Tag Archive: Australia
The Dollar Jumps Back
Overview: The pendulum of market expectations has
swung dramatically and now looks for 100 bp cut in the Fed funds target this
year. That seems extreme. At the same time, the dollar's downside momentum has
stalled, suggesting that the dollar may recover some of the ground lost
recently as the interest rate leg was knocked out from beneath it. The euro
twice in the past two days pushed through $1.09 only to be turned away.
Similarly, sterling pushed...
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Banking Stress Eases
Overview: The banking crisis is ebbing. The Bank of
England and European Central Bank assured investors that the AT1 bonds are
senior to equity claims, and Switzerland is a unique case. Bank share indices
in the Europe and the US rose yesterday, even though the shares of First
Republic Bank fell by 47% yesterday. The $123-stock at the end of last month
reached almost $11 yesterday. It is trading around $14.75 pre-market. Global equities are...
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Swiss National Bank Support Steadies Market as ECB Faces Difficult Choice
Overview: The pendulum of market psychology is
swinging dramatically. Amid the US banking crisis, Credit Suisse's long-running
pressures percolated back to top-of-mind, sending ripples through the capital
markets, trigging a sharp slide in the euro. The SNB support is helping the
markets calm today. The odds of a 50 bp hike by the ECB today have been cut to
about 50% compared with a nearly 100% a week ago. The market has about a 66%
chance of a 25...
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Investor Anxiety Continues to Run High even If More Comfortable ECB 50 BP Tomorrow and 25 bp Next Week by the Fed
Overview: The capital markets remain unsettled. Asia-Pacific
bourses rose, but European markets are sharply lower, with the Stoxx 600 off
1.3%, giving back the lion's share of yesterday's gains and US equity futures
are lower. Benchmark 10-year yields are off 3-9 bp in Europe, with widening
core-periphery yields. The yield on the 10-year US Treasury is off a dozen
basis points to about 3.56%. Two-year yields are also sharply lower, led by the
15-16...
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Tumbling Tokyo Prices Gives Ueda Breathing Space
Overview: Talk from two Fed officials yesterday,
which seemed to validate market expectations eased the upward pressure on the
dollar and helped equities launch a dramatic recovery. The market is pricing in a terminal rate near 5.50%, a little higher than the median dot in December. The S&P 500 posted a
dramatic recover and posted a potential bullish key reversal. Its 0.75% closing
gain was the largest advance in nearly three weeks. A large...
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Doubt Chinese Data, but Its Stronger-than-Expected PMI Lifts Risk Assets
Overview: Many investors may be skeptical of the
accuracy of Chinese data, but its stronger than expected February PMI animated
the animal spirits and bolstered risk-taking appetites. Asia Pacific equities
jumped, led by the 4.2% rally in Hong Kong and a 5% surge in the index that
tracks mainland shares. Among the long bourses Australia and Singapore slipped,
and South Korean markets were closed for a national holiday. Europe's Stoxx 600
is posting...
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Potential Brexit Breakthrough Helps Sterling, while France and Spain Report Stronger Price Pressures
Overview: There are two important developments. First,
the stronger than expected February inflation reports from France and Spain
have sparked a jump in European interest rates and the swaps market is
beginning to price in a 4% terminal rate by the European Central Bank. The
deposit rate is now at 2.50% and is widely expected to rise to 3.0% in the
middle of next month. Second, a tentative agreement to resolve the dispute over
the Northern Ireland...
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Upside Surprise in UK’s Flash PMI and Better-than-Expected January Public Finances Lift Sterling
Overview: Rising interest rates are weighing on risk
appetites and the dollar is broadly stronger. Sterling is a notable exception
after a stronger than expected flash PMI and better than expected public
finances. The correlation between higher US rates and a weaker yen is
increasing and the greenback looks poised to rechallenge the JPY135 area. A
slightly better than expected preliminary PMI and hawkish minutes from the
recent RBA meeting has done...
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Position Adjustments at Month-End and Ahead of FOMC Outcome Lifts the Greeenback
Overview: A combination of month-end adjustments and
positioning ahead of the outcome of tomorrow's FOMC meeting has taken the shine
off equities and has helped lift the dollar. On the heels of yesterday's sharp
decline on Wall Street, several large markets in the Asia Pacific region,
including China's CSI 300, the Hang Seng, and both South Korea's Kospi and
Taiwan's Taiex fell by more than 1%. Although the eurozone eked out a small
expansion in Q4...
