From Marc to Market:
Overview: The combination of OPEC+ decision not to boost output next month and Fed Chair Powell's seemingly lack of concern about the level of long-term rates pushed on a door that was already open. Oil is higher, yields are higher, most equity markets are lower, and the dollar has surged. The S&P 500 is practically flat for the year after yesterday's losses, and the NASDAQ is off nearly 10% from the record high set in the middle of last month. Most Asia Pacific markets fell, though Japan's Topix was a notable exception. Malaysia and Thailand equities also escaped the carnage. Europe's Dow Jones Stoxx 600 is off around 0.4%. It is the second day of losses, but it is still up a little more than 1% for the week. US futures indices are paring earlier losses. The US 10-year Treasury yield is near 1.55%. European benchmark yields are 1-3 bp higher, while Australian and New Zealand yields rose another 6-7 bp. Australia's 3-year bond yield, targeted at 10 bp, will finish the week a little above 15 bp. The dollar is riding higher. The euro fell to new lows for the year near $1.1915, and the dollar pushed above JPY108.50. The Antipodeans and sterling are leading the majors lower with 0.5%-0.7% declines. The JP Morgan Emerging Market Currency Index is falling for a third consecutive session and is at new lows for the year. Gold was is trying to stabilize after being sold below $1690. The $1700 may now offer resistance. April WTI jumped 4.2% yesterday on the back of OPEC+ surprise and is up another 2% today to push above $65 a barrel.
Asia Pacific
Weekly portfolio flows from the Ministry of Finance showed that Japanese investors have sold what appears to be a record JPY3.6 trillion (~$33.5) of foreign bonds in the past two weeks. Some accounts link it to the approaching fiscal year-end (March 31), but it seems early for such strong seasonal flows and maybe a reaction to market developments. When Japanese institutional investors, especially the government-run pension funds, buy foreign assets, some observers want to call it intervention, but when they repatriate, as they apparently have been doing, not a peep. Meanwhile, reports suggest that what they are selling are off-the-run issues and that their US counterparts are hedging by selling on-the-run issues. Due to the negative general collateral repo rate, those giving cash for Treasury securities pay for the privilege. Separately, BOJ Governor Kuroda played down market talk that the central bank could widen the band that the 10-year bond is allowed to trade under the yield-curve control policy (+/- 20 bp around zero).
China's National People's Congress has begun. The initial highlights include a GDP target of above 6% this year and a 3.2% budget deficit. No GDP target was set last year due to the pandemic and this year's target is lower than many expected. The world's second-largest economy is expected to expand by 8.0%-8.5% this year. Indeed, given the base effect, a 6% expansion seems baked into the cake. The central government deficit was 3.6% in 2020, and the 3.2% target this year may be a little higher than anticipated. The government seeks the creation of 11 mln new jobs this year....
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