From Marc to Market:
Overview: The recovery in US equities yesterday helped the MSCI Asia Pacific Index snap a three-day decline. Chinese tech stocks remained under pressure after Tencent announced it was closing its game streaming service and Beijing indicated efforts to crackdown on the improper use of algos by internet companies. Led by energy, financials, and industrials, the Stoxx 600 is up about 1.3% in late morning turnover in Europe. If sustained, it would be the second consecutive weekly advance and the fourth in the past five weeks. US futures are extending yesterday's gains. Benchmark 10-year rates continue to rise. The US 10-year is firm at 2.67%. European yields are slipping after initially setting new highs for the move. The greenback is bid. The Antipodeans and sterling are bearing the brunt today, while only the Norwegian krone is proving resilient. The euro has not traded above $1.09 today for the first time since late March 2020. The dollar is straddling the JPY124 level. Among emerging market currencies, most Asian currencies except the Indian rupee are underperforming. In addition to the rupee, the South African rand and the Hungarian forint are posting minor gains.
Gold is little changed around the middle of this week's consolidative range (~$1915-$1945). May WTI is firm inside yesterday's range (~$93.80-$98.80). US natgas is firm after yesterday's 5.5% gain. It is the fourth consecutive weekly gain, during which time it has risen by around 30%. Europe's benchmark natgas is up almost 4.3%, which leaves it down about 1.3% this week after last week's nearly 12% advance. Concerns about China's demand has seen iron ore prices fall for the fourth session and are off 3.5% for the week. Copper is up 1.1% today. Note that the stockpiles of six industrial metals at the LME are reportedly on historic lows, going back to at least 1997. It was almost flat for the week coming into today. Wheat is slightly higher ahead of the USDA domestic and global crop estimate. The corn and soy output may be cut while wheat is expected to be flat.
Asia Pacific
China's lockdown of Shanghai appeared to intensify. The economic impact is growing. This has not stopped Beijing officials from completely giving up their reform efforts in the tech space. Next week, China is expected to report the fifth consecutive monthly decline in the producer prices, while CPI rises above 1%. The trade surplus is set to fall sharply (~$22.5 bln from $94.4 bln). The easing of monetary policy will likely continue with another cut in the benchmark 1-year medium term lending facility.
Without fail for more than 20 years, Japan's current account balance improves in February from January. This year the pattern holds. Japan's current account surplus rose to JPY1.65 trillion from a deficit of JPY1.20 trillion in January. This was more than expected. Although many observers still seem focused on the export benefits of a weaker yen, the fact of the matter is the Japan runs a current account surplus but a trade deficit. Over the past 12 months, Japan has recorded an average monthly trade deficit of JPY41 bln. February's JPY177 bln trade deficit was a little smaller than expected. The key to the current account position was the primary income surplus of JPY2.27 trillion, about half of which comes from foreign direct investment.
US Speaker of the House Pelosi will reportedly visit Taiwan over the weekend. Of course, Beijing is annoyed. It seems to be protesting the visit more than it protested news that the US military has had boots on the ground for over a year on a training mission. Separately, Taiwan reported a larger than expected March trade surplus ($4.66 bln vs $3.92 bln median estimate from Bloomberg's survey). While exports were weaker than expected at 21.3% year-over-year, imports also missed projections, rising 20.3% rather than 24.3%. Both were slower than in February. Taiwan also reported a stronger rise in CPI. Headline CPI rose to 3.27% in March from 2.34% in February. The core rate stands at 2.47%, up from 1.64% previously. Taiwan's central bank does not meet until June. Its rate stands at 1.375% following the 25 bp increase last month....
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