High Drama Weighs On The Greenback And Lifts Yields

Overview:  One of the two Georgia Senate contests remains too close to call, but the market appears to be pricing in a Democrat sweep.  The 10-year yield has punched above 1% but has offered the greenback little support.  Yesterday, the dollar-bloc currencies rose to highs since early Q2 2018 and are extending those gains today.  The Scandis are also tracking higher.  The yen is the laggard, but the greenback remains below JPY103.00  Emerging market currencies have not been deterred by the higher US rates. The JP Morgan Emerging Market Currency Index is higher for the third consecutive day.  The nine-day rally in the MSCI Asia Pacific Index halted today.  European shares are doing better and have recouped yesterday's 0.2% decline and the Dow Jones Stoxx 600 is challenging the week's high.  US shares are mixed, with the NASDAQ suffering most.  The S&P is about 0.5% lower, while the Dow futures are up by nearly as much.  The US Treasury sell-off appears to be triggering a global rise in yields.  The 10-year yield has broken above 1.0%.  Australia's benchmark jumped 8 bp, while European yields are 1-3 bp higher.   Gold is firm as it extends its rally for the seventh consecutive session and approaches $1960.  Oil, which jumped yesterday on the back of Saudi Arabia's surprise unilateral cut of one million barrels a day of output in February and March, is consolidating today, with the February WTI contract hovering around $50 (in a range of about 40-50 cents on either side of that threshold).  

Asia Pacific 

The week began off with the NYSE reversing a previous decision to delist four Chinese telecom companies.   However, after complaints from several officials, including Treasury Secretary Mnuchin, who was not understood to be a leading advocate of the policy, the NYSE appears to be reversing itself again.  The telecoms in question are subsidiaries of Chinese companies and were not explicitly cited, so normally would be excluded until specified.  Meanwhile, S&P/Dow Jones is now suggesting it will not drop Chinese telecom companies from its index re-jig.  However, the Trump administration has opened another front against China, and this is a ban on the use of transaction apps of 8 Chinese companies, including Alipay, Tencent's QQ, and WeChat Pay.  These are not widely used by Americans, but it would contribute to the fragmentation if implemented by Biden's administration.  As China moves more to such payment vehicles, if one does not have the proper app, it will become increasingly difficult for Americans to operate in China without a local phone and apps.   Meanwhile, China has stepped up its crackdown on dissent in Hong Kong and made more than 50 arrests, including a US lawyer that acted as the treasurer for the main organizers.  

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Read more by Marc on his site Marc to Market.

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