From Marc to Market:
Overview: Ahead of what is expected to be reports confirming the surging US economy, the dollar remains on its back foot, unable to sustain even modest upticks. The euro has drawn closer to $1.20, and the dollar is holding below JPY109 for the first session since March 24. The dollar-bloc currencies lead today's move against the greenback, but nearly all the emerging market currencies are participating too. The JP Morgan Emerging Market Currency Index is rising for the third consecutive session. The US threatened sanctions against Russia for cyberwarfare, and election interference has seen the ruble drop 1%. Turkey's rate decision is expected shortly, and the market expects no immediate reversal of the rate hike that cost the former governor of the central bank his job. Equities in the Asia Pacific region were mixed. Hong Kong, China slipped, but Taiwan's 1.25% gain, helped by strong earnings from TSMC, led the regional rally. Stocks are firmer in Europe, and the Dow Jones Stoxx 600 is a new record high. US shares are also trading higher after the S&P and NASDAQ faded yesterday. The US 10-year yield is softer at 1.61% and is now nearly flat over the past month. European bond yields are 1-2 bp lower, leaving the core up 6-7 bp over the past month, while Italy's 10-year yield has climbed 17 bp and Spanish Bono yields are 10 bp higher. Gold is first and continued to knock on $1750. Oil prices are consolidating after yesterday's surge. June WTI is in a roughly 50-cent range on either side of $63.
Asia Pacific
Australia's employment report was mostly better than expected as 70.7k jobs were filled last month, twice the median forecast from Bloomberg's survey. The unemployment rate slipped to 5.6% from 5.8%, which was also a bit better than expected, especially given the unexpected rise in the participation rate (66.3% vs. 66.1%). However, the disappointment was in the loss of full-time positions (20.8k), which means the job growth was solely a function of part-time positions (91.5k). That said, we must acknowledge that Australia has recouped all the full-time jobs lost last year. The unemployment rate remains above the 5.2% averaged in Q1 20.
The Bank of Korea left the seven-day repo rate steady at 0.5%, as widely expected. It is a little more optimistic/confident in the economic recovery. It recognizes that its 3% GDP forecast made in February can be overshot, while price pressures remain modest (~2%). Separately, while the KOSPI reached a new record high market capitalization, South Koreans have been busy buying US shares. In Q1 21, South Korean investors $128.5 bln in foreign stocks, and the US accounted for more than 93% (or ~$120 bln).
The summer Olympics are supposed to start in 99 days. Public opinion in Japan is very much against holding the games. At the same time, Prime Minister Suga seems to be counting on a successful event to bolster his chances of being re-elected in the fall. The Secretary-General of the LDP acknowledged today that canceling the Olympics is still possible. Several parts of Japan where the contests would be held are in a formal emergency, and the vaccine rollout is lagging well behind Europe. Tokyo is reporting a two-month high in the number of cases, and Osaka is setting new record highs....
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