From Marc to Market:
Overview: The euro has been sold through $1.20 for the first time since December 1 and has now given back roughly half of the gains scored from the US election (~$1.16) to the early January high (~$.1.2350). More broadly, the greenback is bid against most of the major currencies, with the Australian dollar more resilient after reported record iron ore exports and all but a handful of emerging market currencies. Risk appetites, as expressed in the equities markets, are more subdued. The MSCI Asia Pacific Index snapped a three-day (4%+) advance, while Europe's Dow Jones Stoxx 600 is consolidating in a narrow range, though holding above the gap created with yesterday's sharply higher opening. US shares are a little firmer. Benchmark 10-year bond yields are little changed, leaving the US Treasury around 1.13%. Italian bonds also remain firm as the political drama of establishing a technocrat government continues. The price of gold lurched lower. Having settling Monday above $1860, gold has been sold through the trendline connecting the November and January lows (~$1817) and fallen to nearly $1810 before stabilizing a bit in the European morning. Oil prices are moving in the opposite direction. March WTI is advancing for the fourth session to straddle the $56-a-barrel level. It finished last week, a little above $52.
Asia Pacific
Australia's December trade surplus was not as large as expected, and exports did not rise as anticipated, but the details were favorable. The surplus widened to A$6.79 bln from A$5.01 bln. Exports rose by 3% for the second consecutive month. Economists had looked for an acceleration. Imports, which rose by a revised 9% in November (from initially 10%), fell by 2%, as expected. On one level, it is notable that Australia completed its third consecutive year with a trade surplus. On another level, iron ore exports surged by 21% in the month to a new record of A$12.6 bln. Coal exports rose by 26% to A$3.7 bln. Moreover, the country breakdown showed that China, which had been punishing Australian exporters for Canberra's foreign policy, relented. Australia's exports to China rose 21% in the month of December to A$13.3 bln. Exports to Japan increased by almost a quarter to A$4.4 bln.
Reports indicate that foreign investors increased their Chinese government bonds' purchases in January to a recovery of CNY121 bln (~$18.7 bln). Their holdings are now estimated to be about CNY2 trillion), which is about 4% of the outstanding. The inclusion of Chinese bonds in major benchmarks, coupled with the relatively high yield and an appreciating currency, makes it a favored play by real and levered accounts. Offshore investors added CNY570 bn to their holdings in 2020, more than double the net purchases in 2019.
The US dollar was confined to a 20-pip range against the Japanese yen yesterday and enjoys a slightly wider range today. It has recorded a new high for the move, just shy of JPY105.30. Today is the seventh consecutive dollar advance. The next resistance area is seen around JPY105.60, which also houses an expiring option of around $475 mln and the 200-day moving average. Given that the intraday indicators are stretched, the North American market may find it challenging to extend the greenback's upside that much ahead of the US jobs data tomorrow. While the trade figures helped lift the Australian dollar, it remains vulnerable to the recovering US dollar. It may spend most of the remainder of the session between $0.7600, where a A$545 mln expiring option is struck, and $0.7640 area. The PBOC set the dollar's reference rate at CNY6.4605, a little firmer than the models had it. The central bank's liquidity provision was also seen as stingy, and this saw the overnight repo rate rise for the first time in four sessions (+19 bp to 2.05%).
Europe....
....MUCH MORE
