From Marc Chandler at Bannockburn Global Forex:
Overview: A pessimistic assessment offered by the CEO of Moderna shattered the fragile calm seen yesterday after the pre-weekend turmoil. Risk appetites shriveled, sending equity markets lower and the bond markets higher. Funding currencies rallied, with the euro and yen moving above last week's highs. The uncertainty weighs on sentiment and makes investors question what they previously were certain of.
The MSCI Asia Pacific Index fell over 1% before the weekend and again yesterday. Today, South Korea's 2% slide led the regional decline that saw Japan and Hong Kong fall more than 1%. Australia, Taiwan, and India managed to post minor gains. Europe's Stoxx 600 is off over 1.5%, giving back all of yesterday's gain (~0.7%) after the pre-weekend 3.6% drop. US futures are sharply lower. Bond yields are tumbling, led by an 8 bp decline in the US 10-year yield, bringing it to around 1.42%. European benchmark yields are 3-5 bp lower. In the foreign exchange market, the dollar-bloc currencies and Norwegian krone are under pressure, while the funding currencies--euro, yen, and Swiss franc--have risen through last week's highs. Emerging market currencies are mixed, though several central European currencies appear to be pulled higher by the euro. Gold is firm but below $1800. Recall the high from the end of last week was near $1815.50. Oil prices are sliding. January WTI fell through last week's low and took out the 200-day moving average (~$67.45). While US natural gas prices fell and are near two-week lows, European (Dutch) gas prices are up more than 4% on top of yesterday's 7.5% rally. Iron ore prices are paring yesterday's 6.8% rise, while copper is off around 0.5% after recovering 1.25% yesterday.
Asia Pacific
The Moderna CEO warned that the vaccines will likely prove less effective against the Omicron variant, and it will take months to create a vaccine specific to this mutation. This unhinged the markets again. The news overshadowed favorable economic news. China's November PMI was stronger than expected, and Japan reported the first increase in industrial output in four months. China's manufacturing PMI rose above the 50 boom/bust level for the first time since August, albeit barely (50.1), and the non-manufacturing PMI slipped less than expected (52.3 vs. 52.4 in October, while the median Bloomberg forecast) was for 52.3). The composite rose to 52.2 from 50.8, its best reading since July. Japan's industrial output rose 1.1%, which was less than expected, but still the first gain since June. The unemployment rate unexpectedly fell to 2.7% from 2.8%, even though the job-to-applicant ratio slipped to 1.15 from 1.16. October housing starts jumped 10.4%, nearly twice the pace expected.
Still, not all the economic data from the region was upbeat. Building approvals in Australia slumped 12.9% in October. The median forecast (Bloomberg) was for a 1.5% decline. October industrial output in South Korea fell 3%, while the market looked for a 0.1% decline. The September series was revised to -1.1% from -0.8%. South Korea's industrial production has not risen since July....
....MUCH MORE