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Subdued Ending to a Quiet Week, Ahead of Next Week’s Fireworks
Overview: Leaving aside the Australian dollar, which
is benefiting from the optimism over China's re-opening and a reassessment of
the trajectory of monetary policy after a stronger than expected inflation
report, the other G10 currencies traded quietly this week and are +/- less than
0.5%. The risk-on honeymoon to start the year remains intact. The MSCI Asia
Pacific Index has risen every day this week and index of mainland shares that
trade in...
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Bank of Canada may say Pause, but the Market Hears Finished
Overview: Amid sharp losses in the US equity futures, the US dollar is mostly firmer against the G10 currencies. The notable exception is the Australian dollar, where high-than-expected inflation boosts the risk of a more aggressive central bank.
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No Follow-Through Euro Buying while S&P Holds Yesterday’s Breakout
Overview: A quiet consolidative session has been recorded
so far today as North American leadership is awaited. The preliminary PMI
readings are mixed. Japan and the eurozone look somewhat better, but Australia
and the UK disappointed. The dollar is trading with a mostly firmer bias,
but largely confined to yesterday's ranges. The markets seem to be looked
ahead toward next week's Fed, ECB, and BOE meetings, and the return of China
from this...
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Poor US Data Cast Doubts on New Found Hopes of a Soft-Landing
Overview: Yesterday's string of dismal US economic
data delivered a material blow to those still thinking that a soft-landing was
possible. Retail sales by the most in the a year. Manufacturing output fell by nearly 2.5% in the last two months of 2022. Bad
economic news weighed on US stocks. The honeymoon of New Year may have ended
yesterday. The US 10-year yield fell below 3.40% for the first time since the
middle of last September. The Atlanta...
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Is it Too Easy to Think the Market Repeats its Reaction to a Soft US CPI?
The market expects a soft US CPI print today, which has recently been associated with risk-on moves. The US 10-year yield is holding slightly above 3.50%, the lowest end of the range since the middle of last month. The two-year yield is a little above 4.20%, also the lower end of its recent range. Most observers see the Federal Reserve slowing the pace of its hikes to a quarter point on February 1.
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Greenback Consolidates Near Recent Lows Ahead of Tomorrow’s US CPI
Overview: Fed Chair Powell did not push against the easing of US financial conditions when he ostensibly had an opportunity yesterday. This coupled with expectations of another decline in the US CPI, which will be reported tomorrow, has kept the greenback mostly consolidating the losses seen last Friday and Monday.
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Consolidative Tone in FX
Overview: After sharp losses yesterday, the US dollar has stabilized today arguably ahead of Fed Chair Powell's speech at the Riksbank symposium. Yesterday's Fed speakers stuck to the hawkish rhetoric, and this seemed to help reverse the equity market gains, though the greenback remained soft.
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Yesterday’s Gains Unwound may Make the Greenback a Better Buy Ahead of FOMC Minutes
Overview: Yesterday's greenback gains have been
mostly reversed today. New efforts by China in its property market and
anticipation of more stimulus helped rekindle the animal spirits today. Asia
and Europe shrugged off yesterday's losses on Wall Street and the rally in
bonds continued. The 8-12 bp decline in European benchmark 10-year yields comes
even though the final composite PMI was better than expected fanning hopes of a
short and shallow...
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European Rates Continue to Surge, Sending Stocks Spiraling Lower
Overview: Seven of the G10 central banks pumped the brakes between last week and this week as they purposely seek to push demand back into line with supply. And there are more signs that they are succeeding in weakening growth impulses. The dramatic surge in European bond yields continues today with 10-year rates mostly rising another 13-15 bp.
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The Greenback Recovers After the Initial Post-Fed Wobble
Overview: The US dollar has come back bid after losing ground against
most currencies as the markets reacted to the FOMC decision and press
conference. The Antipodeans and Scandis have been tagged the hardest, illustrating
the risk-off mood, and arguably the weakening growth prospects. Countries that
peg their currencies to the dollar have hiked rates, as has the Philippines and
Taiwan. The Swiss National Bank and Norway have also lifted policy...
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Chinese Stocks Extend Rally Even Though Covid Infections Appear to be Spreading
Overview:
The easing of vaccination, quarantine, and some travel protocols
related to Covid in China (and Hong Kong) continues to draw funds back into Chinese
stocks, wherever they trade. The Hang Seng rose 2.3% today to close the week
with a nearly 6.6% advance. The index of mainland companies that trade there
rose 2.5% on the day for a7.3% weekly gain. The CSI 300 of mainland shares rose
1% today and almost 3.3% for the week. Japan’s 1% gain...
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