From Marc to Market:
Overview: The combination of the volatility and a large number of central bank meetings have exhausted market participants, and the holiday phase appears to have begun. Equities are under pressure following the sell-off yesterday in the US. Japan, China, and Hong Kong suffered more than 1.2% losses, while Australia, South Korea, and Taiwan posted minor gains. It was the fifth loss in the past six sessions for the MSCI Asia Pacific Index. Europe's Stoxx 600 is off around 0.7% today, which is sufficient to put into the red for the week. US futures point to a softer opening. The debt market is quiet. The 10-year yield is little changed at 1.42% and is practically flat on the week. European yields are slightly softer and are 2-6 bp higher for the week. UK Gilts yields are slightly firmer. The dollar is mostly firmer, with the yen and Swiss franc showing an iota of resilience. Emerging market currencies are mostly narrowly mixed, +/- 0.25. The notable exception is the Turkish lira, which continues to be shunned. Its 4%+ drop today brings the loss for the week to a dramatic 15%. The JP Morgan Emerging Market Currency Index is off for the fifth consecutive day (-0.25%), which brings this week's loss to almost 1.6%. The Russian rouble initially strengthened to new highs for the session in response to the central bank's 100 bp hike that was widely anticipated. It quickly gave it back amid speculation that the central bank may pause now. Gold's recovery continues, as does the crypto sell-off. In its third consecutive advancing session, the yellow metal has pushed above $1800. The next target is near $1815. January WTI is retracing most of yesterday's 2% advance and today's pullback puts it back into losing territory for the week. Last week, it settled slightly above $71.65. US natural gas is off around 2% today to bring the week's loss to 6% and the month's slide to more than 33%. European gas (Dutch benchmark) gives back nearly half of yesterday's 9% gain, leaving it up 22% on the week and more than 40% on the months after rising almost 30% last month. Iron ore prices are firm, gaining 2.2% after yesterday's nearly 4% gain. It is up over 10% this week and around 30% in the five-week rally. Copper is around 0.5% higher, after snapping a five-day slide with a nearly 3% rally yesterday. It is up almost 0.9% for the week after a 0.4% gain last week.
Asia Pacific
As widely expected, the BOJ stood pat and extended aid for smaller businesses for another six months. It indicated that it would stop its corporate bond-buying at the start of the new fiscal year in April. Japan's low inflation gives the central bank more flexibility than other leading economies. BOJ Governor Kuroda estimated that Japan's CPI is around 0.5% when stripped of the distortions.
The US added 34 Chinese entities to its "blacklist" and will block US investment in another eight Chinese tech firms for their role in surveillance minorities. Meanwhile, there is speculation that after a little more than a year and a half, the PBOC could cut the 1-year and 5-year loan prime rates (3.85% and 4.65%, respectively) on Monday. Also, note that starting January 1, ex-pats in China will be taxed on their extensive benefits (e.g., housing, education, transportation). Some estimates suggest this will boost the tax burden by 20-40% for the roughly 850k ex-pats (excluding people from HK, Macau, and Taiwan). Businesses are objecting and are expressing concern about retaining and attracting talent....
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