From Marc to Market:
Overview: Risk appetites have not returned from the weekend. Equities are heavy, and bond yields softer. The dollar is drifting lower in Europe. China's unusually candid admission of the shortcomings of its vaccine and record new cases in India saw all the equity markets in the region fall. Only South Korea and Taiwan escaped the carnage that saw the Indian market tumble 3.5%. Recall that the MSCI Asia Pacific peaked on February 16. European shares have been faring better. The Dow Jones Stoxx 600 has a six-week rally in tow but is off almost 0.25% through the European morning today with all the sectors under waters but utilities. US futures are around 0.15%-0.25% lower. Benchmark 10-year yields are 1-2 basis points lower in Europe and the US, leaving the Treasury near 1.65%. The US Treasury will sell $96 bln in coupons today (a new three-year note and re-opening of the 10-year) and $111 bln of bills. The dollar's gains in Asia-Pacific turnover have reversed in Europe. Among the majors, only the Swedish krona and Canadian dollar have been unable to turn higher on the day. The yen and sterling are leading the move. Emerging market currencies are mixed, leaving the JP Morgan Emerging Market Currency Index slightly changed after falling ahead of the weekend. Gold rose to its highest level since late February last week (almost $1759) but pulled back ahead of the weekend and is lower today, straddling the $1740 area. Support is seen near $1730. June WTI is firm but below $60. The contract continues to trade within the range set on April 5 (~$57.70-$61.50). OPEC updates its outlook tomorrow and the IEA on Wednesday.
Asia Pacific
Gao Fu, the Director of China's Centers for Disease Control, acknowledged that its vaccines are not particularly effective over the weekend. It looks to offer around half the protection of the Pfizer and Moderna vaccines. China has yet to approve foreign vaccines. Beijing has exported millions of vaccines and has thrown shade on the mRNA vaccines. Some countries have been suspicious of the efficacy of China's vaccine. The UAE has experimented with giving three doses instead of two to boost the antibodies. Singapore has stockpiled but not used the Sinovac.
US confrontation with China is poised to escalate shortly. A bill will be debated by the Senate Foreign Relations Committee as early as tomorrow that will sharpen the antagonism and could draw the most bipartisan support of any initiative so far in the new Biden administration. The bill builds on efforts in the previous administration's waning days to deepen/broaden relations with Taiwan while still stopping shy of a defense pact or formal recognition of Taipei. The US is concerned that China is trying to change the status quo through its persistent harassment of Taiwan through aerial excursions with what appears to be an increasing number of planes. China fears that the US is trying to change the status quo with its diplomatic parries as part of its larger encirclement and isolation strategy. The previous Secretary of State had called for regime change in Beijing. The bill would expand the scope of the Committee on Foreign Investment in the US (CFIUS). It could also entail more sanctions and other measures to check China's territorial claims.
Japan's vaccine efforts kick-off in earnest today. While continental Europe has lagged behind the UK and US, Japan is lagged behind the large European countries in rolling out the vaccine. Its infection numbers and fatalities are considerably lower than in most other high-income countries. Meanwhile, new social restrictions came into force in Tokyo, Kyoto, and Okinawa earlier today. Prime Minister Suga will be the first foreign leader to visit US President Biden in Washington at the end of the week. The two big issues seem to be containing China and Tokyo's support for the administration's new tax proposals. The economic news was better with a surge in March machine tool orders. The 65% increase (year-over-year) is the most in a decade. The base effect flatters, but it still represents a 21% increase month-over-month....
....MUCH MORE
