From Marc to Market:
Overview: The stunning upside reversal in US stocks was not sustained. The NASDAQ futures are off around 1.7% and the S&P 500 futures are nearly 1.2% lower. Asian equities were hit hard, with China, Korea, and Australia off more than 2%. Singapore unexpectedly tightened monetary policy (through the exchange rate) and the local stocks were off 1.3%. Europe's Stoxx 600 is up about 0.7%, led by energy and financials. Bond markets are drawing little support. The US 10-year yield is up to almost 1.79% after testing 1.70% yesterday. European yields are mostly 2-4 bp higher, and the periphery is holding in better than the core. The dollar is firm, though the Australian and Canadian dollars are the most resilient. Among emerging market currencies, the Russian rouble is a little higher after the central bank indicated yesterday it would hold off its forex operations tied to managing its oil proceeds that involves buying foreign currencies. The Singapore dollar has also edged higher. The Chinese yuan ticked up even though bonds and stocks weakened. The JP Morgan Emerging Market Currency Index is off for the third day, the longest losing streak this year. Gold is slipping lower in the European morning. March WTI is trading firmly and is around $84 after falling more than 2% yesterday. US natural gas is off around 2.4% after rallying almost 6% in the past two sessions. European natgas is slightly lower, and is consolidating near the three-day 25% surge. Iron ore has fully recouped yesterday's 3% decline and copper has steadied after falling almost 4% in the past two sessions.
Asia Pacific
Australia's Q4 CPI was higher than expected. The key take away is to boost the market's confidence that the central bank will have to capitulate and raise rates considerably earlier than it has indicated. The Reserve Bank of Australia meets early next week. The market has moved to discount a greater likelihood a June move. The quarterly pace of inflation rose to 1.3% from 0.8% and lifted the year-over-year rate to 2.6% from 2.1%. The median forecast (Bloomberg survey) was for a 2.3% annual pace. The underlying measures also rose more than expected.
The Monetary Authority of Singapore, which uses the exchange rate as its main monetary policy tool, unexpected (between meetings) raised the path slightly of the Singapore dollar. The currency adjustment was in response to the one percentage point increase it is headline and core CPI projections. This is seen as a preemptive move, consistent with its move last October. South Korea's growth accelerated to 1.1% in Q4 from 0.3% in Q3. It was boosted by both exports and consumption (shades of "dual circulation?). The year-over-year pace edged up to 4.1% from 4.0%. 29. The central bank hiked its policy rate 25 bp last month to 1.25%. It hikes twice last year, and the swaps market has 75 bp of tightening discount this year.........Even without a bid from its asset markets, the Chinese yuan edged higher. It is the fifth consecutive advance. To put the yuan’s move this year in perspective, consider it has only fallen against the dollar in four sessions so far. Against its trade-weighted basket, the yuan appears to be at a record high....
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