From Marc to Market:
Overview: Hope that the geopolitical tensions in Eastern Europe are de-escalating is underpinning risk appetites. The large bourses in the Asia Pacific region but China were all up more than 1% and Europe's Stoxx 600 gapped higher, but has come back to close the gap, with communications and financial sectors the largest drags. US futures have softened over the past couple of hours. The 10-year Treasury yield is hovering around 2.04%, while European yields are a little softer. In the foreign exchange market, the risk-on means the dollar, yen, and Swiss franc are underperforming, while the Canadian and Australian dollars are leading the advance. Most emerging market currencies are firmer, and the JP Morgan Emerging Market Currency Index is edging higher for the third consecutive session.
Gold and oil are stabilizing after yesterday's downside reversals. After dipping below $1845 yesterday, the yellow metal is approaching $1860. March WTI is recovering from yesterday's $90.65 low to resurface above $93.00. API estimated that US crude inventories fell by 1.1 mln barrels and the drawdown at Cushing was more than twice as much. US natural gas prices are higher for a third session and around 13% for the week. Europe's benchmark has steadied after collapsing 16% yesterday. Iron ore bounced almost 3.5% to snap an 11% slide over the past three sessions, while copper is edging higher.
Asia Pacific
While many countries are combatting price pressures, China is moving in the opposite direction. Falling food prices helped the January CPI slow to 0.9% year-over-year from 1.5%. Pork prices fell by more than 40% year-over-year and fresh vegetable prices dropped 4.1%. Excluding food and energy prices, the core CPI was unchanged at 1.2% year-over-year. Falling coal, steel, and other industrial goods prices say the PPI ease from 10.3% at the end of last year to 9.1% in January. Both the price gauges were lower than expected and underscore scope for further official support. Many expect rate cuts and a reduction in required reserves to be delivered with Q2 a favorite timeframe.The Bank of Japan conducted its normally scheduled bond buying operation today. The offer-to-cover rose to over 5x, the highest since last October, reflecting the greater willingness to sell the bonds to the BOJ. There may have been some extra interest to sell 20-year bonds ahead of tomorrow's auction. BOJ Governor Kuroda was clear. The offer to buy unlimited amount of 10-year bonds to defend the yield-curve-control cap of 0.25% can be made again. The BOJ has no intention to abandon it or widen the band for the 10-year yield. The IMF has previously suggested targeting a short-term rate, but Kuroda showed no interest. While a strong reception at tomorrow's auction may buy some time, the pressures emanating from the rise in global rates suggests a running battle with the BOJ will continue....
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