Capital Markets: "Stocks Stall while the Dollar Remains Bid"

From Marc to Market:

Overview: The new week is off to a quiet start as the US celebrates Martin Luther King's birthday, and investors look for a fresh focus. Hong Kong and Indian markets were suffered modest declines while most of the other large Asia Pacific markets edged higher. European stocks are trading a little lower, and the Dow Jones Stoxx 600 is threatening to end a four-session advance. Most benchmark bond yields around half a basis point in one direction or the other. Of note, despite China's Loan Prime Rate unexpectedly unchanged, the 10-year benchmark yield slipped a few basis points to 3.05%, its lowest level in three months. The US dollar is firmer against the major currencies, with sterling taking the brunt of the pressures, and traded down to nearly $1.2960 (last week's low was near $1.2955). The greenback is also trading higher against most of the emerging market currencies, with the liquid accessible EM currencies (e.g., ZAR, TRY, HUF, MXN) are all lower. The Chinese yuan also began stronger but yielded in the face of the dollar's strength. Gold prices are a little higher, while supply shocks (Libya and Iraq) lifted oil prices, with the March WTI to almost $59.80 before moving back within the pre-weekend range.

Asia Pacific
There are two developments from China to note. First, defying expectations for a small decline, the Loan Prime Rate (set on the 20th of each month based on a lending survey from major banks), it was left unchanged at 4.15% (one-year) and 4.80% (five-year). The obvious implication is that officials are not in a hurry to ease policy. Second, a new SARS-like virus appears to have emerged, with at least 200 cases now reported and in at least four countries (China, Japan, Thailand, and South Korea.

A brief calm in Hong Kong ended with a new escalation of the conflict. The demonstrators' demand for universal suffrage was explicitly rejected by Chief Executive Lam. Hong Kong equities underperformed. Separately, but not unrelated, Hong Kong reported that its December unemployment rate rose to 3.3% from 3.2% in November and 2.8% in December 2018....

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