<insert Bowie/Mercury>
From Marc to Market:
Overview: Moderna's announcement did not spur nearly the magnitude of the disruption caused by Pfizer's similar announcement a week ago. Still, in the US, the NASDAQ underperformed the other indices, and the US Dow Industrials saw record highs. US yields were firm, and the 10-yield rose almost a basis point compared with a more than 10 bp on Pfizer's news. The dollar-bloc currencies and Scandis lead the broad move against the dollar, while sterling, the yen, Swiss franc, and euro were little changed. The MSCI Asia Pacific benchmark rose for the 12th consecutive session today, though Chinese and South Korean markets were lower. Europe's Dow Jones Stoxx 600 is consolidating yesterday's nearly 1.2% advance. US shares are mixed today, with the NASDAQ futures trading a little higher and the S&P 500 a bit lower. The US 10-year yield is a touch softer, just below 0.90%, and European yields are a little lower as well. The greenback is softer against most of the majors, led by the Japanese yen and sterling. Among emerging market currencies, the liquid accessible currencies are mostly lower, led by the Turkish lira. Among the stronger emerging market currencies, the Chinese yuan's 0.5% gain is the largest. Gold is quiet near $1890, and silver is threatening to snap a five-day advance. Oil is little changed, leaving the December WTI contract consolidating above $41 a barrel in a narrow range.
Asia Pacific
Even though there is little doubt that Biden will be the next US president [but: see], Trump's unorthodoxy lies not only in refusing to accept the election results as legitimate but continuing to take substantive policy action. Last week, the US announced sanctions on 31 Chinese companies with ties to the military. More sanctions are expected in the coming days, focusing on forced labor, which is both a human rights issue and an issue of economic competition. These prohibitions on investments may be a more potent blow than the tariffs. While China is deeply embedded into the flow of goods, its integration in the global capital markets is an earlier and arguably more vulnerable phase. Savings flowing into passive or tracking emerging markets or global equities will likely have a stake in a company that has been or will be sanctioned, such as China Mobile or China Telecom. Biden is being delivered a fait accompli. Even if he wanted to, he could not simply unwind them without sounding worrisome signals to allies and adversaries. The prohibition against new ownership will take effect less than two weeks before the end of Trump's term. Existing owners will have until next November to liquidate. Will the benchmarks adjust for this? Investors?
The Reserve Bank of Australia cuts its key rate (overnight cash rate and its three-year yield target) to 10 bp and announced a A$100 bln bond-buying effort. The minutes released today showed officials had considered targeting the five-year yield but decided against it but nevertheless reveals a potential next step. Separately, Kent, the assistant governor for financial markets, linked the Australian dollar's recent strength to the new on a vaccine and expressed little concern about the exchange rate, which, he opined, was close to fair value. Lastly, we note that six years of negotiations finally produced a reciprocal security arrangement between Australia and Japan. The timing is significant because the regional free-trade agreement over the weekend spurred talk of China's rising dominance, where economics would trump security.
After spiking higher on November 9 in reaction to the Pfizer announcement, the dollar has gradually pared those gains. The low today near JPY104.25 is the lowest since then and approaches the (61.8%) retracement objective (~JPY104.14). The JPY104.00 area is still expected to provide some support, and there is an option just above there (JPY104.03) that holds a nearly $425 mln option that expires today. The greenback may be capped in the JPY104.50-JPY104.60 area. The Nikkei is up 10 of the past 11 sessions, and the yen's recovery may spur some near-term consolidation. The Australian dollar is firm, and it may be the first session in two months that it holds above $0.7300, though it may be challenged in North America today. It has run into resistance around last week's high (~$0.7040). A break of $0.7300 could test support in the $0.7270-$0.7280 area. The dollar's slide against the Chinese yuan continued today, and a new two-year low has been recorded near CNY6.55. The PBOC set the dollar's reference rate at CNY6.5762, in line with expectations. The yuan is also trading at two-year highs against its basket (CFETS)
Europe....
....MUCH MORE
Dollar index futures 92.38 down .25
