Tag Archive: Japan
Week Ahead: Macro and Prices
The market has much to digest. The Bank of England's new purchases of Gilts coincided with a reassessment of the trajectory of Fed policy. After the hawkish FOMC decision and forecasts, the market briefly thought the terminal rate could be 5.25-5.50% in the middle of next year. However, by the end of last week, it had returned to around 4.5% at the end of Q1 23.
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Wake Me Up When September Ends
Benchmark 10-year yields are off 6-8 basis points in Europe and the United States. The panic seen at the start of the week in the UK has subsided considerably, as sterling recovered to almost where it was a week ago, while BOE’s hand has help steady the Gilt market. Equities in Asia Pacific suffered after the losses in the US yesterday. Hong Kong and India were notable exceptions.
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Semblance of Calm Returns
(Business travel will prevent me from updating the blog for the next couple of days. Thank you for your patience. Good luck.)Overview: After extending last week’s moves yesterday, the capital
markets are mostly calmer today. Sterling is firmer, as are UK Gilts.
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Sterling Continues to be Pounded
Overview: Sterling’s pounding continued in Asia where it was driven to $1.0350, a new record low before stabilizing. UK rates also continued to rise sharply after the new government promised more tax cuts next year. The right-wing victory in Italy was not surprising but it kept
pressure on Italian bonds.
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Putin and Powell Lift Dollar
Overview: Between Putin’s mobilization of 300k Russian troops and Fed
Chair Powell expected to lead the central bank to its third consecutive 75 bp
hike later today, the dollar rides high. It has recorded new two-year highs
against the dollar bloc and Chinese yuan, while sterling was sent to new lows
since 1985. Asia Pacific bourses were a sea of red for the sixth decline in the
regional benchmark in the past seven sessions. Surprisingly, Europe’s...
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Riksbank Hikes 100 bp but the Krona gets No Love
Overview: Yesterday’s late rally in US shares
carried into the Asia Pacific session where all of the large markets advanced. However,
the bears are not abdicating and Europe’s Stoxx 600 is off for the sixth
consecutive session and US futures are trading lower. The sell-off in the bond market
continues. European benchmark yields are mostly 8-10 bp higher and the US 10-year
Treasury yield is up nearly five basis points to approach 3.54%. The two-year...
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Calmer Capital Markets…for the Moment
Overview: The capital markets are quiet today. Equity markets and bond yields have a slight upside bias, while the dollar is little changed. Despite reports that the lockdown in Chengdu is easing, Chinese equities underperformed in the Asia Pacific region.
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Markets Remain on Edge
Overview: The firmer than expected US CPI set off a major reversal of the recent price action. It is a two-prong issue. The first is about inflation and the squeeze on the cost-of-living.
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Will the Dollar Recover After CPI?
Overview: The US dollar remains offered ahead of today’s CPI report. Most European currencies are outperforming the dollar bloc, and the greenback is holding inside yesterday’s range against the yen. Most emerging market currencies are firmer, as well.
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Careful about Chasing the Dollar Lower in North America Today
The bout of profit-taking on long dollar positions begun last week has carried into the start of this week. Despite the escalating rhetoric, the yen is not participating today and is trading within the pre-weekend ranges. The greenback’s lows have been set in the European morning and have stretched the intraday momentum indicators, suggesting that North American dealers may not follow suit.
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Sharp Dollar Setback may offer Bulls a Bargain
The dollar is having one of the largest setbacks in recent weeks. We expected the dollar to soften ahead of next week’s CPI, which may fan ideas/hopes of a peak in US price pressures, but the magnitude and speed of the move is
surprising, and likely speaks to the extreme positioning.
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ECB: Coping with Conflict, Covid, and Climate
Overview: Heightened warnings from Japanese officials has helped the dollar steady against the yen, while the euro hugs parity ahead of the outcome of the ECB meeting, where a 75 bp hike is anticipated. Most Asian equity markets rallied in the wake of yesterday’s gains in the US.
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Aussie Sells Off After RBA Hikes 50 bp while Sterling Bounces on UK New Initiative
Overview: A GBP130 bln initiative by the new UK government to protect households from the surge in power costs helped lift sterling from 2.5-year lows. The Reserve Bank of Australia delivered the expected 50 bp rate hike, but the prospect of smaller moves going forward saw the Australian dollar sold through yesterday’s lows.
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What Happened Monday
The US and Canada may have been on holiday on September 5, but the world waits for no one and there were several significant developments. First, Gazprom's decision to indefinitely suspend gas shipments through the Nord Stream 1 pipeline announced before the weekend saw the European natgas benchmark soar 23.7.
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RBA, BOC, and ECB Meetings and more in the Week Ahead
All
three major central banks that meet in the coming days will hike rates. The question is by how much. The Reserve Bank of Australia makes its
announcement early Tuesday, September 6. One of the challenges for policymakers and investors is
that Australia reports inflation quarterly. The Q2 estimate was released on July
27. It showed prices accelerating to 6.1% year-over-year from 5.1% in Q1. The
trimmed mean rose to 4.9% from 3.7%, and the...
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Can the US Employment Report be Anti-Climactic Ahead of Long North American Weekend?
Overview: Nothing is decisive, but the recent
string of data pushes the needle a little more to a soft landing for the US
economy and gave the US dollar another leg up. The risk is that some of the buying
drained some of the interest that may materialize after today's US jobs report. The
greenback is softer against the major currencies except the Japanese yen. The
dollar is extending its rally against the yen for the sixth consecutive session
and...
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New Lockdown in China and the First Drop in South Korea’s Chip Exports in 2 years Euthanizes Animal Spirits
Overview: The precipitous fall in equities continues while the dollar remains buoyant. Nvidia’s warnings about US curbs on sales to China and the first drop in South Korea’s chip exports in two years, coupled with the largest lockdown in China since Shanghai encouraged investors to move to the sidelines.
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EMU August CPI at 9.1%, while the Core Rate Jumps to 4.3%
Overview: The rise in global interest rates continues. The US 10-year yield is a few basis points near 3.15% and European benchmarks are mostly 5-6 bp higher. Of note, the sharp sell-off in UK Gilts has being extended. Yesterday’s 10 bp rise has been followed by another 14 bp surge today. Italian bonds are also getting hit. The 10-year yield is up a little more than 10 bp.
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Turn Around Tuesday Began Yesterday, Likely Ends before Wednesday
Corrective pressures were evident yesterday and they extended today in Asia and Europe but seem to be running their course now. Market participants should view these developments as countertrend and be wary of waning risk appetites in North America today.
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Jackson Hole and More
Overview: Ahead of the much-anticipated speech by
Federal Reserve Chair Powell, the Fed funds futures are pricing in about a 70%
chance of a 75 bp hike next month. The
US 10-year yield is up nearly five basis points today to 3.07% and the two-year
yield is firm at 3.38%. Asia Pacific equities
were mostly higher, with China the main exception among the large markets, after
US equities rallied yesterday. Europe’s
Stoxx 600 is off about 0.3% to...
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