Dollar Surge Stalls


Pressure on equities seen last week carried over into Asia and Europe today. The MSCI Asia Pacific Index fell for the fourth consecutive session, led by more than a 3% decline in the Nikkei.  Australia, Taiwan, and Hong Kong bourses fell by more than 1%.  European equities opened lower, but have turned higher. The Dow Jones Stoxx 600 is up about a third of a percent in late morning turnover.  US futures have found some bids and are up around 0.5%. The US 10-year yield is soft at 1.43%.  The 30-year yield, which initially pushed below 2.0% for the first time in six months, is now holding above it.  European rates are narrowly mixed. The dollar (UDN), which rallied strongly in response to the FOMC, is softer to start the new week.  Led by the Antipodeans, sterling, and the euro,  the majors are mostly up around 0.2%-0.4% against the greenback.  The Japanese yen and Swiss franc are the laggards rising less than 0.10%.  Asian emerging market currencies and the Russian ruble are lower, while European currencies, the Mexican peso, and South African rand are posting modest gains.  The JP Morgan Emerging Market Currency Index is trying to snap a six-day slide.  Gold, too, is posting its first gain in seven sessions near $1785.  Oil is firm, with the July WTI, around $72.  Copper remains heavy after losing almost 8.5% last week.  Steel rebar and iron ore fell in Shanghai earlier today (SPTL, JJC, GLD, OIL, FXF).   

Asia Pacific

China kept its land prime rates steady at 3.85% and 4.65% for the 1-year and 5-year, respectively.  It was not surprising, but with rising price pressures, it suggests that Beijing is not too concerned yet.  While the PBOC is not providing much extra liquidity beyond what is needed to roll over loans, it is not tightening policy further.   Separately, Taiwan has recalled seven of its representatives to Hong Kong in protest of the city's officials pressing harder for all the representatives to take an oath recognizing one-China.  This could spill over and impact trade relations.  

South Korea continues to report strong trade figures, which are understood as further confirming regional and global recovery.  Exports in the first 20 days of June rose 29.5% from a year ago, and when adjusted for the number of working days, it is closer to 34%. Exports to China, Seoul's largest trading partner, rose 7.9%, while shipments to the US rose by more than 41%.  Exports to Europe jumped about 48% and 33% to Japan.  Exports of semiconductors increased by 28%.  Auto shipments surged by more than 62%.  Wireless communication product exports rose by a little more than 15%.  

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Read more by Marc on his site Marc to Market.

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