From Marc to Market:
Overview: Risk appetites have been recharged over the weekend. Equities are mostly higher as are benchmark yields, while the dollar has pulled back. Tokyo markets were on holiday, but the other large markets in the Asia Pacific region advanced by more than 1%, including China, Hong Kong, Taiwan, South Korea, Australia, and India. The MSCI Asia Pacific Index fell 2.85% last week. Europe's Stoxx 600 is up 1.4% to extend its pre-weekend gain of almost 1.8% (which pared the weekly loss to about 0.8%). The S&P 500 snapped a five-day drop before the weekend and is trading about 1% better now. The NASDAQ is nearly 1.25% better as it tries to extend its advance for the third consecutive session. The US 10-year yield is four basis points higher, near 2.96%. European yields are mostly 9-12 bp higher and the peripheral premium is mostly a little wider. The US dollar is weaker against most of the world’s currencies. The weakest of the majors are the New Zealand dollar and Swiss franc, each up about 0.2%. Sterling is leading the move, gaining about 0.9%. Among emerging market currencies, the Mexican peso’s gains (~0.9%) is setting the pace. The Turkish lira is off more than 2% amid a widening budget deficit.
Gold is recovering from an 11-month low near $1700 seen last week. It is trading above $1720. September WTI is at four-day highs near $96.50. It has fallen nearly 10% over the past two weeks. US natgas is up 2.4% to a new July high. It rose 6.3% before the weekend. Europe’s natgas benchmark is 2.1% high after falling nearly 13% over the past two sessions. The Nord Stream 1 pipeline ostensibly is to come back online Thursday and is a key focus now among much skepticism. Iron ore prices tumbled 14.5% last week and snapped back 4.5% today. September copper fell nearly 8.2% last week, its sixth consecutive weekly loss. It has come back better bid and is up nearly 3%. September wheat fell every session last week, falling a cumulative 12.9%. It has begun the new week better bid and up 1.75%.
Asia PacificFor the first time this month, the PBOC provided additional liquidity into the banking system. It injected CNY12 bln (~$1.8 bln) to create a surplus of CNY9 bln. A combination of the mortgage-boycott protest, the corporate tax payment that drained liquidity, and a new surge in Covid case generated tensions and sparked a rise in the interbank lending rate. An Emergency meeting between regulators and banks was called as home buyers are refusing to pay mortgages on stalled construction projects. Local press reports that regulators are also urging banks to support property developers. Meanwhile, S&P warns that the liquidity challenge risks insolvency if the property-sales recovery stalls. The rating agency says that at least a fifth of the rated builders may be at risk....
