From Marc to Market:
Overview: The capital markets remain unsettled. The US CPI with a 6%-handle has lifted bond market volatility, disrupted rallies in stocks, and extended the dollar's rally. Small gains in the US S&P 500 and NASDAQ yesterday and a better news stream from China helped lift Asia Pacific equities today. Benchmarks in Japan, South Korea, and India rose more than 1%. Europe's Stoxx 600 is struggling as energy, health care, and utilities are mostly offsetting gains in consumer discretionary and communication, and real estate sectors. It has increased 19 of the past 24 sessions. US futures are posting slight gains. The bond market remains under pressure. The US 10-year yield is three basis points higher at 1.58%, which puts it up nine basis points this week. European benchmarks are firmer. Germany is a notable exception. It is virtually unchanged on the day, leaving the yield up a single basis point this week. This week, the peripheral yields, led by Greece and Italy's 10-15 bp jump, have risen more than the core. The dollar continues to trade firmly. After making a new low for the year (~$1.3355), sterling has stabilized. The euro was sold to fresh lows in the European morning (~$1.1435). On the week, the Swedish krona's 2% decline leads, but only the Japanese yen and British pound among the majors have fallen by less than 1% this week. A handful of emerging market currencies in Asia, including the Chinese yuan, are posting gains against the greenback. Still, most are lower, led by the Russian ruble, followed by the Mexican peso and Turkish lira. The JP Morgan Emerging Market Currency Index is off around 0.4% this week. It will likely be the eighth weekly decline in the past 10. Rising yields had seemed to sap gold's strength earlier, but it has a six-day advance in tow coming into today. It is struggling to sustain the momentum after nearing $1870 in the middle of the week. With about a 0.8% loss on the day (~$1849), it is up almost 1.7% on the week. December WTI is off 1.6% as it tests the $80 level. Today's loss is enough to offset the gains earlier in the week, and a close below the $81.25 area extends the weekly loss to three, the longest since last October.
Asia Pacific
Three developments in China helped lift sentiment. First, Single Day sales (11-11) surged to new records. Second, the US rejected a request to investigate Asian solar panel manufacturers. Third, an investigation into Evergande's relationship with Shengjing Bank appears to have been completed, and there is speculation that Beijing will begin easing up on the property developers. Separately, we note that several new virus cases in Beijing have led to orders to cancel conferences.
First thing Monday in Tokyo, Japan reports Q3 GDP. A small contraction is expected, but the more recent data gives reason to expect that the world's third-largest economy is recovering. Moreover, the government is expected to unveil a large supplemental budget in the coming weeks. Consumption and business spending is expected to have fallen in Q3. Trade and inventories may have been less of a drag than in Q2 when both shaved about 0.3 percentage points from growth. Perhaps the most disturbing element will be the deflator. It fell 0.2% in Q1 (year-over-year), the first decline in three years. It fell 1.1% in Q2 and is expected to have fallen 1.2% in Q3....
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