From Marc to Market:
Overview: When Russia did what the US has been warning about since February 11, the markets seem to have an exaggerated response. The recovery in the S&P 500 and NASDAQ, the $90 pullback in gold from its highs, a $7 retreat in the price of April WTI, set the tone for today's action. In Asia Pacific, Hong Kong was the only market that failed to trade higher today. Europe's Stoxx 600 has rebounded almost 2% after plummeting nearly 3.3% yesterday. Utilities, real estate, and information technology are leading. After an amazing upside reversal yesterday, US futures are around 0.5% lower. The US 10-year yield is hovering near 1.95%, which is around the middle of this week's range. European yields are softer to extend this week's decline of between four (Germany) and 12 basis points (Italy). Higher than expected Tokyo CPI may have helped lift Japan's 10-year yield back above 0.20%, potentially setting up a test on the upper end of the approved band (0.25%) under Yield Curve Control. The dollar-bloc currencies and yen are pushing higher in the foreign exchange market, while the Scandis and euro are nursing small losses. Among emerging market currencies, the Russian rouble is the strongest, up 2.5% to cut yesterday's loss in half. Central European currencies are weaker, while Mexico, India, South Africa, and China are the strongest in the EM space after Russia. The JP Morgan Emerging Market Currency Index has stabilized after falling 2% of the past two sessions.
Gold is firmer after yesterday's wild session. It is poised to close higher for the fourth consecutive week. Recall it settled last month a little below $1800 and has held above $1900 today. April WTI is struggling to advance after gaining for the past four sessions. It is near $92.75 after finishing last week a little above $90. It has risen every week except last week since mid-December. US natgas is falling for the second session and is near $4.50, up 1.5% this week after a nearly 12.5% advance last week. Europe's natural gas benchmark gained more than 30% yesterday and is giving around a fifth of that today. Iron ore pared this week's gains to settle up about 2.5% after falling 11% last week. Dr. Copper is threatening to snap five-day drop.
Asia Pacific
Japan is not among the high-income countries struggling with inflation. Do not be misled by the 1% year-over-year rise in Tokyo's February CPI, though it was above expectations (0.7% median forecast in Bloomberg's survey). Economists had underestimated the rise in energy and fresh food prices. Excluding fresh food prices, the headline gain was halved. If fresh food and energy were excluded, consumer prices in Tokyo are 0.6% lower than they were a year ago. Next week, Japan reports January retail sales and industrial output figures, which coupled with final February PMI readings, will show the world's third largest economy is off to a very weak start of the year. Social restrictions will be lifted next month and a recovery in Q2 is expected.Many are watching Beijing response to Russia's invasion of Ukraine. It appears to be more critical of NATO than supportive of Russia. The creation of a separatist movement and then using that movement as a pretense for invasion strikes too close to home for Beijing to be comfortable. Russia does not have much support globally and China could use it as an opportunity to bolster its image on the world stage. Press reports suggest oil importers from China, the largest buyers of Russian oil are hesitating and pausing new seaborne purchases. Chinese refiners and traders in the Far East ports seek more clarify on cargo financing and payments. Note that Russia's energy exports were exempt from sanctions, but some banks have begun imposing restrictions on commodity-trade finance....
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