Category Archive: 4.) Marc to Market

FX Daily, November 25: Hong Kong, China, and UK Election Hopes Fan Modest Risk-Taking

Overview: The combination of the victory of the pro-democracy movement in Hong Kong and an apparent concession by China on intellectual property rights is helping bolster risk appetites to start the week. Equities are higher. Hong Kong's Hang Seng led Asia Pacific equities with a 1.5% gain, the second biggest this month. Korea and India's bourses also gained more than 1%.

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FX Weekly Preview: Is Conventional Wisdom Too Optimistic?

There have been three general issues that the macro-fundamental picture has revolved around this year: trade, growth, and Brexit. On all three counts, conventional wisdom seems unduly optimistic, and this may have helped dampen volatility. A series of signals suggest that the US and China remain far apart in trade negotiations.

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FX Daily, November 22: Europe’s Flash PMI Disappoints and Hong Kong Shares Advance Ahead of Sunday’s Election

Overview: Equities in the Asia Pacific managed to mostly shrug off the drag of the losses in US equities yesterday. China and India could not escape the pull, but most other bourses were higher, led by Singapore and Hong Kong. It was the second consecutive week that the MSCI Asia Pacific Index fell. The US and European benchmarks are paring this week's small losses.

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FX Daily, November 21: Markets Hear What it Wants from China’s Chief Negotiator, but HK maybe New Obstacle

Overview: The strongest signs to date that even phase one of a US-China trade deal is proving elusive helped spur the risk-off mood that had already been emerging. The S&P 500 fell by the most in a month (~-0.40%) yesterday, closing the gap from last week we had noted was the risk, and follow-through selling was seen in Asia Pacific and Europe.

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FX Daily, November 20: Dollar Snaps Back

Overview: The idea that a US-China trade deal is proving more elusive than the agreement in principle on October 11 implied is being seized upon to spur what we suspect is an overdue round of profit-taking in global equities. The MSCI Asia Pacific Index snapped a three-advance, with over 1% declines in South Korea and Australia.

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FX Daily, November 18: Sterling Shines in Subdued Start to the New Week

Overview: Equities in Europe and the US look to extend their six-week rally, while the MSCI Asia Pacific Index gets back on the winning way after stumbling last week. Despite the escalation of the conflict in Hong Kong, the Hang Seng rose 1.35% to lead the region and recoup a chunk of last week's 4.8% slump. The Dow Jones Stoxx 600 puts the European benchmark within spitting distance of the four-year high set recently.

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FX Daily, November 15: Market Runs with US Line that US-China Deal is Close

Comments by US presidential adviser Kudlow playing up the prospects of a trade agreement between the US and China, with other reports suggesting a key call be held today, is helping to underpin sentiment into the weekend. The MSCI Asia Pacific Index pared this week's loss today, with China the only main market not participating, despite the PBOC's unexpected injection of CNY200 bln of the Medium-Term Lending Facility.

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FX Daily, November 14: Unexpected German Growth Fails to Buoy the Euro

Overview: Rising trade anxiety and disappointing economic reports from the Asia Pacific region helped unpin the profit-taking mood in equities, while bond yields continued to pullback. The MSCI Asia Pacific Index and the Dow Jones Stoxx 600 are in the red for the fourth time in the last five sessions. Germany reported a surprise 0.1% expansion in Q3, but it has done little for the DAX or the euro.

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FX Daily, November 13: Investors Temper Euphoria

Overview: The recent rise in equity markets and backing up in yields spurred many observers to upgrade their macroeconomic outlooks rather than the other way around. Yet we continue to see may worrisome signs. It is not just trade, though, of course, that is part of it. Sentiment itself is fragile and will likely follow prices.

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FX Daily, November 12: Farage Declares Truce with Tories after being Offered a Peerage, Underpins Sterling

Global capital markets are calm as investors look for a new catalyst. The MSCI Asia Pacific Index snapped back after posting its first back-to-back decline in a month. All the equity markets were higher, but Australia. The Nikkei, Kospi, and Taiex led the advance with about a 0.8% gain. European shares closed firmly near session highs yesterday, even if still lower on the day, and there has been some follow-through buying today.

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FX Weekly Preview: Caution: Prices Diverging from Macro Drivers

Sometimes the news drives the markets and but now it seems that the markets are driving the news.  The dramatic swing in market sentiment from fearing a repeat of Q4 18 and the pessimism of World Bank/IMF forecasts have been cast aside for a few data points and a tease from the world's two largest economies that an agreement to begin a de-escalation process not just extending the third tariff truce.

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FX Daily, November 8: Risk Appetites Satiated Ahead of the Weekend

The capital markets are consolidating the recent moves ahead of the weekend. Equities are paring this week's gains, though the Nikkei, which was closed on Monday, extended its advance for the fourth consecutive session. Despite the profit-taking today, the MSCI Asia Pacific Index rose for the fifth week. Europe's Dow Jones Stoxx 600 is snapping a five-day rally, but it is closing in on the fifth consecutive weekly advance.

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FX Daily, November 7: Trade Optimism Boosts Sentiment but Weighs on the Dollar

Indications that a phase one agreement between the US and China would include rolling back some existing tariffs is boosting risking appetites, sending stocks higher, and pushing up yields. However, this appears to be simply a restating of China's views rather than a new breakthrough. The dollar is paring its recent gains. The MSCI Asia Pacific Index rose for the fifth time in six sessions to reach its best level since August 2018.

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FX Daily, November 6: Markets Catch Collective Breath as Dollar Consolidates Yesterday’s Advance

Overview: Investors seem to be catching their collective breath today, and the global capital markets are consolidating recent moves. A notable exception is the Chinese yuan, which has continued to strengthen, and the dollar has slipped back below CNY7.0. Asia Pacific equities were mixed, and the four-day advance in the regional benchmark stalled today.

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FX Daily, November 5: Animal Spirits Remain Animated

The prospects that the US-China deal could include some rolling back of existing US tariffs helped underpin risk appetites. After new record highs in the US S&P 500 and NASDAQ, Asia Pacific markets marched higher, and the MSCI Asia Pacific reached its highest level since August 2018. A small rate cut by China and catch-up by Tokyo, which was on holiday on Monday, helped extended the regional rally for the 14th session in the past 17.

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November Monthly

Two main developments drove the foreign exchange market in October.  First, the market grew more confident that a hard Brexit could be avoided.  This drove sterling sharply higher.  It rallied from $1.22 on October 10 to a little above $1.30 on October 21 before doubts grew about the likelihood that Parliament will approve the new agreement.

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FX Daily, November 4: Investor Optimism Carries into the New Week

Overview: Investor optimism is reflected by the risk-taking appetite that is lifting equity markets and bond yields. With Japanese markets closed for a national holiday, the MSCI Asia Pacific Index was led higher by more than 1% gains in Hong Kong, Taiwan, South Korea, and Thailand. The regional benchmark advanced for the seventh session in the past eight and is approaching the year's high.

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FX Weekly Preview: Synchonized Emergence from Soft Patch?

There have been plenty of developments warning of a global economic slowdown. Yet, seemingly to justify the continued advance in equity prices, there has begun to be talk of possible cyclical and global rebound. That is the new constellation, connecting the better than expected Japanese, South Korean, and Chinese September industrial output figures,  a slightly stronger than expected Q3  GDP reports from the US and the eurozone. 

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