Dollar Steadies, But Weakly For Turn-Around Tuesday

Overview: The global capital markets remain calm after the surge in volatility seen over the last couple of weeks. Asian equities were mixed, with the Japanese, Australia and Indian shares gaining, but other large regional markets, like China, South Korea, and Taiwan fell. European equities are firmer. Benchmark bond have edged higher. The US dollar is steady to a little higher against most currencies. Oil is extending its rally into the seventh consecutive session. 

Asia Pacific 

There appears to be growing optimism on the US-China trade conflict. Commerce Secretary Ross fed such ideas, suggesting that the basis for an agreement could be that China agrees to buy more US agriculture and energy and agree to longer-term structural reforms. In essence, this is similar to what happened with NAFTA. The Trump Administration criticized it as the worst deal ever and pulls out of the TPP, which would have modernized it, among other things. And the final product, which was heralded as the best agreement ever, was little more than the old NAFTA plus TPP and a new domestic content rule. China has already taken steps to appease the US, making intellectual property protections more robust, granting greater market access in finance, and buying more US soy (as recently as yesterday).  

The Japanese benchmark 10-year bond yield rose back to almost zero after falling to minus five basis points last week. Japan auctioned a new 10-year bond today amid strong demand. The bid-cover rose to 4.04 from 3.82 at last month's auction. The auction may have been aided by the fact that tomorrow the BOJ conducts its 5-10 year bond purchases.  

Australia reported a smaller than expected trade surplus in November. The November surplus of A$1.93 bln follows a downward revision of the October surplus to A$2.01 bln (from A$2.31bln initially). Exports rose 1% on the month, while imports rose 2%.  

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Read more by Marc on his site Marc to Market.

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