From Marc to Market:
Overview: US Treasury yields were slipping, but the weaker than expected manufacturing ISM, which included the slowest rise in price paid since March, sent the 10-year yield below 1.15% and the 30-year below 1.83%. The yen appears to be the most sensitive of the major currencies to US yields, and the drop in yields saw the dollar trade down to JPY109.20 and post its lowest close since early June. US equities pared early gains, which had lifted the Dow to new record highs before reversing lower, and both the Dow and S&P 500 finished lower. Asia Pacific shares were mixed, with Taiwan, South Korea, and India (Nifty 50 closed at a record high), among the large markets advanced, while Japan, China, and Australia slipped. Europe's Dow Jones Stoxx 600 is extending its gains into record territory, led by energy and health care. US futures point to a higher opening, while US bonds are consolidating, and the 10-year yield is hovering below 1.20%. European bonds are snapping their rally with a 1-2 bp gain today. That said, Greek bonds are extending their advance today, with the 10-year benchmark yield off for the ninth consecutive session. The Norwegian krone and the Antipodean currencies are leading the move against the dollar, though near midday in Europe, the yen, euro, and Canadian dollar are less than 0.2% changed on the day. Most emerging market currencies are mostly firmer against the dollar. Gold is consolidating in a narrow band within yesterday's range, stuck between the 200-day moving average (~$1820) and the recent lows ($1805). Crude oil prices are stabilizing after yesterday's retreat. Near $71.80, WTI for September delivery is about 0.80% higher after dropping 3.6% yesterday, the most in two weeks. Copper is trading off for the third consecutive session and the fifth in the past six. The CRB Index fell by more than 1% yesterday for the second consecutive session.
Asia Pacific
The Reserve Bank of Australia surprised investors by sticking to its plan to reduce its bond purchases next month. Starting next month, the RBA will buy A$4 bln a week of bonds, down from A$5 bln currently. Governor Lowe argued that once the virus is contained, the economy responds quickly. The slower pace of bond buying will continue through mid-November before another opportunity to taper opens. The RBA will update its economic forecasts at the end of the week. Still, Sydney, which accounts for a quarter of the country's GDP and a little more than a fifth of employment, has been in lockdown for the past five weeks and has reported a record number of cases. Lowe was adamant, though, that the conditions that would allow a rate hike are not anticipated until 2024. The market appears to be discounting a hike in 2023.
Tokyo's core CPI, which excludes fresh food, rose to 0.1% in July, its first positive reading since last July. However, the gain seems to reflect higher energy prices, and without fresh food or energy, Tokyo's CPI remained at zero year-over-year. The headline rate actually slipped to minus 0.1% from zero in June, which was the highest since last September. Japan has not escaped deflation, but officials seem to have stopped doing more to turn it around.
Chinese officials took another swipe today, calling gaming a "spiritual opium," and companies in that ecosystem, including Tencent, fell. Subsequently, the South China Morning Post reported that the reference has been deleted "because its attack against the industry does not represent Beijing's official stance." Ironically, investors using the "connect" links reportedly bought about $3 bln of Chinese shares in the four sessions through yesterday. On another front, Beijing announced an investigation into the possible price manipulation of makers of semiconductor chips for autos. The State Administration for Market Regulation is focused on prices but also on companies "hoarding" chips....
....MUCH MORE
Taking on the gaming community may be a bridge too far for the government and set up the third Chinese revolution (counting 1911). If only the hard-core gamers got out more.
