From Marc Chandler at Bannockburn Global Forex:
Overview: The markets lack a clear direction today and await fresh incentives. After gaining almost 1% yesterday, the MSCI Asia Pacific Index slipped. Japan, Hong Kong, and Australia are among the few equity markets that rose. The Dow Jones Stoxx 600 is posting minor gains, while US futures are largely steady. The S&P 500 and NASDAQ have a five-day advancing streak in tow. The US 10-year yield reached a five-month high near 1.64% yesterday and extended to 1.67% before consolidating. European benchmark yields are 1-2 bp lower, including the UK Gilts, despite the strong inflation report. Asia Pacific yields mostly played catch-up to yesterday's rise in rates, but the Chinese benchmark slipped slightly back below 3%. The dollar is decidedly mixed. European currencies are softer, while the dollar-bloc currencies are posting small gains. Central and Eastern European currencies are also lower, while many Asian currencies are higher, as are the South African rand and Mexican peso. The JP Morgan Emerging Market Currency Index is little changed. It has been alternating between gains and losses since the middle of last week. Yesterday, it rose by almost 0.2%. Chinese officials reportedly are contemplating intervention to steady coal, while the LME opens an inquiry into copper and introduces some position rules and spread limits. Copper is trading lower for the third consecutive session. The 3.3 mln barrel build of US oil stocks estimated by API helped steady oil prices, and the November WTI contract is trading within this week's range (~$81.80-$83.90). Gold is trading firmly but inside yesterday's range (~$1763-$1785), and just below $1780 near midday in Europe.
Asia Pacific
The strong seasonal pattern of Japan's trade remained intact as September's balance improved over August's (-JPY623 bln vs. -JPY637 bln). Exports and imports were stronger than expected. Exports rose 13.0% year-over-year in September, about half the pace seen in August. Exports were restrained by the disruption in the auto sector. Japan's auto shipments are off 40% from a year ago. Steel exports and sales of chip-making equipment to China offered some offset. Higher oil prices, and some observers cited the new iPhone as possibly boosting imports too.
China reported its first decline in house prices in six years. The fall was minor, but the direction, in light of the disruption in the property market, is notable. New house prices in 70 cities, excluding state-subsidized housing, eased by 0.08% last month. Existing house prices fell in about three-quarters of the cities. The slump in sales may be hiding an even larger decline in prices. According to some estimates, residential sales were off 17% last month, and existing home sales were off by nearly 65% in the first part of October. Separately, note that China completed its $4 bln dollar-denominated bond sales. There were four tranches (three years to 30 years), and at the short-end, China paid about six basis points above Treasuries and around 53 bp at the long-end.Rising US yields seem to be the most compelling explanation of the greenback's rise against the yen to JPY114.70 earlier today, a new four-year high....
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