From Marc Chandler at Bannockburn Global Forex:
Overview: The surging Covid cases in China and the protests in several cities seemed to set the tone for today’s session. Equities are lower. China, Hong Kong, Taiwan, and South Korea were marked down the most. Of the large bourses, only India escaped unscathed. Europe’s Stoxx 600 is off more than 0.8% and US futures are poised to gap lower. Bond markets are quieter. The 10-year US Treasury yield is off a little more than one basis point to around 3.66%. European benchmarks are mostly firmer, and peripheral spreads are a few basis points wider. The US dollar began off stronger, but now only the dollar bloc among the majors is weaker. The euro rose through the recent high to edge closer to $1.05. Among emerging market currencies, central European currencies are leading. China, Taiwan, and South Korea, join Russia with the largest losses.
Gold is trading near a six-day high and reached almost $1764. Demand concerns and Europe’s inability to agree so far to a price cap for Russian oil have pushed January WTI below $75 a barrel for the first time since mid-January. February Brent is near $81. It had briefly traded below $80 in late September. US natgas is off 5.75% after falling almost 4% before the weekend. Europe’s natgas benchmark is off 5.2% after rallying more than 25% over the past two weeks. Iron ore fell almost 1% today. It offset last week’s 0.55% advance, which was the fourth consecutive weekly rally, during which time it had surged by nearly a quarter. March copper is off about 0.5% to give back a little more than it had gained before the weekend. Lastly, March wheat has fallen in seven of the past eight weeks and starts this week with a loss of nearly 1%.
AsiaPacific It is difficult to know what to make of the protests in China. The deadly fire in Urumqi last week, blamed on zealous local authorities, seems to have been the spark. The kindling is the rising Covid cases in China, the slowing economy, popular discontent, and pent-up frustrations Demonstrations took place in several cities, but might not be a "nationwide movement" as some in the media claim. Calls for Xi to step down and criticism of censorship suggest underlying frustrations. Paradoxically, the more profound the challenge (which is the hope of many), the more possible repression. At the same time, Beijing may align with the people against the overzealous. China needs to buy some time if it is going to make a significant change in its Covid policy stance. It needs to construct emergency medical facilities, boost the vaccination rate, and import mRNA vaccines, which Beijing already accepted making one available to foreigners. We are skeptical that the property measures will be sufficient and see the surge in Covid making us even more suspicious. Similarly, last week's 25 bp cut in reserve requires (worth ~CNY500 bln or ~$70 bln) is going to be lost amid the continued surge in Covid cases....
