From Marc to Market:
Overview: A calmer European debt market and the second consecutive decline in the German two-year yield has weighed on the euro. It briefly dipped below $1.14 in the European morning. European bond benchmark yields are softer and most peripheral premiums over Germany have narrowed. Bonds in the Asia-Pacific area rose sharply after the sell-off seen in Europe and the US yesterday. Australian and New Zealand 10-year yields jumped 12 and 10 bp, respectively. The JGB benchmark poked above 0.20% and the BOJ has not shown its hand. The US 10-year is around 1.93% as the 2% psychological level draws near. Equity markets are mostly higher. In the East, China, Hong Kong, and India were the exceptions. Europe's Stoxx 600 is extending yesterday's gains but has yet to take out the pre-weekend high. US futures are firmer.
The dollar has edged higher, though sterling, where Gilts are under pressure, and the Swiss franc are the most resilient. The Norwegian krone, Canadian dollar, and Japanese yen are the heaviest. Emerging market currencies are mostly lower. There the euro's weakness seems to be a drag on most eastern European currencies, including the Polish zloty, where the central bank is expected to deliver a 50 bp hike (to 2.75%). The rouble and South African rand are up about 0.4%, helping to lift the JP Morgan Emerging Market Currency Index. Turning to commodities, the rally in gold appears to be stalling after a two-day, $15 advance. Oil is pulling back with the March WTI contract slipping below $90. US natural gas prices have steadied after falling by around 25% over the past three sessions. Europe's benchmark has recouped most of the 5% lost yesterday. Iron ore prices are extending their rally that began in mid-December. Today is the sixth consecutive gain. Copper is moving in the opposite direction to probe the 200-day moving average near $439.
Asia Pacific
There are three developments in Japan to note. First, the US and Japan struck a deal to lift the 2018 steel tariffs (25%) starting April 1. It will allow 1.25 mln tons of steel a year to be shipped to the US without the levy. Second, household spending rose by 0.1% in December, helping the year-over-year rate improve to -0.2% from -1.3%. Yet it remains weaker than expected, and part of the reason why may be the unexpected weakness in income as winter bonuses were cut. Third, seasonal patterns held, and Japan's current account balance deteriorated in December from November. The trade deficit was smaller but still larger than expected. The key driver of the deterioration was the decline in primary income. The report also showed that Japanese investors were net sellers of US and European bonds. China was a net buyer of JPY1.04 trillion of Japanese debt, the most since August 2016.Taiwan lifted its ban on most food imports from Japan's Fukushima regions. The ban will be lifted toward the end of next week. Only a few countries have maintained the ban since the 2011 meltdown (China, South Korea, and Taiwan). This could be a risky move politically. A 2018 referendum found most Taiwanese were in favor of keeping the ban. When the Taiwanese government lifted its ban on US pork with traces of ractopamine, consumers boycotted, and US pork sales slumped. Local elections will be held in November. Taiwan is trying to enhance its candidacy for the Comprehensive and Progressive TransPacific Partnership (CPTPP). While some members welcome Taiwan, many are reluctant to antagonize Beijing....
....MUCH MORE
