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Overview: The sharp fall in global equities after the stunning reversal in the US yesterday is the main development today. The largest markets in the Asia Pacific region fell more than 2% today. Europe's Stoxx 600 is off more than 1%. It is selling off for the sixth session in the past seven. After posting larger losses early, US index futures have recovered in the European morning.  The S&P futures are off fractionally and the Nasdaq futures are down around 0.25%. Bonds have caught a haven bid, including JGBs, where the very long-end is rally for the first time in more than two weeks. European bond yields of 2-5 bp lower. Moody's is set to announce the results of its review of Italy debt rating today, and an upgrade is possible. The 10-year US Treasury yield is near 4.06%, down a couple of basis points. This is a new low for the month. 

The dollar is mostly firmer, but for a change, the yen is the strongest currency, with the explicit threat of material intervention spurring some, albeit limited short covering. The New Zealand dollar is the second strongest among the G10 currencies, up about 0.2%. The RBNZ is widely expected to cut rates next week. All but a few emerging market currencies are lower, led by the Indian rupee (~-0.80%) and South African rand (~-0.60%). Gold is not drawing a safe haven bid today and sulked to a three-day low a little below $4023. It is hovering around the 20-daying average in Europe near $4039. January WTI has been sold to nearly $57.40, its lowest level in about 4.5 weeks. 

USD: The Dollar Index matched the month's high yesterday (~100.35), which was the highest since late May. It settled above the 200-day moving average for the second consecutive session, for the first time since early March. The momentum indicators are being pulled up by the fourth advance in the past five sessions. It is consolidating mostly between 100.00 and almost 100.25. The next important technical area is around 101.55, which is the (38.2%) retracement of this year's decline. US reported yesterday that nominal average hourly earnings rose by 0.2% in September for a steady year-over-year rate of 3.8%. Today, the BLS will report real earnings, and an inflation rate will be interpolated. In August, the difference between the average hourly earnings and real earnings was 3.0% (though the August CPI was 2.9%). The preliminary November PMI is expected to have softened, though last month the composite PMI was at 54.6, matching the second highest of the year and slightly above the Q3 average. The year's average through October is 53.3. The final University of Michigan survey tends not to elicit the same response as the preliminary estimate, and the November KC Fed services activity is not typically a market-mover. The Fed speakers today (Williams, Barr, Jefferson, and Logan) have all spoken recently and their views are generally known. Although Logan is the only of the speakers that does not vote this year, any comments about the balance sheet will be notable. 

EURO: The euro has a five-day losing streak in tow coming into today. It approached $1.15 yesterday and it held, perhaps helped more large options struck there and another set for about 1.6 bln euros expires there today. There are also another 1.25 bln euros at $1.1535 that also roll off today. It has been capped slightly above $1.1550 today, and after the unimpressive PMI, has been pressed to almost $1.1510. A break of $1.1500 could spur a move to the $1.1470-80 area. The eurozone's preliminary November PMI was reported. The manufacturing PMI slipped to 49.7 from 50.0. A year ago, it was 45.2. The services PMI edged up to 53.1 from 53.0. Last November it fell to 49.5 from 51.6. The composite eased to 52.4 from 52.5, the high since May 2023. It was the first time since May that it did not improve. Separately, EMU negotiated wages rose a miserly 1.87% in Q3 from slightly more 4% in Q2. It is the smallest increase since Q3 21. 

CNY: For the third consecutive session today, the dollar has been capped near CNH7.12. That is roughly the middle of the range that has dominated since mid-September (~CNH7.0850-CNH7.1550). It is holding above Wednesday's low around CNH7.1085. After raising the dollar's reference rate for the third consecutive session yesterday, the PBOC pushed it back below CNY7.09 (CNY7.0875 vs. CNY7.0905 on Thursday) today. Still, on a week-over-week basis, it is the first weekly increase in the dollar's fix in eight weeks. 

