From Marc to Market:
Risk Appetites Start the Weekend Early
Overview: Disappointing revenue and sales figures by Amazon shortly after the US close yesterday set the tone for today's equity sell-off. Many large markets in the Asia Pacific area fell by more than 1%, including Japan, Hong Kong, South Korea, and New Zealand. New lockdown measures around the capital sent the Philippines bourse down nearly 3.5%. Singapore, India, and China's Shenzhen Composite were notable exceptions and posted minor gains. After reaching record highs yesterday, the Dow Jones Stoxx 600 has retreated, led by energy and consumer discretionary sectors. The S&P 500 is poised to gap lower after it too set record highs yesterday. The US Treasury market is bid, and the 10-year yield is below 1.25%, while European yields are mostly a little firmer. China's 10-year benchmark yield is off about 2.5 bp to 2.85%, the lowest level in nearly a year. The poor equity showing and risk-off are finding the normal expression in the foreign exchange market. The US dollar is mostly mixed, with the Scandis and Antipodeans showing heavier tones. However, the yen is also softer and the Canadian dollar is the best performer through the European morning. The JP Morgan Emerging Market Currency Index has edged higher, and if sustained, it would be the fourth session this week that it has advanced. Barring a reversal, the benchmark is set to snap a four-week decline. Gold is firm near $1830 and is up around 1.5% on the week, the fourth advance in the past five weeks. Oil is firm, and the September WTI contract is near two-week highs, around $73.50. It has gained about 2% this week, which leaves it little changed on the month. The CRB closed at new six-year highs yesterday. Coming into today, it is up a little more than 2% for the week, which is the eighth gain in the past 10 weeks.
Asia Pacific
Japan's economy is showing sufficient resilience, and rather than contract in Q2, the world's third-largest economy may manage to eke out a small gain. Helped by foreign demand, industrial output rose by a stronger than expected 6.2% in June. Economists had projected a 5% gain after a 6.5% decline in May. For the quarter, industrial production rose by around 2.5%. June retail sales also rose more than expected. The 3.1% gain last month follows a revised 0.3% decline (initially -0.4%). Retail sales fell by a little more than 1.5% in the quarter, showing the fragility of domestic demand and the absence of tourism. Separately, Japan's unemployment rate unexpectedly slipped to 2.9% from 3.0%, and the jobs-to-applicant ratio kicked up to 1.13 from 1.09. This was better than expected and the highest since last May.
China will report its PMI over the weekend. In the official version, both the manufacturing and non-manufacturing readings are expected to tick slightly lower. The Caixin measure, which focuses more on small and medium businesses, is expected to see manufacturing soften, but the services PMI may rise. However, the events over the last couple of weeks as officials launch an aggressive campaign to tame domestic economic agents are superseded by concerns over high-frequency economic data. China's Politburo issued a statement saying that it will improve the process for foreign listings without elaboration. Separately, but perhaps not totally unrelated, Beijing has ordered a dozen of its large internet companies to update data security protections. Note that while Beijing said it will allow IPOs in the US, the US indicated it will pause IPO registrations for Chinese companies....
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