.  The bond market is taking it in...

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FX Daily, December 6: Semblance of Stability Returns though Geopolitical Tensions Rise

2021-12-06

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2021-12-06

EUR/CHF and USD/CHF, December 6
The absence of negative developments surrounding Omicron over the weekend appears to be helping markets stabilize today after the dramatic moves at the end of last week.  Asia Pacific equities traded heavily, and among the large markets, only South Korea and Australia escaped unscathed today. 

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Aussie Slumps below $0.7000 and the Loonie Can’t Sustain Upticks Despite a Monster Jobs Report

2021-12-05

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2021-12-05

The US dollar rose to new highs for the year last week against sterling, the Australian dollar, the New Zealand dollar, and the Norwegian krone.  In late November, the greenback recorded the high for the year against the euro, yen, and Swedish krona.  The high for the year was recorded in April against the Swiss franc and in August against the Canadian dollar.  The greenback remained resilient in the face of some disappointing elements of the jobs...

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US CPI to Accelerate, while Omicron adds Color to Covid Wave that was Already Evident

2021-12-04

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2021-12-04

At the risk of over-simplifying, there seem to be three sources of dynamism in the investment climate:  Covid, the Federal Reserve, and market positioning.  The last of these is often not given its due in narratives in the press and market commentary, so let's begin there.  The anthropologist Clifford Gertz once posed the question about distinguishing between someone winking and someone with a twitch in their eye, and a person mimicking the wink or...

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The Greenback Finds Traction ahead of the Jobs Report

2021-12-03

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2021-12-03

Overview:  The Omicron variant has been detected in more countries, but the capital markets are taking it in stride.  Risk appetites appear to be stabilizing.  The MSCI Asia Pacific Index rose for the third consecutive session, though Hong Kong and Taiwan markets did not participate in the advance today.  Europe's Stoxx 600 is struggling to hold on to early gains, while US futures are narrowly mixed.  The US 10-year yield is a little near 1.43%,...

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FX Daily, December 02: Calm Surface Masks Lack of Conviction

2021-12-02

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2021-12-02

The downside reversal in US stocks yesterday seemed to accelerate after the first case of the Omicron variant was found in the US.  In itself, it should not be surprising, but perhaps, what was especially disheartening is that the person had been fully vaccinated. 

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December Monthly

2021-12-01

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2021-12-01

The pandemic is still with us as the year winds down and has not yet become endemic, like the seasonal flu.  Even before the new Omicron variant was sequenced, Europe was being particularly hard hit, and social restrictions, especially among the unvaccinated, were spurring social strife.  US cases, notably in the Midwest, were rising, and there is fear that it is 4-6 weeks behind Europe in experiencing the surge.  Whatever herd immunity is, it has...

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