From Marc to Market:
Overview: A return of risk appetites can be seen through the capital markets today, arguably encouraged by ideas that Omicron is manageable and China's stimulus. Led by Hong Kong and Japan, the MSCI Asia Pacific rose by the most in three months, while Europe's Stoxx 600 gapped higher, leaving a potentially bullish island bottom in its wake. US futures point to a gap higher opening when the local session begins. The bond market is taking it in stride. The US 10-year Treasury is slightly firmer at 1.44%, while European yields are 1-3 bp higher. The dollar-bloc currencies and Norway are leading the move higher among most major currencies. The yen and euro are softer. Sterling struggles to sustain upticks. Among emerging markets currencies, the Turkish lira is bouncing, while most central European currencies are being dragged lower by the weaker euros. The JP Morgan Emerging Market Currency Index is slightly higher after four consecutive losses. Gold is trading within yesterday's narrow range. Oil continues to recover, and the January WTI contract is up around 2.5% (after yesterday's 4.9% advance) and is above $71.50 a barrel. US natgas prices dropped 11.5% yesterday and have come back firmer today, while the European benchmark (Dutch) is up 7% today (~+0.5% yesterday) to near last week's highs. Iron ore prices jumped 7.7% today after 2.5% yesterday, perhaps encouraged by strong Chinese import figures. Copper prices are also firm.
Asia Pacific
The Reserve Bank of Australia stuck to its stance. It may take two years to reach the 2-3% inflation target, and the uncertainties surrounding the Omicron variant also favor a cautious approach. This was in line with expectations. The swaps market still has about 75 bp of higher rates discounted next year. The Australian dollar's gains reflect the risk-on mood.
Japan's economy is on the mend. Household spending rose 3.4% month-over-month in October. Paradoxically, outlays on medical care actually fell (-5.7%) year-over-year in October. Meanwhile, Labor cash earnings rose by 0.2% year-over-year, the same as in September, but less than expected. Households headed by a worker rose 0.5% year-over-year.
China's trade surplus fell to $71.7 bln in November from $84.5 bln in October. The US accounted for a little more than 50% of the surplus (~$37 bln). Exports rose by 22% year-over-year, less than the 27.1% increase in October. But, what really stood out were China's imports. They surged, jumping 31.7% from a year ago after a 20.6% increase in October. Commodity imports were robust. The 35 mln tons of coal imported was the most this year. Oil imports were at three-month highs. Iron ore imports reached a 13-month high, Gas purchases were the highest since January. Copper imports appear to be a record. Separately, China reported that the value of its foreign exchange reserves rose by a minor $4.7 bln to $3.222 trillion. Economists (Bloomberg survey median) had expected around an $11 bln decline....
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