Monday, August 24, 2020

Capital Markets: Resilience

From Mark to Market:

Markets Prove Resilient to Start New Week 
Overview: New virus outbreaks in Europe and Asia are not adversely impacting the capital markets today. Global equities are firmer.
 Some reports suggesting the US ban on WeChat may not be as broad as initially signaled helped lift Hong Kong shares, but nearly all the markets in the region traded higher. Europe's Dow Jones Stoxx 600 is following suit. Last week's 0.8% loss is being offset with today 1.7% gain through the European morning.
US shares are firmer, and after setting a new record ahead of the weekend, the S&P 500 is poised to gap higher. European and US benchmark yields are 1-2 bp higher, putting the 10-year Treasury yield near 64 bp.
Yields in the Asia Pacific region eased, in line with US slippage before the weekend, and new that the Reserve Bank of New Zealand missed its bond purchases. The dollar is weaker across the board. The Turkish lira is a notable exception in the emerging market space. The JP Morgan Emerging Market Currency Index is about 0.3% higher to recoup most of its pre-weekend loss. Gold is firm but holding below the $1955 area that capped the yellow metal in the past two sessions. Two storms in the US Gulf that have shut down nearly half of the rigs in the regions have helped steady oil prices and snap a four-day decline in the October WTI contract.

Asia Pacific
The discretionary authority of the US president on national security issues makes the situation less than transparent.
However, reports suggest that President Trump has reassured US executives that the ban on WeChat will not be as extensive as initially feared. Meanwhile, TikTok is preparing to challenge the executive order that appears to be forcing a sale. It seems premature to draw any implications about the US-China relationship. The discretionary authority and fear of wider sanctions are prompting some fund managers to shift their holdings of Chinese companies to their Hong Kong listing from the US.

Rumors of Japan's Prime Minister Abe's health continue to swirl. Reports suggest he visited a hospital earlier today, for the second time in around a week. Abe claimed he was getting the results of last week's tests, while other reports suggest he was getting treatment for a chronic condition....