From Marc to Market:
Overview: The market awaits the ECB meeting and the first look at the US Q3 GDP. The pullback in US shares yesterday was a drag on the Asia Pacific equities. It is the first back-to-back loss of the MSCI Asia Pacific in a few weeks. Europe's Stoxx 600 is recovering from early weakness and US future indices are firm. The US 10-year yield is flat, around 1.55%, after falling around 15 bp over the past four sessions. European bonds are paring yesterday's gains, and yields are up 2-6 bp. The dollar is mixed. Among the majors, the yen, New Zealand dollar, and Norwegian krone are firm, while the Australian and Canadian dollars, Swedish krona, and euro are slightly lower. Emerging market currencies are also mixed. The Turkish lira and South African rand are the weakest, while the Russian rouble, Thai baht, and Indian rupee lead the advancers. The JP Morgan Emerging Market Currency Index is slightly heavier after falling about 0.3% yesterday. Gold is faltering after yesterday's recovery but remains within Tuesday's range (~$1782-$1808). Plans to resume talks between Iran and Europe and a larger than expected increase in US crude inventory saw December WTI initially extended yesterday's losses, but new buying emerged as the 20-day moving average (~$80.70) area was approached. It has not closed below this moving average in two months. After losing around 3% over the past two sessions, copper has bounced more than 1% today. Iron ore and aluminum are softer.
Asia Pacific
As well anticipated, the Bank of Japan left policy on hold. It shaved this year's growth and inflation forecasts. The economy is now projected to grow 3.4% rather than 3.8%, while the CPI forecast cut to zero from 0.6%. While growth projection in the next fiscal year was raised to 2.9% from 2.7%, it is not enough to make up for this year's reduction. Growth in FY23-24 was left unchanged at 1.3%. The CPI forecasts in the next two fiscal years were unrevised at 0.9% and 1.0%, respectively. Separately, September retail sales rose 2.7%, almost twice the 1.5% the median forecast in Bloomberg's survey anticipated. As a result, the year-over-year decline narrowed to -0.6% from -4.0%.
The Reserve Bank of Australia did not defend its target on the April 2024 bond, though the yield is well above the level seen last Friday when it intervened (A$1 bln) for the first time since mid-February. Its three-year yield surged 19 bp (to 1.12%, the highest level in two years). That follows a nearly 16 bp jump yesterday on the back of the above 2% underlying CPI. There is still a window of possibility that it shows its hand tomorrow. Still, today's absence is fueling speculation that at next week's central bank meeting, the RBA may abandon its yield-curve control policy....
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