JPY: Tokyo's verbal intervention to arrest the slide in the yen had little impact. It has fallen every session this week coming into today. However, the rhetoric was ratcheted up and the threat of material intervention was made explicit. The yen is the strongest of the G10 currencies today, gaining a little more than 0.5%. The dollar has been pressed to almost JPY156.50 after reaching about JPY157.90 yesterday. The JPY156.25 area corresponds to a (38.2%) retracement of the last leg up that began last Friday from around JPY153.60. Without a stunning reversal, this will be the 10th week in the past 13 that the yen has fallen against the greenback. There were three high-frequency data reports from Japan today, but the market impact has been minimal as the market continues to test the resolve of the Ministry of Finance. First, Japan reported the October CPI. The small rise was anticipated by the Tokyo figures reported at the end of last month. The year-over-year headline rate is 3.0% (2.9% in September), while the core rate, which excludes fresh food, is also at 3.0% (from 2.9%). The measure that excludes fresh food and energy edged up to 3.1% from 3.0%. Second, Japan reported October trade figures today after reporting on Monday that net exports shaved 0.2% off Q3 GDP. The trade deficit was nearly flat at JPY232 bln (~JPY237 bln in September). Japan's trade deficit through October has been nearly reduced about JPY3.06 trillion this year from JPY5.63 trillion in January-October 2024. In October exports were 3.6% higher than a year ago and imports were up 0.7%. Third, Japan's preliminary November composite PMI stands at 52.0 from 51.5 in October. The 51.6 average in Q3 was the highest since Q3 24. The manufacturing PMI ticked to 48.8 from 48.2, reflecting a slower contraction, while the services PMI was flat at 53.1. Meanwhile, the escalation of tensions with China over the prime minister's comments about Taiwan have yet to subside. Prime Minister Takaichi's comments difficult retract and the risk is further escalation by Beijing. Lastly, the cabinet approved the "fresh water" (new spending) of JPY17.7 trillion (~$112 bln) support measures as part of a larger JPY21.3 trillion package. Still, the 30-year yield fell for the first time 12 sessions today and the 40-year yield fell for the first time in 14 sessions. 

GBP: Sterling recovered from a two-week low slightly below $1.3040 to session highs in North America near $1.3125. That practically managed to retrace half of the losses since last week's high near $1.3215. It needs to move above the $1.3150-60 area to be significant, which could perhaps be fueled by short covering ahead of next week's budget. However, sterling is struggling to sustain modest upticks today. It was greeted by sellers as it was briefly pushed above $1.31 and returned to $1.3050 in the European morning. A break of $1.3035 could see a new test on $1.3000 and $1.2945 is the halfway mark to this year's rally. The UK reported a sharper than expected decline in October retail sales and a softer preliminary November PMI. Retail sales fell by 1.1% after posting a revised 0.7% (initially 0.5%) increase in September. Excluding gasoline, retail sales fell by 1.0% (+0.7% in October). Unlike most other countries, British retail sales are reported on a volume not price basis. November manufacturing firmed to 50.2 from 49.7, while services slowed (50.5vs. 52.3). The composite, which averaged 51.7 in Q3, fell to 50.5 from 52.2 in October. 

CAD: The US dollar pushed above CAD1.41 yesterday as the risk environment changed quickly. Remember how heavy the greenback looked on Tuesday when it posted the lowest settlement in a couple of weeks, slightly below CAD1.40. It reached CAD1.4065 on Wednesday and extended it yesterday. It is straddling the CAD1.4100 level and has not been below CAD1.4080 today. The month's high near CAD1.4140, which was also a seven-month high, was a little short of the halfway mark of this year's range (~CAD1.4165). Canada is expected to report s 0.7% decline in September retail sales after a heady 1.0% increase in August. Excluding autos, retail sales may have slipped by 0.5% (+0.7% in August). Canada reports Q3 GDP at the end of next week. It contracted by 1.6% at an annualized rate in Q2, the first contraction since Q3 23, but the economy appears to have stabilized in Q3, albeit barely. The median forecast in Bloomberg's survey is for 0.5% annualized growth. 

AUD: The Australian dollar flirted with it on an intraday basis on Wednesday, but yesterday it settled below the 200-day moving average for the first time since the end of May as it was sold to almost $0.6435 yesterday and slightly below $0.6425 today. Nearby support is seen around $0.6400, which also corresponds with the (38.2%) retracement of this year's rally. Australia's preliminary composite PMI rose to 52.6 from 52.1. It averaged 53.9 in Q3 compared with 51.0 in Q2 and 50.4 in Q3 24. The manufacturing PMI rose to 51.6 from 49.7 in October. It peaked at 53.0 in August and stood at 47.3 in October 2024. The services PMI also peaked in August (55.8) and in November rose to 52.7 from 52.5. The market, as is typical, showed little reaction. 

MXN: The reversal of risk appetites proved too much for the otherwise resilient Mexican peso. The dollar had initially been sold to a marginal new three-day low, ever so closer to MXN18.30 before rebounding and settling above Wednesday's high (~MXN18.3715). The greenback peaked on Tuesday near MXN18.4920 and has reached almost MXN18.48 today. The (50%) retracement of this month's losses is closer to MXN18.5120. A near-term shelf has been forged over the past two weeks in the MXN18.25-MXN18.30 band. Mexico takes another looks at Q3 GDP today. Initially, it reported a 0.3% contraction, quarter-over-quarter, and a 0.2% decline year-over-year. The September IGAE report on economic activity may show the economy ended the quarter with poor momentum (expected to have fallen by 0.1% after rising 0.57% in August). Next week's CPI for the first half of November and the central bank's inflation report will help shape expectations for next month's central bank decision. 

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