Tag Archive: US
Anti-Climactic Return of China
Overview: The re-opening
of China's mainland market amid reports of strong activity during the holiday,
was relatively subdued. The CSI 300 rose less than 0.5% and the Shanghai
Composite eked out less than a 0.2% gain. The 0.5% gain in the yuan was largely
in line with the performance of the offshore yuan. Indeed, it seems like a bit
like "buy the rumor sell the fact" type of activity as Hong Kong's
Hang Seng tumbled 2.75%, to give back...
Read More »
Read More »
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...
Read More »
Read More »
Euro Closed above $1.09 but Follow-Through Buying Limited
Overview: After
some intraday penetration, the euro finally settled above $1.09 yesterday. However,
follow-through buying has been limited and technical and option-related
resistance is seen in the $1.0940-50 area. The dollar is more broadly mixed
today, with the dollar-bloc and Norwegian krone leading the advancers. The
euro, yen, and sterling are nursing small losses near midday in Europe. The
recovery of US equity indices yesterday after gap...
Read More »
Read More »
Dismal UK Retail Sales Weigh on Sterling, While the Yen Softens
Overview: The US dollar is mostly softer today against the G10
currencies, with the notable exception, yen, Swiss franc, and sterling. The
risk-on mood is seen in the foreign exchange market with the Antipodean and
Scandi currencies leading the move against the greenback. The yen has fallen by
about 1.3% this week, leading losers, while sterling's 1.1% gain puts it at the
top. Despite the poor showing of US equities yesterday, risk appetites...
Read More »
Read More »
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...
Read More »
Read More »
The BOJ Surprises by Standing Pat
Overview: The BOJ defied speculation and stuck to its
current policy, which saw the yen sell-off sharply. The dollar rallied about
3.4 yen before falling back. The greenback is broadly lower against the other
G10 currencies. However, for the fifth consecutive session, the euro has
stalled around $1.0870. While UK headline inflation softened, mostly due to fuel,
core prices were unchanged, and this may have helped sterling extend its recent
gains to...
Read More »
Read More »
Monday and Beyond
Monday Ranges: Euro: $1.0802-$1.0874JPY/$: JPY127.23-JPY128.87GBP: $1.2172-$1.2289CAD/$: CAD1.3353-CAD1.3418AUD: $0.6941-$0.7019MXN/$: MXN18.7313-MXN18.8566Rumors of an emergency BOJ meeting sent the dollar to its lows in Tokyo, slightly below the pre-weekend low (~JPY127.46). The on-the-run (most current) 10-year yield settled above the 0.50% cap and the generic 10-year bond has not traded below the 0.50% level since January 5. The market...
Read More »
Read More »
Greenback’s Sell-off may Stall Ahead of Powell Tomorrow
Overview: Don't fight the Fed went the manta as the
market took the US two-year yield back up to 4.50% in the aftermath of the FOMC
minutes last week, the highest in over a month. The minutes warned of a
premature easing of financial conditions. And then bam, softer than expected
hourly earnings and a weak service PMI and bonds and stocks rallied, and the
dollar was sold. This is a key part of the backdrop for this week, for which
several Fed...
Read More »
Read More »
The Dollar Jumps
Overview: Market participants have returned from the New Year celebrations apparently with robust risk appetites. Equities and bonds are rallying, and the dollar has surged higher. The markets seem to be looking past the surge in China's Covid cases and anticipates a recovery, helping Chinese equities lead Asia Pacific bourses higher, where Japanese markets are still on holiday.
Read More »
Read More »
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...
Read More »
Read More »
Political Developments Overshadow Economics
Overview: There is nervous calm in the capital
markets today. The weakness of US shares
yesterday is taking a toll today. An exception in the Asia Pacific region is
the Hang Seng and the index of mainland shares that trade there, which up
around 3.5% today on thUe easing of some Covid protocols. Europe’s Stoxx 600 is off for a fifth day,
its longest losing streak in nearly two months. US futures are posting minor
gains. Benchmark 10-year yields...
Read More »
Read More »
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...
Read More »
Read More »
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.
Read More »
Read More »
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...
Read More »
Read More »
Attention turns to US Jobs while the Yen’s Surge Continues
Overview: There have been significant moves in the capital markets this week
and participants are turning cautious ahead of the US employment report. After the
US equity market rally stalled yesterday, nearly all the Asia Pacific bourses fell
today. The strength of the yen (~3.8% this week) has weighed on Japanese equities
(Nikkei -1.8% this week) and spurred the BOJ to buy ETFs today for the first
time in five months. Europe’s Stoxx 600 is...
Read More »
Read More »
Dollar Jumps, while Surge in Covid Cases Raise Questions about China’s Pivot
Overview: Surging Covid cases in China and Hong Kong
are undermining hopes of a Covid-pivot and the US dollar is broadly higher.
Equities are under pressure to start the week. Most of the large bourses in the
Asia Pacific but Japan, fell earlier today. Europe’s Stoxx 600 is paring last
week’s minor gain, which was the fifth consecutive weekly rise. US stock futures
are lower, while the 10-year US Treasury yield is flat near 3.83%. European
yields...
Read More »
Read More »
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.
Read More »
Read More »
The Dollar Edges Higher
Overview: After selling off amid
speculation that China’s Covid policy was going to ease, we expected the greenback
to recover and consolidate ahead of Thursday’s CPI. This did not materialize
yesterday, but the dollar has come back better bid today. Equity markets are
mostly firmer, but nearly all the large markets, but China/Hong Kong, rising in
the Asia Pacific region. Europe’s Stoxx 600 is posting small gains. It is the third
session in a row...
Read More »
Read More »
Risk Appetites Survive China Keeping Zero Covid Policy
Overview: Chinese officials denied plans to end the zero-Covid policy
and after a brief wobble, risk assets have traded better. Asia Pacific equities
rallied, led by Hong Kong and mainland stocks that trade in Hong Kong. Europe’s
Stoxx 600 opened lower but recovered and is around 0.5% higher after the 1.8%
gain before the weekend. US futures are firm. Benchmark 10-year yields are mostly
2-4 bp softer in Europe and the US. The dollar is mixed. The...
Read More »
Read More »
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...
Read More »
Read More »