From Marc to Market:
Overview: The economic disruption seen since the US warning of an imminent Russian attack on February 11 continue to ripple through the capital and commodity markets. Equities are being slammed. Most Asia Pacific bourses were off 2-3% today. Europe's Stoxx 600 gapped lower ad has approached February 2021 levels, orr about 2.6% today. US futures are around 1.5% lower. The reaction in the major bond markets is subdued. The US 10-year yield is near 1.72%, off about 10 bp from a week ago. European benchmark yields are mostly firmer after falling 15-20 bp last week. In the foreign exchange market, the dollar-bloc currencies continue to show resilience, while the European complex remains under pressure. The Swedish krona continues to underperform. It is off more than 5% in the past week. The euro slumped to almost $1.0810 in the European morning. The JP Morgan Emerging Market Currency Index is down 1.3% after last week's 4.6% drop. Central European currencies, as one might expect, continue to be punished the most. They appear to be being treated like high-beta euros.
Gold is flirting with $2000. April WTI gapped higher and spiked to $130.50 before pulling back to around $123. US natgas is up more than 1%. It has risen by more than a quarter of the past three weeks. Europe's natgas benchmark is surging by nearly a third today after jumping by almost 123% last week. Iron ore rose about 5.5% today after 14.7% last week. Copper initially rose by more than 1.5%, but is pulling back a bit. Still, it is up around 0.5% after gaining more than 10% last week. May wheat is rising for the sixth consecutive session. Today's 7% advance comes on top of last week's 40.6% jump.
Asia Pacific
China and Russia's relationship is on two-tracks. The strategic relationship is based on the antipathy to a US-centric world and the expansion of NATO, which Beijing says the US is trying to create a Pacific version. The other track is tactical. They avoid saying much about each other's neighborhoods, including Ukraine, Taiwan, or the fact that Russia sells weapons to India that are used to fight and resist China.China reports a larger than expected Jan Feb trade surplus of nearly $116 bln. The median forecast in Bloomberg's survey was for a $95 bln surplus. Exports rose 16.3%, more than anticipated, while imports rose 15.5%, a bit less than expected. Separately, and also surprisingly, the value of China's reserves fell to $3.21 trillion from $3.22 trillion. A small gain had been expected. Still, it appears that valuation, weaker non-dollar reserve currencies and a sell-off in bonds, is the key consideration.
China's National People's Congress gave a 5.5% growth target this year. It is on the upper end of expectations and is higher than a weighted average of the projections of the provinces, which typically over-deliver. Still, it is the lowest since 1990, excluding 2020. China's economy is said to have grown 8.1% last year. Despite increased spending and slower growth, the NPC projected that the budget deficit would fall to 2.8% of GDP from 3.2% last year. Here, Beijing seems to plant to draw from unspent funds from past year. The targets seem ambitious and would seem to require more monetary and fiscal support....
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