Equities Slump On Growth Concerns Ahead Of US Jobs

Overview: A weak economic assessment in the Beige Book and an ECB that slashed growth forecasts have been followed by news of a nearly 21% slump in China's exports have marked the end of the dramatic equity rally that was seen in the first part of 2019 after the sharp losses late last year. The Shanghai Composite dropped 4.4%, the largest fall in six months, ending the eight-week rally with a 0.8% decline. All the markets in Asia were lower.  It is the second consecutive weekly loss for the MSCI Asia Pacific Index. European markets are falling and the Dow Jones Stoxx 600 is off for the third day.  This week is the second of the year that this regional benchmark is lower. The S&P 500 has fallen for seven of the last eight sessions. It closed below the 20-day moving average for the first time since January 4 and below its 200-day moving average for the first time since February 11. Growth concerns and weak equities keep Asian and core European yields soft. US 10-year yields have moved lower every session this week and are a little lower now. At 2.63%, the yield is off 12 bp this week, the most since the first week last December. The US dollar is consolidating yesterday's gains, giving it a softer profile. The yen appears to have been lifted by the weaker stocks and lower yields. Its four-week drop is ending. US and Canadian jobs data are the highlight before the weekend. After the markets close, Powell will discuss monetary policy and note that the Fed Chair will be on "60-Minutes" this Sunday.  

Asia Pacific

With China's National Party Congress endorsing a large stimulus program, including about a $300 bln of tax and fee cuts, officials may feel a bit bolder to resist US pressures. Recall, last year, the US fiscal stimulus was understood to give it a cushion to absorb the disruption spurred by the Trump Administration's more vigorous pursuit of economic nationalism. Now the shoe may be on the other foot. Reports yesterday claimed Chinese officials were wary of a quick trade deal and did not want to commit to US structural demands. Also, given the unpredictable element and last minute demands of the "art of the deal," there may be some reluctance for President Xi to come all the way to the US without knowing a deal is in hand. The risk of the loss of face (see US walk away from North Korea) may not be acceptable.  

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Read more by Marc on his site Marc to Market.

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