From Marc to Market:
Overview: The Omicron variant has been detected in more countries, but the capital markets are taking it in stride. Risk appetites appear to be stabilizing. The MSCI Asia Pacific Index rose for the third consecutive session, though Hong Kong and Taiwan markets did not participate in the advance today. Europe's Stoxx 600 is struggling to hold on to early gains, while US futures are narrowly mixed. The US 10-year yield is a little near 1.43%, down around six basis points this week. European yields are slightly softer. Core yields are off 5-6 bp this week. The dollar is firm ahead of the jobs data. The Antipodeans and Swedish krona are the heaviest, falling around 0.6% through the European morning. The Swiss franc and euro are up about 0.1% and are the most resilient so far today. The JP Morgan Emerging Market Currency Index is trading lower for the third session and is set to extend its losing streak for the fourth consecutive week. Accelerating inflation is the latest drag on the Turkish lira. The 0.6% decline today brings the week's drop to around 10.5%. Gold is little changed within yesterday's range. Last week, it settled a little above $1802. Now it is below $1775 Oil is extending yesterday's recovery. Although OPEC+ unexpectedly stuck with plans to boost output by 400,000 barrels a day next month, it warned it could change its collective mind at any point. January WTI recovered from around $62.40 yesterday to close at $66.50. It is trading close to $68.20 before US markets open. US natural gas fell nearly 25.5% over the past four sessions but is bouncing by around 3.7% today. European gas (Dutch) is stabilizing after yesterday's 5.6% decline. Still, it is posting gains for the fifth consecutive week and is up more than 35% over the run. Iron ore and copper prices are little changed.
Asia Pacific
At the same time that Chinese officials are cracking down on the "variable interest entity" form of offshore listings for domestic companies, the US SEC is moving to enforce the 2002 laws that require foreign companies to allow greater scrutiny by US regulators. Didi, the ride-hailing service, which listed in the US over local official objections, is now in the process of reversing itself. The press reports that China and Hong Kong companies are the only ones to refuse to acquiesce to US demands. This seems to be another facet of the decoupling meme. Note that the NASDAQ Golden Dragon Index that tracks 98 Chinese companies listed in the US has fallen for five consecutive sessions coming into today, for a cumulative loss of about 10%.
China's Caixin service PMI was weaker than anticipated at 52.1, down from 53.8. This, coupled with the softer manufacturing reading, shaved the composite to 51.2 from 51.5. In contrast, Japan and Australia's flash service and composite PMIs were revised higher. In Japan, the service PMI was revised to 53.0 from 52.1 and 50.7 in October. The composite was revised to 53.3 from 52.5, to rise for its third consecutive month. Australia's service PMI stands at 55.7, up from the flash reading of 55.0 and 51.8 in October. The composite PMI is at 55.7, its third consecutive monthly rise as well. Japan and Australia's PMI contrasts with the disappointment in China and Europe, and the US. This is because they are recovering from the long emergency (Japan) and lockdowns (Australia).Trading remains choppy, and market confidence is fragile....
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