Monday, February 1, 2021

Capital Markets: "Markets Snap Back"

 From Marc to Market:

Overview: Global equities are snapping back today, while the greenback retained the strength seen last week that was attributed to safe-haven flows. The MSCI Asia Pacific Index snapped a four-day decline led by Hong Kong, South Korea, India, and Indonesia. Europe's Dow Jones Stoxx is up around 1.1% after losing a little more than 3% last week. US shares are trading higher as well. Benchmark 10-year yields are firm, with the US near 1.07%. Yields in Europe are softer, with peripheral yields led lower by Italy, where a political crisis resolution is still anticipated. The dollar is higher against most of the major currencies, though sterling's resilience remains evident. The JP Morgan Emerging Market Currency Index is higher for its third consecutive session, led by the freely accessible currencies, including the Mexican peso, Turkish lira, South African rand, and Russian ruble. The weakest so far today has been the Chinese yuan, which is off nearly 0.6%. Gold is firmer but within the pre-weekend range, while the retail-led short squeeze in silver saw a gap higher opening in Asia, and follow-through buying lifted it to over $30, for the first time since 2013. It has come off the boil, but around $29.50 at pixel time, it is up about 9% after rising about 6.5% in the past two sessions. March WTI slipped through the 20-day moving average (~$52.15) for the first time in a month but has recovered smartly to hover around $52.50.

Asia Pacific
Chinese growth shifted lower in January, and given the distortions around the Chinese New Year, the next clean read on the world's second-largest economy may be several weeks away
. The manufacturing PMI eased to 51.3 from 51.9, and the non-manufacturing PMI fell to 52.4 from 55.7. Both were lower than expected. New manufacturing orders slowed to 50.2, the weakest since August. The decline in new orders in non-manufacturing PMI fell below the 50 boom/bust level for the first time since last March. Caixin's manufacturing PMI also disappointed, slipping to 51.5 from 53.0 at the end of last year.

Japan's preliminary manufacturing PMI was revised a touch higher to 49.8 from the initial reading of 49.7. In December, it was at 50, the highest since April 2019. However, we note that several others in the region report robust numbers outside of China and Japan. Taiwan and South Korea's manufacturing PMIs are the strongest in around a decade. Indonesia and the Philippines are at multi-year highs. Separately, South Korea reported January trade figures. Exports fared better than anticipated (11.4% vs. 9.8%), though still slower than December's 12.6% gain. Imports picked up to a 3.1% pace from 2.2%, which explains the narrowing of the overall trade surplus to $3.96 bln from December's $6.77 bln. Australia's manufacturing PMI was confirmed at 57.2, up from December 55.7. The Reserve Bank of Australia meets tomorrow and is expected to stand pat....