From Marc to Market:
The Euro and Sterling Remain within Tuesday's Ranges
Overview: A new record high in the S&P 500 yesterday and news that Evergrande had made an interest rate payment failed to lift most Asia Pacific bourses, though Japan and Hong Kong, among the large markets, posted modest gains. The Dow Jones Stoxx 600 is pushing higher in the European morning to put its finishing touches on its third consecutive weekly gain. US tech is trading off, and this is weighing on the NASDAQ futures while the S&P 500 is little changed. The US 10-year yield had probed 1.70% yesterday and is coming back a basis point or two lower. European benchmark yields are mostly a little higher, but soft UK data are helping the Gilts outperform. The Antipodeans are recovering from yesterday's fall and leading the major currencies higher against the dollar. Sterling is struggling. Emerging market currencies are mixed, but the JP Morgan EM FX index has stabilized after yesterday's decline. After dropping 3.25% yesterday on the back of an unexpectedly large 200 bp rate cut, the Turkish lira has extended its losses by more than 1% today (for a 3.7% loss on the week). Political and economic turmoil in Brazil led to the resignation of four members of the economic team that saw the real sell-off for the fourth consecutive session yesterday and is off 3.6% for the week coming into today. Gold is rising for the fourth consecutive session, and its 1.5% gain this week is the best in two months. Crude oil is stabilizing after yesterday's 1% decline. December WTI is still up about 1% on the week, which is the ninth consecutive weekly advance (during which time it has risen from around $61.50 to trade around $82.80 now). After plunging 3.75% yesterday, its biggest decline in four months, copper prices have risen around 1%.
Asia Pacific
Rising fresh food and energy prices helped lift Japan's September CPI. The headline rate now stands at 0.2% (up from -0.4%). It is the first reading above zero since August 2020. The core rate, which excludes fresh food, rose to 0.1% from zero. It is the highest reading since March 2020. However, when fresh food and energy are excluded, Japan disappointed, with an unchanged rate of -0.5%. On the other hand, the preliminary October PMI suggests the world's third-largest economy has turned the corner as the formal emergency is lifted. The manufacturing PMI rose to 53.0 from 51.5, and the service PMI rose to 50.7 from 47.8. These helped lift the composite to 50.7 from 47.9, the highest since April. The BOJ meets next week. No new initiatives are expected but will provide updated forecasts.
Australia's October PMI also improved, and it too looks to have turned the corner. The manufacturing PMI rose to 57.3 from 56.8, and the service reading rose to 52.0 from 45.5. As a result, the composite stands at 52.2, its highest reading since June, after September's 46.0. Separately, the central bank defended its yield curve control strategy by buying April 2024 bonds (A$1 bln) for the first time since February. The market was sufficiently impressed to knock as much as five basis points off the yield. Australia reports Q3 CPI next week, and the year-over-year rate is expected to moderate to 3.1% from 3.8%....
.... MUCH MORE
