Mr. Chandler packs a lot of information into his morning missive.
From Marc to Market:
Overview: The reverberations from last week continue to roil the capital markets today. Equities and bonds have been sold and the greenback bought. Most of the large markets in Asia Pacific fell by more 2%, including Japan’s Nikkei, Taiwan’s Taiex, and South Korea’s Kospi. Ironically, the Shanghai and Shenzhen Composites eked out minor gains, but the CSI 300 still eased. Europe’s Stoxx 600 is off 1% after falling nearly 1.7% before the weekend. US futures warn of another lower opening. Recall that the major indices gapped lower last Monday as well. The US 10-year yield is up 7 bp to 3.11%, probing last week’s highs, while the two-year yield reached new highs near 3.48% before steadying. European benchmark yields are 12-13 bp higher. The dollar is firmer against all the major currencies. Most of the European currencies but the Norwegian krone and British pound are off modestly, while the yen, the Australian dollar and sterling are off more than 0.5%. Emerging market currencies are under pressure, though the Hungarian forint and Czech koruna are steady to firm.
Rising rates and a stronger dollar are no match for gold, which has been sold to a new low for the month (~$1720.45). There appears little support in front of $1700. October WTI is firm near $93.75. Talks with Iran will carry over into next month. US natgas slipped fractionally last week and is up nearly 2.5% today to about $9.55 after testing $10 last week. News that Germany is near its 85% tank capacity objective for next month has seen Europe’s benchmark soften a little (off ~1.8%). Iron ore is giving back most of last week’s 4.7% gain. December copper is off 3.4% after posting a minor gain last week (~0.7%). December wheat rallied 4.4% last week and is off almost 1% today.
Asia PacificAs China's Xi awaits the coronation for a third term, the challenges seem to be intensifying. Shijiazhuang, the provincial capital of the Hebei province that borders Beijing is in a partial lockdown for three days, which started yesterday, and includes the suspension of subways and non-essential business operations. It is a city of more than 11 mln people and follows lockdowns in other parts of Hebei last week. Power shortages are leading to rolling blackouts in different regions and compounding the challenge arising from the end of property boom. The economic toll spurred the government into action recently with rate cut and new lending/spending initiatives mostly concentrated on infrastructure. Over the weekend, China reported that industrial profits fell 1.1% in the Jan-July period. They had risen by 0.8% in the first half. The decline in profits dovetails with the deepening of the economic slump seen in a batch of data reported recently....
