Equities Advance, Dollar Slips, Key Events Awaited

Overview: The eventful week has begun off slowly. After Wall Street's best week in four months underpinned Asian' equities, where all the markets but Thailand, advanced, led by the nearly 2.5% rally in Shanghai. Note that New Zealand's S&P/NZX 50 rose to new record highs. European bourses are firmer, and the Dow Jones Stoxx has edged to a new high for the year, with the help of materials and energy. Benchmark 10-year yields are mostly firmer, though the US yield remains below 2.60% after disappointing industrial output/manufacturing production were reported before the weekend. The dollar is softer against most of the major currencies, with the yen and sterling struggling to stay positive, while the Antipodeans lead the way. Iron ore prices rose 3% on supply concerns following Vale's output cut announcement. 

Asia Pacific

The anticipated meeting between the US and Chinese presidents that was hoped for the end of this month is now looking like May or June as the next possible window. The talks have produced more than a 100-page document. The innovation is thought to be the enforcement mechanism that moves away from the traditional mechanism of an independent panel to adjudicate. Instead, if a conflict cannot be resolved by official negotiations, the US reserves the right to retaliate proportionately.  

After seasonal adjustments, Japan reported its first trade surplus since last June. The February surplus of JPY116 bln was about a third larger than expected. It was recorded despite a larger than expected fall in exports (-1.2%). It was the third month that exports fell on a year-over-year basis.  Autos and semiconductors were the main culprits. The 14% decline in exports to South Korea, including a 60% drop in chipmaking equipment plays on fears of the slowing of the tech cycle. The source of improvement of the trade balance came from a 6.7% decline in imports after a revised 0.8% decline in January (initially -0.6%).  

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Read more by Marc on his site Marc to Market.

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