From Marc to Market:
Overview: The foreign exchange market is quiet to start the new week. As the North American session is about to begin, the dollar is mostly +/- 0.10% against most of the G10 currencies. The Swedish krona is the notable exception, rising about 0.25% against the US dollar amid good demand for its bonds today. Emerging market currencies are mostly lower. The Taiwanese dollar is the strongest in the complex so far today, rising about 0.30% against the dollar, despite a dramatic 16% drop December export orders. The two trend moves among Asia Pacific equities continued. Japanese indices made new 30-year highs, while Chinese stocks on the mainland and Hong Kong continued to be pummeled. Europe's Stoxx 600 is up about 0.4%, while US index futures are extending their gains that carried the S&P 500 and Nasdaq 100 to record highs before the weekend.
Bonds are bid. Benchmark 10-year rates are 3-6 bp lower in Europe. Of note, Italy's 10-year premium over Germany is around 155 bp to approach two-year lows. The 10-year US yield is slightly softer near 4.10%. The 2-year US yield is flat slightly below 4.40%. Gold is softer but trading quietly in around a $6-range on either side of $2025. March WTI is little changed near $73.40. Meanwhile, US natgas is lower for the fifth consecutive session. During this slump, it has fallen by almost a third. Europe's benchmark is off about 5% today and down around 15% since January 12.
Asia Pacific
As signaled when the PBOC failed to cut the benchmark one-year Medium-Term Lending Facility rate last week, Chinese banks maintained their loan prime rates. Officials are understood to have signaled that more economic support will be forthcoming. The focus in Q4 23 seems more on quantities (loans and increased quotas) rather than price (interest rates). Consistent with this, many observers anticipate another reduction in reserve requirements. Meanwhile, Beijing purposefully popped the property bubble, and while it appears to have returned to industry as a vital engine of growth, it has not found a new place to park savings. The CSI 300 is off 35% in the three-year slide through 2023. Today's 1.5% loss brings the year-to-date decline to 6.2%. And this might understate the case. The index of mainland companies that trade in Hong Kong has fallen for the past four years and has been nearly halved. It is off another 13.3% since the start of this year. Given the hemorrhaging of the stock market, it ought not be surprising that Beijing seeks to avoid a vicious cycle by keeping the yuan stable....
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