Tag Archive: China

Fragile Calm Casts a Pall over the Capital Markets

2023-04-06

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2023-04-06

Overview: There is a fragile calm in the capital markets today ahead of the long holiday weekend for many. The poor US economic data yesterday and third consecutive decline in the KBW bank index weighed on risk sentiment. Most of the large bourses in the Asia Pacific region fell, with Hong Kong and India notable exceptions. In Japan, the Topix bank index fell 1.1% after a 1.9% decline yesterday and is now lower on the week. Europe's Stoxx 600 is...

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OPEC+ Surprises while Manufacturing Remains Challenged

2023-04-03

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2023-04-03

Overview: News of OPEC+ unexpected output cuts saw May WTI gap sharply higher and helped lift bond yields. May WTI settled near three-week highs before the weekend near $75.65 and opened today near $80. It reached almost $81.70 before stabilizing and is straddling the $80 area before the North American session. The high for the year was set in the second half of January around $83. Benchmark 10-year yields are up 2-5 bp points. The 10-year US...

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March: Going Out like A Lamb after Wrestling with a Lion

2023-03-31

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2023-03-31

Overview: The banking stress that roiled the markets this month has eased. However, the emergency lending by the Federal Reserve, vias the discount window and new Bank Term Funding Program hardly slowed in the past week ($152.6 bln vs. $163.9 bln). Money markets took in more funds. Almost $305 bln has flowed to them over the past three weeks. The US KBW bank index is up 3.75% this week coming into day (after pulling back 1.2% yesterday). Europe's...

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Dollar Soft but Stretched

2023-03-30

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2023-03-30

Overview: While bank stress seems to continue to ease, the dollar languishes against most of the major currencies. The Japanese yen is the notable exception. It is off about 1.5% this week. The Dollar Index has given back the gains scored at the end of last week but remains inside the range set last Thursday and Friday (~101.90-102.35). Perhaps the participants are waiting for Friday. In addition to month-, quarter, and fiscal-year ends, it is...

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Firmer Rates and Higher Bank Stocks Give the Greenback Little Help

2023-03-28

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2023-03-28

Overview: Financial strains eased yesterday, and short-term yields jumped. The two-year US yield jumped 25 bp to pierce 4%. Yet, the dollar fell against most of the major currencies yesterday and is mostly softer today. Banking stress is ebbing. The Topix bank index snapped a three-day decline and jumped nearly 2% today to recoup the lion's share of its three-day decline. The Stoxx 600 index of EMU banks is extending yesterday's 1,7% advance. The...

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Calmer Markets to Start the New Week

2023-03-27

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2023-03-27

Overview: There did not appear to be any negative surprises over the weekend, and this is helping calm investors' nerves at the start of the new week. Deutsche Bank shares have recovered most of the pre-weekend loss in the German market, and Stoxx bank index is posting a gain for the first time in four sessions. The AT1 ETF is slightly softer. In Japan, the Topix bank index slipped around 0.5%, its fourth decline in the past five sessions. Asia...

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Terms of UBS Acquisition Wipes out Additional Tier 1 Capital and Spurs Fresh Concerns

2023-03-20

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2023-03-20

Overview:  UBS takeover of Credit Suisse, the sale of Signature bank assets, and the daily dollar swaps could have helped stabilize the budding banking crisis. However, the wipeout of the additional tier 1 capital cushion (16 bln Swiss francs) at Credit Suisse has raised concern about the vulnerability of other such assets, which post-GFC is a $275 bln market in Europe. Asia Pacific equities was a sea of red, led by a 2.65% drop in the Hang Seng...

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Fragile Calm to End the Volatile Week even with the Quadruple Expirations

2023-03-17

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2023-03-17

Overview: The support for First Republic Bank shown by a consortium of US banks by shifting $30 bln of deposits is helping break the financial anxiety that has gripped the market for more than a week. The liquidity provisions for Credit Suisse by the Swiss National Bank also are contributing to improved sentiment. The Fed's balance sheet expanded sharply last week as the bridge banks were extended credit to help the unwind of SVB and Signature...

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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

2023-03-15

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2023-03-15

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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Does the US Inflation Report Matter or Has it Been Superseded by Deflationary Forces of a Financial Crisis?

