"Dad, why do people trade the New Zealand currency?"
"I don't know son, I just don't know."
"I don't know son, I just don't know."
From Marc to Market:
Overview: Investors are trying to figure out the impact of the likelihood of a vaccine. One thing that has happened is that the market perceives less chance that the UK or New Zealand will adopt negative rates, and their respective currencies are adjusting higher. Meanwhile, the equity rally is continuing in Asia and Europe. The MSCI Asia Pacific Index rose to new two-year highs in its seventh consecutive advance. During the Nikkei's seven-day rally, it has gained around 10% to near 30-year highs. Today, Taiwan, South Korea, and Australia rose over 1%, leaving China and Hong Kong in the red. The Dow Jones Stoxx 600 is rising for the eighth session of the past nine, during which time it has risen around 13%. It is at fresh highs since March. US shares are trading firmer, and the NASDAQ is trying to snap a three-day slide. The US cash bond market is closed today, while yields are firmer in Europe and the Asia Pacific. The dollar is mostly firmer, though the Antipodeans are firm, and the New Zealand dollar traded above $0.6900 for the first time since March 2019. Most of the freely accessible emerging market currencies are moving higher, led by the Turkish lira. After falling for the previous six sessions, the JP Morgan Emerging Market Currency Index is higher for the seventh consecutive session. Gold is trading quietly in roughly a $5 range on either side of $1880. Oil is trading higher, and the December WTI contract traded above $42.60 for the first time since early September. If the EIA confirms the API estimate of a five million barrel draw, US inventories would be at their lowest since March.
Asia Pacific
The Reserve Bank of New Zealand offered a new loan facility that will be launched next month (Funding for Lending Program), NZD$28 bln), and left its bond-buying (NZD$100 bln) and cash rate target (25 bp) unchanged. It also delayed the imposition of new capital buffer rules for a second time. The central bank upgraded its economic outlook. The market responded by removing the risk that negative rates are adopted. They had been priced in for next year. Governor Orr was more circumspect. While acknowledging the economy has been more resilient than expected, he was reluctant to eschew any policy option, including negative rates. New Zealand's 10-year yield jumped nearly 15 bp to 0.85%. The two-year yield jumped 10 bp to 0.18%. The New Zealand dollar's advancing streak has been extended to the eighth consecutive session.
China's Single's Day sales were impressive, but the focus is on the new antitrust action that threatens to curtail the growth of its internet giants like Alibaba. This saw the internet companies sell-off hard today and drag down the major benchmarks. Although Europe and US regulators have begun pushing back against the large US tech companies, Beijing's actions are catching many investors and observers by surprise. Separately, China reported lending slowed considerably in October. It is difficult to know the extent that the long holiday was the main driver or if the reduced government bond sales part of a larger policy adjustment.
A new law in Hong Kong making "patriotism" a requirement for lawmakers disqualified four opposition officials. In response, the entire opposition bloc resigned today. They accounted for 15 seats in the 70-member legislative body. Legislative Council elections were scheduled for this past September but were postponed a year. ....
....MUCH MORE
