Capital Markets: "Monday's Dollar Blues"
From Marc to Market:
Overview: New actions to contain the virus are being taken in the US and Europe, but investors are looking past it and taking equities and risk assets, in general, higher to start the new week. MSCI Asia Pacific recouped most of last week's 0.7% loss with gains of move than 1% in Japan, Hong Kong, South Korea, and Australia. Coming fiscal support helped lift the Australian market by more than 2.5%. Europe's Dow Jones Stoxx 600 is up for a third consecutive session and is nearing the 200-day moving average that has checked the benchmark over the last three months. US shares are trading with a clear upside bias.
Meanwhile, yields are edging higher, and the US benchmark 10-year yield is near 71 bp, while European yields are also slightly firmer. The dollar is under some pressure, falling against all the major currencies, but the Japanese yen and most emerging market currencies are also gaining against the greenback. The JP Morgan Emerging Market Currency Index is higher for the fifth session but remains below the 20-day moving average. Gold has straddled the $1900-level, while oil stabilizes after sliding last week. November WTI is within yesterday's ranges.
Asia Pacific
Japan's service and composite PMI were revised from the initial estimate, but both remain below 50. The service PMI was revised to 46.9 from 45.6 after 45.0 in August. The composite PMI is now at 46.6 from 45.5 flash reading and 45.2 in August. The government has indicated it will have a third supplemental budget. Elsewhere of note, South Korea's manufacturing PMI rose to 49.8 from 48.5, and Taiwan's rose to 55.2 from 52.2.
Tomorrow's Reserve Bank of Australia meeting will be followed the following day by the release of the government's budget. Imagine if US Treasury Secretary Mnuchin was a member of the FOMC. When the Japanese finance minister attends a BOJ meeting, chins wag about central bank independence. The RBA's board consists of a governor, a deputy, the Treasury Minister, and six individuals form the private sector. Unlike the Reserve Bank of New Zealand and the Bank of England, the RBA has downplayed the likelihood of negative interest rates. It targets the cash rate and the 3-year yield at 25 bp. The government is promising not to prematurely tighten fiscal policy. It drew the line at 6% unemployment. It is expected to bring forward income tax cuts, new aid for business, and infrastructure spending. It seeks to support the labor market as its "Jobseeker" and Jobkeeper" programs expired last month. Australia will unveil a A$1.2 bln (50%) wage subsidy for hiring apprentices for one year and aims for 100k to be included in the program....
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