From Marc to Market:
Overview: The market appears to be judging the initial salvo of sanctions against Russia for formally recognizing the separatist regions in Ukraine as modest at best and has preceded to take on more risk. Tokyo markets were on holiday but the other major equity markets in region rallied and the MSCI Asia Pacific Index rose for the first time in four sessions. Led by consumer discretionary, materials, and staples sectors, the Stoxx 600 is rising for a second session. US futures are 0.65%-1.0% higher. The NASDAQ has a four-day losing streak in tow. Benchmark bond yields are firmer. The US 10-year yield is up about three basis points to 1.97%. European yields are narrowly mixed. Australia and New Zealand benchmark yields rose 7-9 bp, reflecting some catch-up, but also Reserve Bank of New Zealand's rate hike and more aggressive forward guidance. The more robust appetite for risk is helping lift the dollar-bloc and Scandi currencies, while the Japanese yen is flat. Most emerging market currencies are firmer, but the Russian rouble is off about 1%, after advancing a little more than 1% yesterday.
Gold’s appeal has diminished, and after trading a little through $1914 yesterday and may vulnerable to a test the recent lows near $1885. Crude oil is consolidating. In the past two sessions, the April WTI contract has traded between roughly $87.50 and $95.00. It is hovering around the middle of that range (~$91.50). US natgas prices are a little softer, but Europe's benchmark has jumped over 12%. Iron ore prices rose almost 2% earlier today, while copper's three days fall maybe snapped today.
Asia Pacific
As widely expected, the Reserve Bank of New Zealand hikes its cash target rate by 25 bp to 1.0%. Officials expected the key rate to stand at 2.50% in 12-month, but now sees a peak at 3.25% by the end of next year, 75 bp higher than previously. It also announced that it will begin a gradual reduction of its balance sheet in July by selling NZ$5 bln per fiscal year. In addition, it will not reinvest proceeds from maturing holdings. The hawkish posture was underscored by the acknowledgment that the 25 bp hike was "finely balanced" and that the RBNZ is raises rates quicker, if required. Some observers see the comment as a hint of a 50 bp move in May. New Zealand is experiencing an Omicron wave while the economy is strong. Unemployment stood at a record low of 3.2% in Q4 21, and inflation is running just below 6%. That said, the RBNZ projects growth of about 5.3% in the year through next month, while it cut is growth forecast for the next fiscal year to 2.9% vs. 4.2%.Australia reported Q4 21 wages growth of 0.7% after a 0.6% increase in Q3 21. The year-over-year rate edged up to 2.3% from 2.2% and missing the median forecast in Bloomberg's survey of 2.4%. The market's initial reaction was to take the three-year yield down six basis points and the Australian dollar wobbled. The Reserve Bank of Australia meets next week. The market looks for a rate hike around the middle of the year, but the central bank is less sanguine. Governor Lowe has allowed for a rate hike before the end of the year, if wages continue to accelerate....
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