Tag Archive: U.K.
What Can the Fed tell the Market it Does Not Already Know?
Overview: The softer than expected US CPI drove the
dollar and interest rates lower, while igniting strong advances in equities,
risk assets, commodities, and gold. Calmer market conditions are
prevailing today, and we suspect that in the run-up to the FOMC meeting, a broadly
consolidative tone will emerge. The dollar is mostly softer, but within yesterday’s
ranges. Only the New Zealand and Canadian dollars among the G10 currencies are softer....
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US CPI ahead of FOMC Outcome Tomorrow
Overview: The dollar
softer against the G10 currencies ahead of today’s CPI report and the FOMC meeting
the concludes tomorrow. Emerging market currencies are most mixed. The
Hungarian forint leads the complex with around a 1% gain on news of a
preliminary deal struck with the EU. The South African rand is the worst
performer, off around 0.8%, as impeachment proceedings against Ramaphosa
proceed. Global equities are mostly higher today after the...
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Markets Await Central Banks and Data
Overview: There are two themes today. First, there has been a modest bout of profit-taking on Chinese stocks (and yuan) after last week’s surge. Second, the ahead of the five G10 central bank meeting this week a series of market-sensitive economic reports, a consolidative tone is seen in most of the capital markets. Most of the large bourses in the Asia Pacific region fell, led by a 2.2% loss in Hong Kong and 3% loss in its index of mainland shares.
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Risk Appetites Challenged after US Equities Tumble
Overview: The sharp sell-off of US stocks yesterday as
sapped the risk appetite today. Equities are being sold. Hong Kong and the
index of mainland shares that are listed there led the regional decline with
3.2%-3.3% losses. Europe’s Stoxx 600 is off about 0.65% in late morning
turnover, the fourth day of losses. US futures are trading with a lower bias as
well. European 10-year bonds are mostly 1-2 bp firmer. The US 10-year Treasury is
practically...
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Yesterday’s Dollar Recovery Questioned Today
Overview: The 11 bp jump in the 10-year US yield yesterday after dropping nearly 26 bp in the previous three sessions, helped the greenback recover and took a toll on stocks. Still, the S&P 500 is above the low set on November 30 (~3939) before Fed Chair Powell's talk that day.
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Chinese Yuan Jumps While the Dollar recovers After Losses were Extended Against the Euro and Sterling
Overview: The markets remain hopeful about a re-opening in
China and continue to pour into Chinese stocks on the mainland and in Hong Kong. The
index of Chinese companies that trade in the US rose nearly 22.4% last week. Large
bourses in the Asia Pacific region were mixed, but China and Hong Kong stand out.
Europe’s Stoxx 600 is nursing a small loss for the second consecutive session. US
equity futures have a slightly heavier bias. European 10-year...
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What Did Powell Say?
Overview: Asia Pacific stocks rallied on the heels of the surge in US equities. China’s CSI 300 led the large bourses higher with a 1% advance. Europe’s Stoxx 600 is matching yesterday’s gain of a little more than 0.6%, while US futures
are a touch softer. European yields are 9-13 bp lower, with the peripheral premiums shrinking.
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China Shakes Markets, Euro Shakes it Off
Overview: The surging Covid cases in China and the protests in
several cities seemed to set the tone for today’s session. Equities are lower. China,
Hong Kong, Taiwan, and South Korea were marked down the most. Of the large
bourses, only India escaped unscathed. Europe’s Stoxx 600 is off more than 0.8%
and US futures are poised to gap lower. Bond markets are quieter. The 10-year
US Treasury yield is off a little more than one basis point to around...
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Calm Markets with Japan on Holiday Today and the US Tomorrow
Overview: The capital markets are quiet today with
Japan on holiday and the US on holiday tomorrow. Asia Pacific equities were
mostly firmer after yesterday’s rally on Wall Street. Europe’s Stoxx 600 is
about 0.25% higher and at its best level in three months. US futures are steady to
slightly higher. Benchmark 10-year yields are little changed. The dollar is narrowly
mixed against the major currencies, with Scandis leading the way. Sweden is...
