Tuesday, August 8, 2023

"Risk Appetites Squashed by Weak Chinese Imports/Exports and Moody's Downgrade of 10 US Banks"

From Marc to Market:

Overview: The combination of falling Chinese imports and exports, Moody's downgrade of ten US small and medium-sized banks is serving to squash risk appetites. Equities are weak, but bond markets are strong despite the surprise tax on Italian banks announced yesterday and the kick-off of the US $103 bln refunding today. Outside of Japan and Australia, Asia Pacific equity markets were lower led by a 1.8% drop in the Hang Seng and a nearly 2.2% loss of the mainland shares that trade there. The 0.65% fall in Europe's Stoxx 600 offset the gains of the past two sessions plus some. US equity futures are around 0.5% lower. Bond are rallying strongly. European benchmark yields are mostly 10-12 bp, including Italy and Spain. Greece is the lagged today. The 10-year US Treasury yield is off nearly nine basis points to 4.0%, a five-day low.

The US dollar is bid, rising against all the G10 currencies. The risk-off tone is seeing the dollar-bloc and Scandis hit the hardest (~0.5%-0.90%), while the euro and Swiss franc are around 0.25% lower. Emerging market currencies are lower, led by the South Korean won and Polish zloty. The firmer dollar and lower rates seem to practically neutralize each other in terms of the impact on gold, which is trading quietly at little changed levels around $1935. September WTI is at a three-day low near $80.60 in the European morning. It had reached a new high for the year yesterday around $83.30.

Asia Pacific...