2023-03-14

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2023-03-14

Overview: The dramatic shift in expectations for Fed policy is a potent shock, with reverberations throughout the capital markets.  The business press was full of accounts putting the nearly 50 bp decline in the US two-year note in an historical perspective. Yesterday, it fell by 61 bp as the market continued to unwind Fed hikes and reprice the chances of a cut as early as Q2. While the poorly received bill auctions suggests not significant deposit...

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US Banking Crisis Swamps Other Considerations

2023-03-13

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2023-03-13

Overview:  The US banking crisis has overwhelmed other market drivers. The strong measures announced as Asia Pacific trading got under way was embraced by the market even though moral hazard issues and gaps in the Dodd-Frank regulatory framework were exposed. The dollar is trading heavily. The prospect of a 50 bp Fed hike next week has evaporated and some are doubting that a 25 bp increase will be delivered. Rate hike expectations for the ECB this...

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Yen Jumps Despite Poor GDP Ahead of Tomorrow’s BOJ Outcome

2023-03-09

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2023-03-09

Overview: Seeing the drama he inspired on Tuesday, the Fed chair tried soft-pedaling the idea that he was signaling a 50 bp hike in March. The market did not buy it. And the odds, discounted by the Fed funds futures rose a little above 70% from about 62% at Tuesday's close. The two-year note yield solidified its foothold above the 5% mark. With the Bank of Canada confirming its pause, the Reserve Bank of Australia does not seem that far behind, and...

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US Dollar is Better Bid Ahead of Powell, while Aussie Sells Off on Dovish Hike by the RBA

2023-03-07

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2023-03-07

Overview: The US dollar is trading with a firmer bias against nearly all the G10 currencies ahead of Federal Reserve Chairman Powell's semi-annual testimony before Congress. Speaking for the Federal Reserve, the Chair is likely to stay on message which is higher rates are necessary to cool the overheating economy. This comes on the heels of the Reserve Bank of Australia's 25 bp hike and indication that it is not pre-committing to an April hike. The...

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Yields Pull Back to Start the New Week

2023-03-06

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2023-03-06

Overview: The modest economic goals announced as China's National People's Congress starts was seen as a cautionary sign after growth disappointed last year. It seemed to weigh on Chinese stocks, though others large bourses in the region advanced, led by Japan's Nikkei and South Korea with gains of more than 1%. Europe's Stoxx 600 is little changed after rising for the past two sessions. US index futures are slightly softer. Strong gains were seen...

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Tumbling Tokyo Prices Gives Ueda Breathing Space

2023-03-03

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2023-03-03

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

2023-03-01

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2023-03-01

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

2023-02-28

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2023-02-28

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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Markets Catch Collective Breath

2023-02-27

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2023-02-27

Overview: After last week's flurry of activity that saw the US dollar extend its recovery, it has begun off the new week largely consolidating in relatively narrow ranges. The Australian and New Zealand dollar's remains softer, and the Swiss franc is virtually flat, but the other G10 currencies, led by sterling are posting small gains. A break-through on the Northern Ireland protocol, which has been rumored for a more than a week may be announced...

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Monday: A Short Note while US is on Holiday

2023-02-20

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2023-02-20

The dollar is mostly softer, but turnover is mostly quiet.  The Swedish krona leads the move after higher-than-expected underlying inflation.  It is a mild risk-on day with equities moving higher too.  In the Asia Pacific region, China stood with the CSI 300 up almost 2.5%.  Europe’s Stoxx 600 is up fractionally to recoup most of the pre-weekend decline.  US equity futures are narrowly mixed.  European bond yields are little changed, with a couple...

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Dramatic Swing in Sentiment Extends the Greenback’s Rally

2023-02-17

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2023-02-17

Overview:  A series of strong US high-frequency data points after a poor finish to last year has spurred a dramatic shift in market expectations. And talk among a couple of (non-voting) FOMC members of a 50 bp hike has provided added fodder. The greenback is extending its recovery today against all the major currencies, with the Australian and New Zealand dollars hit the hardest. Emerging market currencies have also been knocked back. This is part...

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