EC Calm Capital Markets See The Dollar Drift

Overview: Global stocks are moving higher today. Fears of a new lockdown in Tokyo amid rising covid cases weighed on Japanese stocks, a notable exception as the MSCI Asia Pacific Index rose for its fifth session of the past six. Europe's Dow Jones Stoxx 600 is edging to new record highs today and is advancing for its fifth session of the past seven.US futures are trading higher, led by the NASDAQ, which settled weaker yesterday. Bond markets are quiet. The US 10-year yield is hovering around 1.65%. Recall that it finished last week, after the jobs data in thin markets at 1.72%. European yields are narrowly mixed. The dollar is mostly softer against the majors in the foreign exchange market, but the euro and Norwegian krona are struggling to make any headway. The Swedish krona, yen, and the Aussie and Kiwi are the strongest (~0.25%-0.35%). JP Morgan's Emerging Market Currency Index is drifting a little lower for the second consecutive session after rising in the first two days of the week. Gold is firm but is backing off from the two-week high set in late Asian turnover near $1747.75.The $1750-$1755 area is seen as a formidable cap. May WTI continues to trade within the range set at the start of the week ($57.6-$61.5). It has not traded above $60, and if this is sustained, it will be the first time in a month.  

Asia Pacific

The economic consequences of the pandemic and policy responses have impacted trade in different ways. In Japan's case, it has been helpful. In the second half of last year, Japan recorded its largest trade surplus since the second half of 2010. Today's February balance of payments figures continued to pattern and was stronger than expected. It rose to JPY2.9 trillion, nearly half again as high as forecast. The trade surplus was about 10% stronger than expected at JPY524.2 bln. Despite the trade surplus, it is a good reminder that the current account surplus is not driven by trade as much as earnings from investments (not only the return from portfolio investment but profits, royalties, licensing, etc.). Separately, virus cases hit a two-month high in Tokyo, and Japan is behind Europe, for perspective, in the vaccine rollout, and the Olympics to begin in about 3.5 months.  

Tensions around Taiwan have escalated. China continues to harass Taiwan with air sorties, including 15 aircraft yesterday incursions into Taiwanese air space. At the same time, China was engaged in naval exercises nearby with a carrier group. Meanwhile, the US Theodore Roosevelt carrier strike group enters the South China Sea, and a Destroyer was in the East China Sea. The US also sent a destroyer armed with guided missiles into the Straits of Taiwan.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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