From Marc to Market:
Overview: The Bank of Japan took the market by surprise with its adjustment of the cap on the 10-year yield before the weekend, and then stepped in to buy the government bond as yields rose in reaction today. The move helped lift the dollar to JPY142.50. from where it had settled on Friday (~JPY141.15). The dollar is mostly softer, however, with only the yen and Swiss franc weaker. The Australian dollar is leading the other currencies higher ahead of tomorrow RBA meeting. Emerging market currencies, outside of a handful of central European currencies and the Malaysian ringgit and South Korean won are lower.
Asia Pacific equities rallied with Taiwan being the only notable exception. Europe's Stoxx 600 has edged higher after falling 0.2% before the weekend. US index futures are narrowly mixed. Benchmark 10-year yields are higher. In Japan, the 10-year JGB is near 0.60%. European yields are mostly 3-4 bp higher. The 10-year US Treasury yield is near 3.98%, up 3.5 bp. Gold is a little lower but inside the pre-weekend range, which itself was inside last Thursday's wide range (~$1942.65-$1982.15). September WTI has rallied for the past five consecutive weeks and is higher today, pushing above $81. The contract reached $81.75 in January and $81.45 in April.
Asia Pacific
China's July PMI softened in line with expectations. The manufacturing PMI firmed to 49.3 from 49.0 and is the fourth consecutive month it is hovering around 49.0. The non-manufacturing PMI continued to slow as it has done since the peak in March. The 51.5 (from 53.1) is the lowest of the year. The slippage in the composite to 51.1 from 52.3 also brings it to a new low for the year. The data may not be relevant in the aftermath of last week's Politburo meeting and new even if vague efforts to bolster the private sector, property market, and foreign investment. The CSI 300 rallied 4.5% last week, the most since in nearly eight months. It was up another 0.55%t today.
The Bank of Japan adjusted its Yield-Curve Control stance ahead of the weekend. The 0.50% cap is now a reference point, and the central bank will conduct fixed-rate purchases at 1.0%....
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