From Marc to Market:
Overview: The apparent campaign by Fed officials to calm market fears that its operational flexibility was going to choke growth is having the desired effect. The implied yield of the December Fed funds futures contract is easing for the second session after jumping by more than 25 bp in the previous five-session slide. Tech earnings from Alphabet, Meta, Snap, Pinterest and AMD is helping extend the dramatic recovery in the NASDAQ, where the futures contract is up another 1% today. Most Asian centers are still on holiday, but those markets that are open were all up over 1%, including Japan, Australia, India, Singapore, and New Zealand. Europe's Stoxx 600 is posting its third day of gains, led today by information technology and financials. The 10-year US Treasury yield is firm a little below 1.80%, ahead of the quarterly refunding announcement later today. European bond yields edged higher after the eurozone's upside CPI surprise. The dollar is softer against the major currencies. The Scandis are leading, while the Canadian and New Zealand dollars are lagging. Emerging market currencies are more mixed. Turkey and South Africa are heavier, but the Russian rouble continues to recover. It is higher for the fifth consecutive session and has gained around 5% over that span, leaving it about 2% lower on the year. The JP Morgan Emerging Market Currency Index is slightly higher after gaining around 1.2% over the past two sessions. Gold is little changed. It needs to resurface above the $1808-$1810 area to be of note. Oil prices remain firm, with the March WTI contract knocking on $89 ahead of the OPEC+ decision, and after API estimated a 1.65 mln barrel decline in US oil stocks, according to reports. US natural gas prices are fully recouping yesterday's 2.5% decline, while Europe's benchmark has steadied after falling nearly 19% over the past two sessions. Copper is lower for the third session.
Asia Pacific
There are days in which Japan's 10-year benchmark bond does not trade, but the JGB market is being closely watched now. Yields are slowly creeping up, largely as a function of higher global rates. Some observers expected it to step up its bond buying at today's operations, but it did not. Still, some are not deterred and warn that the BOJ could conduct unscheduled bond-buying if yields continue to rise. Yield-curve control aims to keep the 10-year yield within 25 bp of the zero. It is being encouraged by the IMF to target a shorter maturity. Japan's five-year yield is flirting with zero for the first time since the negative rate policy was adopted in January 2016. In our discussions with BOJ officials, we were left with the impression that they would not stand in the way of a global adjustment of rates. Recall that in April, last year's drop in mobile phone charges will no longer be in the 12-month measure of CPI, which will lift the headline and core rates.
News that Q4 unemployment slipped in New Zealand to its lowest level since 1986 (3.2% vs. 3.3%) underpins expectations for another rate hike at the meeting later this month. Recall New Zealand lifted its cash target rate in October and November by 25 bp to 0.75%. The swaps market sees the RBNZ as the most hawkish central bank this year with nearly 175 bp of tightening priced in over the next 12 months. Most of it (110 bp) is expected in the next six months. The market sees about a 1-in-5 chance of a 50 bp move at its February 23 meeting.The dollar is approaching important support against the Japanese yen near JPY114.30....
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