From Marc to Market:
Overview: With the FOMC's decision several hours away, the dollar is trading lower against nearly all the major currencies. The Antipodeans and Norwegian krone are leading. The euro, yen, and sterling are posting minor gains (less than 0.1%). Most of the freely liquid and accessible emerging market currencies are also firmer. The Turkish lira is a notable exception. The decline in the core inflation and a smaller than expected rise in the headline pace embolden officials for another rate cut when the central bank meets on November 18. The JP Morgan Emerging Market Currency Index is rising for the second consecutive session after falling in the previous four sessions. Equities are lower. The MSCI Asia Pacific Index fell for the fifth session in the past six. Among the large markets, Taiwan and Australia bucked the trend. The four-day advance of the Stoxx 600 in Europe is at risk, and US futures are weaker. Benchmark 10 year yields are mostly two-four basis points lower across most high-income countries today. That puts the US 10-year Treasury yield near 1.52%. Australia's two-year yield fell almost 10 bp to 0.55%. It had peaked above 0.71% last week. The three-year yield is off nearly 30 bp in recent days. Gold continues to chop within the range set last Friday (~$1772-$1801). Ahead of the OPEC+ meeting tomorrow amid talk that the US may seek to coordinate sales for a coalition of strategic reserves and a build of US inventories reported by API weigh on oil prices. December WTI has approached the 20-day moving average (~$82), which has not closed below since late August. Base metals are higher as iron ore snapped a five-day slide during which it lost over 20%. Copper is also recovering after forging a base in the $432-$433 area. It is up around 1.5% today. If sustained, it would be the largest gain in three weeks.
Asia Pacific
China's Caixin services unexpectedly rose to 53.8 from 53.4 in September. Recall that the manufacturing reading had improved to 50.6 from 50.0. The net effect was that the composite edged up to 51.5 from 51.4. The composite has converged with the "official" PMI, which stands at 50.8. Separately, note that China is experiencing a broad spread of the virus into a dozen provinces, and the number of new cases is the highest in a couple of months. Inter-provincial travel has been restricted, and new social protocols are being introduced. According to reports, the government advised households to stock up in necessities and ensure adequate food supplies for local authorities.
Australia's service and composite PMI shows the recovery was not quite as strong as the preliminary data suggested. The service PMI rose to 51.8, not 52.0 from 45.5. The composite stands at 52.1 rather than 52.2. It was at 46 in September. Tomorrow Australia reports Q3 real retail sales, but it will still be picking up the weakness of the lockdown. September trade figures will also be reported. Weaker exports and stronger imports are expected to have narrowed the trade surplus by almost 20% to A$12.4 bln. Ahead of the weekend, the central bank will make its Monetary Policy Statement. The swaps market is pricing in 70 bp, down from 80 bp, of tightening over the next 12 months....
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