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Consolidative Session, even if Not Turn Around Tuesday
Overview: The US dollar is trading with a somewhat heavier bias after bouncing
higher yesterday. All the G10 currencies are higher, led by the New Zealand
dollar, where the central bank is expected to hike first thing tomorrow. Most emerging
market currencies are also firmer. Those that are not, like the South Korean
won and Mexican peso, are nursing minor losses. The surge in Covid cases
weighed on Chinese shares that trade in Hong Kong, while the...
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Higher Japanese CPI Won’t Change the BOJ’s Stance
Overview: The capital markets are heading into the
weekend mostly quietly in a consolidative fashion. Ambiguous signals from yesterday’s US
equities saw a narrowly mixed performance among the large Asia Pacific bourses,
but of note, Hong and China markets saw this week’s gains trimmed. Europe’s
Stoxx 600 is up around 1% near midday and is slightly above last week’s
close. US equity futures are trading
with a firmer bias ahead of a large...
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The Dollar Comes Back Better Bid
Animal spirits are retreating today. Asia Pacific and European equities are lower, and US futures are narrowly mixed. US 2- and 10-year yields are edging higher, while European benchmark 10-year yields are mostly softer. Italy and the UK are notable exceptions.
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Markets are Less on Edge as the Darkest Scenarios seem Less Likely
The situation in central Europe is still intense but it appears top US, European and Polish officials are more reluctant than some market participants to attribute the darkest of intentions and paint extreme narratives.
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Poor Chinese and Japanese Data Are Not Deterring Euphoria
Overview: Recent developments have spurred a euphoria
that is exciting the animal spirits. Greater confidence that US inflation has
peaked, and new initiatives from China, and yesterday’s Biden-Xi meeting are all
feeding this narrative. The dollar, which
slumped last week, is sliding anew today. Strategically, we anticipated the
turn, but tactically, we thought last week’s move had stretched the near-term
technical condition. The dollar is...
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The Dollar Posts Corrective Upticks, while the Market Digests China’s Initiatives
Overview: China’s new initiatives to support the property sector helped lift the Hang Seng. And while the China’s CSI 300 edged higher both the Shanghai and Shenzhen composites fell. Most Asia Pacific markets fell, while Europe’s Stoxx 600 is posting a small gain.
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Capital Flows Outstrip Trade Flows and that is Where to Look for Drivers of FX
Policymakers have often said that exchange rates should reflect fundamentals. What does that really mean? Can they do anything but that? It begs the question of which fundamental factors they should reflect.
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Caution Advised in Chasing FX, but Wow!
Overview: The softer than expected US inflation figures unleashed significant market adjustment that continue to ripple through the capital markets. The modification of some of China’s Covid stance may have also fanned some optimism, but we suggest that measures are modest tweaks, and the surge in infections will prevent the end of disruptive restrictions.
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High Anxiety: China’s Covid and US Inflation
Overview: Anxiety is running high. Rather than ease its Covid restrictions, a surge in cases is seeing more areas in China come under restrictions. The US reports CPI and of the ten reports this year, seven of them have been stronger than expected.
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The Week Ahead: How Sticky is US Inflation and How Soft is China’s?
There are three potential inflection points. The first is a
pause from the Fed; if nothing else, Powell signaled it was too early to think
about it. The second is for the Bank of Japan to change monetary policy.
Governor Kuroda has signaled that it is not time. Conventional wisdom is there
will not be a change until Kuroda's term ends next April. However, we note that
the surveys suggest economists and BOJ inflation forecasts for next year have...
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RBA Hikes by 25 bp, Chinese Stocks Surge, and the Greenback Trades Heavier
Overview: Risk appetites have returned today. Bonds
and stocks are advancing, while the dollar is better offered. Unsourced claims
that Beijing has formed a committee to assess how to exit the zero-Covid policy
sent Chinese shares sharply higher. An index of mainland companies list in Hong
Kong jumped nearly 7% and closed up almost 5.5%. The Hang Seng surged 5.2%,
while all the large markets in the region advanced. Europe’s Stoxx 600
recovered...
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