From Marc to Market:
Overview: Federal Reserve Governor Brainard's suggestion of a rapid unwind of the Fed's balance sheet stoked a bond market sell-off that is continuing today, rippling through the capital markets. The US 10-year yield is rising for the fourth consecutive session. The six-basis point gain today puts the yield near 2.62%, which represents a little more than a 25 bp increase since the jobs data on April 1. European benchmark yields are 3-6 bp higher. Japan's 10-year yield is poking above 0.23% to again challenge the BOJ's Yield Curve Control. Equity markets are taking it on the chin. The major markets in the Asia Pacific region fell, led by a 2%+ sell-off in Hong Kong. China's markets re-opened after a two-day holiday, and although the Shanghai and Shenzhen markets posted minor gains, the CSI 300 slipped by 0.3%. Europe's Stoxx 600 is off around 1.1% and US futures are about 0.75% weaker. The dollar is mixed. The Swiss franc, Norwegian krone, and Japanese yen are weaker. The Swedish krona, sterling, and euro are posting small gains. Among the emerging market complex, the South African rand leads the few currencies higher. Poland, which is expected to lift rates 50-75 bp today has not prevented the zloty from softening. The Hungarian forint and Indian rupee lead the decliners today.
Gold is edging higher within its consolidative range, after the $1915 area held. May WTI is firm near $104, but within yesterday's range (~$99.90-$105.60). US natgas is extending yesterday's 5.6% gain by another 2% today. It is up roughly 40% since mid-March. Europe's benchmark is snapping a three-day 13% decline with a 2.75% gain today. Iron ore is off around 1.3%, while copper is slipping lower for the first time this week. May wheat is paring the two-day 6% rise.
Asia Pacific
China's mainland markets re-opened after the two-day holiday. The news was poor. The Caixin service and composite PMI were weaker than expected. The services PMI slumped to 42.0 from 50.2. The composite dropped to 43.9 from 50.1. In some ways, the news confirms what the market already knew in broad strokes. The world's second-largest economy is struggling mightily as the zero-Covid policy is disrupting activity. The lockdown in Shanghai, for example, has been extended. The economic disappointment will underscore expectations for additional policy support.New Zealand is placing a 35% tariff on imports from Russia while extending its export prohibitions. Australia reports February trade figures tomorrow. Weaker exports and stronger imports are projected to translate into a smaller surplus. The new pact between the US, UK, and Australia (AUKUS) is not just about the nuclear-powered submarines. It was announced that they are also working on developing hypersonic weapons. Meanwhile, a Quad (Australia, Japan, India, and the US) meeting slated for next month may be delayed until after the Australian election. This also means that US President Biden's first trip to Japan will also be rescheduled....
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