Consolidative Moment As Markets Wait For Fresh Developments

 

10 and one 10 us dollar bill

Three brinkmanship dramas continue to play out. The UK-EU trade talks have reportedly made little progress and may have even moved backward, according to some reports, over the past two days. The EU and Poland, and Hungary will be butting heads at the leaders' summit that begins Thursday. 

The US federal spending authorization is exhausted at the end of the week. A maneuver to extend the deadline by a week appears in the works, but substantial differences remain. 

With equities falling in Japan, Hong Kong, China, and South Korea, the MSCI Asia Pacific Index fell for the second consecutive session for the first time since the end of October. 

Europe's Dow Jones Stoxx 600 is also posting its second consecutive losing session.US shares are softer. Bond markets are also subdued, with the US 10-year benchmark around 0.93%, and yields are mostly a little lower in Europe. The greenback is mixed, with the euro, Swiss franc, and Canadian and Australian dollars and the euro enjoying small gains. Sterling is heavy but calmer than yesterday, and the Swedish krona is matching its decline (~0.3%).  Thus far today, sterling is in around a quarter of a cent band on either side, $1.3350. 

The freely accessible emerging market currencies are mostly firmer, and the JP Morgan Emerging Market Currency Index is extending its advance for the fourth consecutive session to reach its best level since March. Today, the South African rand is the strongest among the emerging market currencies, helped by a stronger than expected Q3 GDP report (66.1% growth on a quarter-over-quarter basis, well above expectations for almost a 54.5% expansion).

Gold extended its recovery to almost $1872 in Asia (November 30 low near $1765) following yesterday's big outside up day. The momentum has flagged, and initial support is seen near $1860. Oil prices are little changed. The February WTI contract slipped to a three-day low near $45 and recovered to almost $46 and is little changed on the day.  

Asia Pacific

Japanese news dominates the region today, ahead of tomorrow's release of Chinese inflation dataFirst, Japan's Q3 GDP was revised higher. The 21.4% annualized pace initially reported was revised to 22.9%. On a quarter-over-quarter basis, this is a 5.3% growth instead of 5.0%. Business investment and consumption were stronger than initially anticipated. Second, the October high-frequency data were mixed. Labor cash earnings continue to fall. The 0.8% decline year-over-year in October was the seventh consecutive decline. On the other hand, household spending rose year-over-year for the first time since September 2019. However, the 1.9% increase was less than economists expected (2.8% was the median forecast in the Bloomberg survey).  

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Read more by Marc on his site Marc to Market.

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