Capital Markets: "Month-End Profit-Taking Weighs on Equities as the Euro Pops Above $1.11"

From Marc to Market:

Overview: The announcement that President Trump will hold a press conference on China later today rattled investors yesterday after they had earlier shrugged off the escalation of tension between the US and China to take the S&P 500 up to its highest level in nearly three months. The S&P 500 reversed and settled on its lows, and this carried over into today's activity, which also may be reflecting month-end adjustments. Equity markets in the Asia Pacific region were mixed, with Japan, Hong Kong, Australia, and Taiwan seeing selling pressure. Still, the Nikkei finished the week with more than a 7% gain, and Australia's rose 4.7%. The Dow Jones Stoxx 600 is snapping a four-day advance today, led by energy, consumer discretionary, and finance sectors. With a 1.25% loss near midday, the benchmark is still up nearly 3.2% on the week. US stocks are trading lower, and the S&P 500 is up 2.5% for the holiday-shortened week coming into today. The US dollar is softer against most of the major currencies, and the euro rose to almost $1.1140, its best level since the end of March. Emerging market currencies are mixed, while the JP Morgan Emerging Market Currency Index gained a little more than 1% this week after a 2.4% gain last week. Gold is consolidating near $1725. It settled last week near $1734. Oil is a little heavy after a sharp rise in US inventories. The July WTI futures contract is near $32.50 after closing last week around $33.25.

Asia Pacific
Honk Kong dollar forward points eased a little but remain elevated. The three-month forward points are a bit below 170 points, down from 213 at the end of last week. It was near 65 points in the middle of the month. The 12-month forward points are near 645. It was quoted near 768 a week ago, and 221 two weeks ago. The Hong Kong stock market eked out a minor gain on the week (-0.15%).

The PBOC set the dollar's reference rate at CNY7.1316. The bank models implied about CNY7.1324. There was some intra-week volatility, but the dollar is finishing the week little changed. It is near CNY7.14 now and CNY7.1365 a week ago. The offshore yuan shows a bit more pressure. The dollar is trading a little above CNH7.16, and a week ago, the dollar settled near CNH7.1485.

Japanese April industrial output and retail sales were weaker than expected, tumbling 9.1% and 9.6% on the month, respectively. The jobless rate edged up to 2.5% from 2.4%, and the job-to-applicant ratio eased from 1.39 to 1.32. On the other hand, as has been seen elsewhere, consumer confidence ticked up in May, rising to 24 from 21.6. Tokyo's core CPI returned positive in May, rising 0.2% year-over-year after a 0.1% decline in April and excluding fresh food and energy, it rose to 0.5% from 0.2%....

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