EC Big Week Begins Quietly

Overview: The capital markets are beginning a new and busy week in a non-committal fashion. Equities are mixed. Except for Japan, Hong Kong, and Australia, most markets in the Asia Pacific region were lower, led Chinese and Indian shares. Europe's Dow Jones Stoxx 600 ended a four-day advance ahead of the weekend but has come back bid today, led by consumer sectors and info technology. Utilities are the only sector lower in the European morning.US futures are slightly higher. The US 10-year benchmark yield is little changed near 1.61%, while European yields are mostly 1-2 bp lower. Australian and New Zealand bond yields rose (nine and 11 basis points, respectively) after the jump in Treasuries before the weekend. The US dollar is mixed against the majors, with the New Zealand and Canadian dollars, and sterling a bit firm, and the Swedish krona, euro, Australian dollar, and yen trading heavier. Emerging markets currency are mixed, and the JP Morgan Emerging Markets Currency Index is little changed after slipping by around 0.4% at the end of last week. Gold is slightly firmer, near $1730. Last week's low was near $1677, and the high was almost $1740.Light sweet crude for May delivery is trading around a 45-cent range on either side of $66 a barrel. Last week's high was around $67.80.  

Asia Pacific

China reported January and February data combined, and an uneven recovery remains evident. On the surface, it looks as if industrial production and retail sales were stronger than expected, rising 35.1% and 33.8% above year-ago periods, respectively. Fixed asset investment was a bit softer than anticipated at 35.0% (instead of nearly 41%), and the surveyed unemployment rate of 5.5% was higher than projected. It appears that retail sales in February were particularly soft (~0.6%), underscoring the weakness of the holiday period. Strong metal output (e.g., aluminum and steel) and coal and gas boosted industrial output.  

Japan reported that January core machine orders fell 4.5%, ending a three-month increase. The series is seen as a lead indicator for capital expenditures, and the weakness is consistent with a sluggish start to the new year. Separately, Japan reported its tertiary index fell by 1.7% in January, much weaker than the 0.6% decline anticipated. Tokyo itself remains in a state of emergency until the end of the week, and the criteria for lifting restrictions have been tightened. Tomorrow, Japan reports January industrial output figures and February trade figures on Wednesday. The February CPI and BOJ meetings are the week's highlights. 

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Read more by Marc on his site Marc to Market.

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