"Capital Markets: Still Seems to be the Calm before the Storm"

From Marc To Market:

Overview: Equities are trading lower, and bonds are mixed as the FOMC, UK election, and the US decision on the December 15 tariffs draw near. The MSCI Asia Pacific Index three-day rally ended today as only China and South Korea's markets rose. Europe's Dow Jones Stoxx 600 gapped slightly lower at the open. The upside momentum has faltered, and the benchmark is headed south for the third session of the past four. The S&P 500's three-day rally ended yesterday, and the index closed on its lows. It is poised to gap lower today. Initial support may be seen a little below 3120, but more important support is seen in the 3095-3102 range. Yields pulled back in Asia, but are 1-2 bp firmer in Europe. The US 10-year is hovering around 1.80%. The dollar is a little softer against most of the major currencies, while JP Morgan Emerging Market Currency Index is trying to extend its rally for the fifth session. Gold is a couple of bucks firmer and well within its recent ranges. January WTI is softer but continues to consolidate above $58.

Asia Pacific
China's economic data showed a continued divergence between consumer and factory prices and a jump in lending last month. Consumer prices rose 4.5%, a seven-year high from a year ago in November. This was more than economists forecasts and marks an acceleration from the 3.8% pace in October. Pork prices jumped 110% over the past year and contributed 2.64 percentage points to the headline CPI. Some observers detect a potential peak in pork prices as they rose only 3.8% after a 20.1% increase in October. China appears to have stepped up its imports of pork. Core prices (excluding food and energy) was unchanged at a mild 1.4%. Producer prices are still mired in deflation, falling 1.4% year-over-year. They had dropped by 1.6% in October. The weakness of producer prices signals pressures on profits and sluggish demand. Separately, China reported a larger than expected jump in November lending after a subdued October. Bank lending doubled to CNY1.39 trillion from CNY661 bln. Aggregate financing, which includes the shadow banking, surged to CNY1.750 from CNY619 bln.

For the first time in nine months, the generic 10-year JGB reached the zero yield mark briefly in Tokyo today. Apparently, the zero yield brought in new buyers and sending the yield back down into negative territory before the end of the local session. The late rally came even as the five-year auction met lukewarm demand. The yield was nearly -30 bp in September. The Tankan Survey of business sentiment is due out later in the week, and some deterioration is expected. The economy appears to be contracting sharply this quarter, and these considerations will likely see the yield stay remain in negative territory, despite the new supply that the fiscal package may bring. ...

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