Monday, January 24, 2022

Capital Markets: "Stock Slide Continues"

 From Marc Chandler at Bannockburn Global Forex:

Overview: Equity markets are fragile after last week's rout, while bond markets have extended their recovery. The dollar is mostly firmer to start the new week. Japan, China, and Taiwan saw equities advance, but not enough to offset weakness elsewhere, and the MSCI Asia Pacific Index was off around 0.75%. It fell by 1.7% last week. Europe's Stoxx 600 fell for the first three weeks of the year and is off another 2.1% today. US futures have surrendered their early gains. Bonds are bid. The US 10-year that had toyed with 1.90% three days ago, is approaching 1.70%. European benchmark yields are 2-4 bp lower and the periphery is outperforming the core. China's 10-year benchmark yield was around 2.77% at the end of last year and is now by 2.67%. It looks to be on its way toward 2.50%. Meanwhile, the dollar is mostly firmer. The yen and Swiss franc appear the most resilient. The Australian dollar and Scandis are leading the declining currencies. Among emerging markets, the Turkish lira, Philippine peso, and Chinese yuan are firm, but most others are lower, led by the Russian rouble. It has fallen by around 5% over the past four weeks and down another .75% today. The JP Morgan Emerging Market Currency Index, which has risen for the past three weeks is off for the second consecutive session. Turning to the commodity complex, gold is firm, though holding below last week's high just shy of $1848. March WTI is steady and slightly heavier, slipping below $85, after falling for the last two sessions. US natgas prices are around 2.7% lower after falling 6.2% last week. European gas prices have surged almost 12% higher, recouping last week's 4.9% loss in full. Iron ore prices are snapping a four-day, nearly 11% advance. Copper is around 1.8% softer, cutting last week's gains by more than half.

Asia Pacific
Japan's flash PMI disappointed, but the new quasi-emergency measures in the face of a surge in the virus is the main culprit.
The manufacturing PMI remained firm, rising to 54.6 from 54.3, but the services collapsed to 46.6 from 52.1. This dragged the composite back below the 50 boom/bust level to 48.8 from52.5. Separately, at least five prefectures felt the impact of the 6.6 earthquake in the southern islands. Lastly, after a 90-minute call before the weekend, US/Japanese officials seek a "quick resolution" to the steel and aluminum tariffs imposed on national security grounds by the US in 2018. 

Australia's preliminary PMI also disappointed. The manufacturing PMI eased to 55.3 from 57.7, but here too the virus sapped the service sector. Its PMI slumped to 45.0 from 55.1. The composite is at 45.3, down from 54.9. Australia reports Q4 CPI tomorrow. The year-over-year pace is expected to tick up to 3.2% from 3.0%, while the trimmed and weighted mean prices are forecast (Bloomberg survey) to 2.3% from 2.1%....