From Marc to Market:
Overview: Helped by new record highs in the S&P 500 and Dow Industrials, constructive earnings, and an easing of political tensions, risk appetites are robust today. The MSCI Asia Pacific Index recouped yesterday's losses plus more as the large equity markets in the region, but China and Hong Kong rose, led by a more than 1% gain in Tokyo. European shares are rallying, and the Stoxx 600 is posting gains for the ninth session in the last 11 and is at its best level since early September. US futures are extending yesterday's gains. European and US benchmark yields are softer. The US 10-year is slipping below and little changed near 1.62%. It had probed the 1.70% area at the end of last week. It has not been below 1.60% for a week. European yields are mostly 1-3 bp lower. The dollar is narrowly mixed. Sterling and the dollar bloc are trading with a firmer bias, while the yen and Swiss franc are underperforming. After a rapprochement to the latest drama, the Turkish lira rallied 1.5% today to lead the emerging market currencies higher. Poland, Hungary, and the Philippine peso are seeing minor losses. Gold is recording a lower high for the second consecutive session but is holding above $1800. A break could spur a test on the 200-day moving average around $1793. December WTI, which poked above $85 a barrel yesterday, has come back softer today in the roughly $83.00-$84.15 range. Note that EU ministers are meeting today to discuss how to balance efforts to cushion the blow of high energy prices with the efforts to address climate change and reduce carbon use. Copper prices are weaker as they slip for the fifth time in the past seven sessions. The CRB Index made a new multi-year high yesterday.
Asia Pacific
China's Vice Premier Liu He and US Treasury Secretary Yellen held their second call in four months yesterday. China said the call was "pragmatic, candid, and constructive." Still, it seems that Bloomberg's assessment that the overall US-China relationship has improved since Biden and Xi held a phone call last month seems like a stretch. There was a successful "prisoner exchange," but there is little else concrete that one can point to, and no date has been set for the so-called virtual summit, which seems like a fancy way to say a phone call in this Covid era, between the two leaders.
At the end of last week, the Reserve Bank of Australia intervened for the first time in more than six months to defend its 10 bp target of the April 2024 bond. The yield reached 19 bp before the central bank stepped in and bought A$1 bln of the bond. The yield is still above the target, and the market seems inclined to test the RBA's resolve. The swaps market is pricing in about 40 bp of tightening in a year. Governor Lowe argues that until inflation is sustainably in the 2%-3%, which he does not anticipate until 2024. Australia reports Q3 CPI first thing tomorrow in Canberra. The headline is expected to have increased by 0.8% in the quarter, the same pace as Q2. The year-over-year rate is likely to moderate to 3.1% from 3.8%. The trimmed mean and weighted mean measures may tick up but will likely remain below 2%. The RBA meets next Tuesday morning in Australia....
....MUCH MORE
