From Marc to Market:
Overview: The rise in 10-year benchmark yields stands out. The US 10-year yield is up four basis points to 1.36%, while European yields are 3-5 bp higher. Australia, where the central bank indicated it would proceed with its tapering plans, saw no change in their benchmark, and its two-year yield remained a little below zero. Equity markets are mixed. The MSCI Asia Pacific Index has been up for the past seven sessions, struggled today, though Japanese and Chinese markets advanced by more than 1%, and Hong Kong's Hang Seng rose for the sixth time of the past seven sessions. Europe's Dow Jones Stoxx 600 is paring yesterday's gains, and US futures are posting small gains. The dollar is mostly higher, and the dollar-bloc currencies are the heaviest, off 0.2%-0.35% through the European morning. The Scandis are posting small gains, while the euro straddles unchanged levels and the yen is slightly softer. Emerging market currencies are mostly lower, and the JP Morgan Emerging Market Currency Index is lower to extend yesterday's loss. Gold is lower for the second session after rallying 1% before the weekend. October WTI lost 1% before the weekend and is still heavy today, but it remains within the range set last Thursday (~$69.00-$70.55). China's iron ore prices slumped for a sixth session, while Singapore's contract rose 4% after sliding 8.3% yesterday. Copper is off slightly more than 1%.
Asia Pacific
The Reserve Bank of Australia kept its policy unchanged. It will proceed with the weekly tapering to A$4 bln a week and hold that until February. It is not so much as tapering, a gradual reduction as a means of exit, but rather a downshift in buying intentions. The central bank does not expect the economy to return to its pre-Delta path until the second half of next year.
Japan's households cut spending for the third consecutive month in July. On a monthly basis, seasonally adjusted, spending fell by 0.9%, leaving it 0.7% above the depressed year-ago levels. Transportation and food expenditures rose, but medical spending and home goods purchases fell. The government targets a 60% vaccination rate by the end of this month, up from about 48%, and the state of emergency may begin being lifted next month. On the other hand, wages are rising (fifth monthly increase year-over-year), which will help provide a lift to the economy in Q4. Meanwhile, Kono, former foreign and defense minister and now Minister of Vaccination and Administrative Reforms, appears to be solidifying his lead to replace Prime Minister Suga. A large supplemental budget is reportedly being prepared following the LDP leadership contest at the end of the month and ahead of the national election needed later this fall.
Despite port and other logistic disruptions, China was surprised with a strong August trade figure. Imports and exports were stronger than expected. Imports surged 33.1%, and exports rose by 25.6%, both now at record levels. The net result was a whopping $58.3 bln surplus, the biggest in seven months. Oil and natural gas imports fell, while iron ore and soy imports rose (10% and 9%, respectively). The export of oil products and steel fell. Many suggest that strong exports to the US and Europe were for the year-end holiday and consumer demand, which may be a little earlier this year as supply chain disruptions and other delays spur order adjustments. China's large trade surplus did not translate into an increase in the PBOC's August reserves, which eased less than $1 bln. On a $3.23 trillion base, the change is meaningless. Valuation adjustments may have helped lower reserves. The other reserve currencies eased against the dollar, and bond prices fell....
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