From Marc to Market:
Overview: Russia's brutality as it re-positioned forces in Ukraine and China's move to ease the clash with US auditors dominate the news. Hong Kong tech stocks rallied on the news while mainland markets are close today and tomorrow for a national holiday. The MSCI Asia Pacific Index has traded higher for the past three weeks. European stocks are firm to start the week. The Stoxx 600 has rallied in three of the past four weeks. US futures are have edged higher in the European morning. The 10-year Treasury yield is slightly higher at 2.39%. The two-year is off a little at 2.43%. Europe's 10-year benchmarks ae mostly 1-4 bp softer. The US dollar is mixed. Amongh the major currencies, the dollar bloc is doing best while the euro and Swedish krona are trading with a heavier bias. Among emerging market currencies, the Philippine peso is faring best. Foreign investors were buyers of local equities and tomorrow's CPI may prompt the central bank to hike rates as early as next month's meeting. The South African rand, Indian rupee, and Mexican peso lead the complex.
The re-election of Orban in Hungary means that confrontation with the EU will likely intensify and the forint is the weakest among the emerging markets currencies today with around a 0.5% loss. Gold initially slipped to a four-day low near $1915 before recovering back above $1930. May WTI is in a $98-$101 range and natgas is the US and Europe is softer. Iron ore rose 1.4% today after rising 4.6% last week. Copper enjoys a firmer tone today after slipping for the past two weeks. May wheat has begun the new week with an almost 1% advance. It fell by about 4.2% over the past two sessions and declined by 10.7% last week.
AsiaBeijing took an important step toward meeting the US requirement that foreign-based companies must share key financial data, including audits with the Securities and Exchange Commission. China has been balking but over the weekend, regulators proposed a draft of revisions that remove a key hurdle from companies complying. There are more than 200 Chinese companies that trade in the US on American Depositary Receipts. Wtihout complying for three-consecutive years, Chinese companies would face de-listing starting in 2024. The draft is subject to feedback until April 17 and would still need additional approvals. It may be that some Chinese-based companies may chose to re-list elsewhere, but the weekend developments show in that in the face of resolute regulators who are not singling out China, Beijing will conform.China's relations with Europe have deteriorated over the past year. The pre-weekend summit seemed to be express mutual re-criminations. The EU warned Beijing not to help Russia. Beijing warned the EU from tying its future to the US. Russia's invasion of Ukraine has brought Europe and the US closer. Some Russian gas will be replaced by US suppliers. NATO has been strengthen and will likely have a semi-permanent increase in troop-levels. Some of Europe's new military spending will also go to US contractors. Inventories drawn down in transfers to Ukraine will be replenished and modernized. After many years of negotiations, the EU-China investment agreement seemed at done deal in late 2020, but in now lies in ruins. It was shattered by Beijing's counter-sanctions against the EU, including members of the European Parliament who was to approve the deal. The EU had sanctioned China over human-rights abuses in Xinjiang.
There is a wide gap between what the market anticipates and what the Reserve Bank of Australia has signaled. The cash rate futures suggest the market leans toward a June hike (78%) and around 40 bp of tightening is priced in for July. The RBA has acknowledged a rate hike is possible before the end of the year. The market has almost 170 bp of hikes discounted for the remainder of the year. The RBA meets first thing tomorrow in Sydney. The Australian dollar may be vulnerable if the central bank does not lay the groundwork to begin closing the gap....
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