From Marc Chandler at Bannockburn Global Forex:
War, What's It Good For?
Overview: There is much talk about how the sanctions being imposed on Russia will hasten the demise of the dollar's role in the world economy, but today the dollar rides high. There is no sign of its abandonment as its safe haven appeal shines. The dollar-bloc currencies, helped perhaps by the commodity exposure are faring best. The Canadian dollar is the most resilient and that may be a function of expectations of a rate hike and guidance on the balance sheet later today. Of note, the euro has been sold to about $1.1060. Among emerging market currencies, eastern and central European currencies are the weakest. The JP Morgan Emerging Market Currency Index is off for a third day, and the cumulative loss is around 3.5%. Equities in the Asia Pacific region were lower, snapping a three-day advance. South Korea and Australia were the exceptions. Europe's Stoxx 600 is recovering from early losses. US futures are firmer. The US 10-year yield is slightly firmer at 1.74%, while European benchmark yields are mostly 3-5 bp higher. Italy is an exception, and the bonds are under greater pressure. The 10-year yield is up almost 14 bp.
Gold stalled near $1950 and is offered in Europe below $1930. April WTI rose to $111.50 before stabilizing. It finished last week near $91.60. US natgas is up about 3% after a nearly 4% advance yesterday. The same can be said for Europe's natgas benchmark. It is matching and repeating yesterday's gains, except there, we are talking about something closer to 26%-28%. Iron ore is up around 1.5%, its third advance this week, while copper is edging higher after yesterday's 3.2% gain. May wheat is up over 7.0% today to bring this week's gain to over 20% after last week's nearly 7% gain.
Asia Pacific
Chinese banks are treading carefully and do not appear to be the escape-valve for Russia that was feared. Chinese business is concerned about payments, and this impacts not only Russia's seaborne oil but also commodity shipments, including coal. China's criticism of Russia has been ratcheted up. Foreign Minister Wang said China "deplores the outbreak of conflict between Ukraine and Russia, and yesterday for the first time officials seemed to refer to it as a war. Russia has been calling it a "special military operation."
Economic data in the region was not the focus, but for the record, Japan's Q4 capex was stronger than expected rising 4.3% year-over-year, up from 1.2% in Q3. The median forecast in Bloomberg's survey as for a 2.9% gain. Corporate profits were also strong, rising 24.7% year-over-year on a 5.7% increase in sales. In Q3 profits rose by 35.1% on an 8.4% increase in sales. Australia's Q4 GDP rose 3.4% after the virus-induced 1.9% contraction in Q3. South Korea's January industrial output edged 0.2% higher. The market had expected a decline in output, though December's 4.3% increase was shaved to a still impressive 3.7% pace....
....MUCH MORE
