Thursday, May 20, 2021

Capital Markets: "Market Stabilize after Yesterday's Tumultuous Session"

From Marc to Market:

Overview: US equity indices finished lower, but the real story was their recovery. Asia Pacific equities were mixed, with Australia's 1.5% rally leading the recovery in some markets, including Tokyo and Singapore. Europe's Dow Jones Stoxx 600 is up a little more than 0.5% near mid-session, led by information technology and industrials, while energy and financials lagged with small gains. US futures are narrowly mixed. The other main development was the jump in US Treasury yields as the market (over) reacted to the FOMC minutes that showed that the discussion of tapering has already begun. The rising yield lent the dollar support. The US 10-year yield is hovering around 1.65%, while European yields have edged a little higher. The German two-year bond yield is at the high for the year near -66 bp. The dollar has come back offered, falling against most of the major currencies. The Swiss franc and Japanese yen are leading the move advancers with around 0.25% gains, while the Scandis are lower. The euro and sterling are firmer but little changed. Emerging market currencies are split, with most of the Asian currencies softer and the European currencies higher. Yesterday's 0.4% drop in the JP Morgan Emerging Market Currency Index ended a four-day advance, but it is recovering a little today. Gold is consolidating in yesterday's broad range (~$1852-$1890) and is holding above $10 inside both extremes. After falling around 4.5% Tuesday-Wednesday, July WTI is trading quietly between about $63.20 and $64. Iron ore prices tumbled 6.3% in China, but copper prices that fell more than 3% yesterday have stabilized today. July lumber futures prices snapped a seven-day 25% slide yesterday with a nearly 5% gain.

Asia Pacific
Japan's net exports shaved 0.2 percentage points off Q1 GDP, but today's figures suggest Q2 is off to a strong start.
Led by autos and parts, exports surged 38% year-over-year in April, well above expectations. The year-over-year comparison is, of course, distorted by last year's covid shock, but exports were up 8% from 2019. Shipments to the US are up 45% year-over-year and nearly 34% higher to China. Exports to Europe rose by almost 40%, the most since 1980. Imports rose by 12.8% compared with the median forecast in Bloomberg's survey for a 9% gain. The net result was a trade surplus of JPY255 bln rather than JPY148 bln.

Australia's April employment report was mostly disappointed.
Overall it lost around 30k jobs when economists expected a 20k increase. Still, the number of full-time positions grew by almost 34k after a 21.1k loss in March. The participation rate fell to 66.0% from 66.3%, and that explains most of the drop in the unemployment rate to 5.5% from a revised 5.7% (initially 5.6% in March). The JobKeeper wage subsidy program ended, and it may take another month or so to have a better sense of the pace of recovery in Australia's labor market....

....MUCH MORE including such tidbits as:

The European Parliament has called on the EC to formally suspend ascension negotiations with Turkey over human rights and Ankara's foreign policy.  The vote was overwhelming: 480-64 with 150 abstentions.  The ultimate decision is in the hands of the European Council (heads of state), and it will decide next month.  Austria and France are sympathetic, while Germany, Bulgaria, and Hungary are opposed. Greece is still at odds with Turkey over gas exploration and Cyprus, but the US and some European countries are torn over Turkey's strategic importance.