From Marc Chandler at Bannockburn Global Forex:
Overview: Neither the chaos and tragedy unfolding in Afghanistan nor the US refusal to acquiesce to the allies' request to extend the August 31 deadline seems to have much impact on the global capital markets. Instead, participants seemed to focus on a brighter economic outlook. Perhaps the FDA's approval removes another reason for vaccine hesitancy in the US, while China has reportedly brought its flare-up under control. US S&P 500 and NASDAQ set new record highs, and Asia Pacific markets moved higher, though there was profit-taking in Hong Kong on Chinese tech names. It was the third consecutive advance of the MSCI Asia Pacific Index. European shares are edging higher, and US futures are posting minor gains. The US 10-year continues to push against the 1.30% area, while European yields are mostly 2-3 bp higher. The greenback is narrowly mixed through the European morning, with a small upside bias. The majors are +/- 0.15%. Emerging market currencies are also mixed, but the JP Morgan EM FX index is rising for the fourth session after trending lower in the previous four sessions. Gold has backed off from the 200-day moving average ($1810) it approached yesterday. Support is seen near $1775. October WTI is consolidating its big two-day advance (~8.5%), while iron ore and copper are extending their recoveries.
Asia Pacific
China's regulatory crackdown spooked foreign investors. The SEC has modified the disclosures needed for Chinese IPOs in part because of Beijing's recent actions. Consider the performance of the NASDAQ Golden Dragon Index, which is compromised of companies whose shares are traded in the US while conducting a majority of their business in China. It set a record high in mid-February, a few months after Beijing stopped the Ant IPO. It was halved in the following six months and recorded its lowest level since June 2020 on August 19. The index has fallen for eight consecutive weeks coming into this week and 11 of the past 12 weeks. The Golden Dragon Index rose by 8% yesterday. It was the third successive gain. The fear of missing out may be greater than the fear of Beijing's moves. US SEC Chair Gensler renewed his warning that unless Chinese companies listed in the US allow inspections of their financial audits, their shares could be delisted from the NYSE and NASDAQ starting in 2024.
South Korea's central bank meets tomorrow. It is a close call, and news yesterday of rising household credit favors a hike. The issue is really one of timing, and a slight majority in the Bloomberg survey see the next meeting (October 12) as more likely. Governor Lee had suggested last month that a hike as early as this week was possible and opined that policy would still be easy if the central bank were to deliver 1-2 hikes. The reason we thought the October timeframe would be more likely is primarily due to the virus. Seoul is under lockdown that has been extended into next month. The government's goal is to have 70% fully vaccinated by the end of next month....
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