Headline US CPI May Decline For The First Time In A Year

Overview: New record highs in the US S&P 500 and NASDAQ coupled with China allowing Tencent to acquire a search engine helped lift Asia Pacific equities. It is the first back-to-back by MSCI's regional index for more than two weeks. Australia's market was a notable exception. The lockdown in Sydney is weighed on new confidence measures and prompts economists to cut growth forecasts for Q3.European equities are softer. Weakness in health care and utilities is offsetting the gains in information technology and materials.US futures are slightly lower as well. The US 10-year Treasury yield is little changed near 1.36%. European yields are marginally lower, while China's 10-year bond yield of 2.92% is a new three-month low. Only the yen and Australian dollar are posting minor gains against the greenback. The other major currencies are slightly lower, though the Norwegian krone is off 0.3%. Emerging market currencies are mixed, with social unrest continuing to weigh on the South African rand. It fell by 1.3% yesterday and is off another 1.2% today. The Russian ruble leads the advancers ahead of tomorrow's CPI, which is expected to set the stage for a potentially large rate hike next week. The JP Morgan Emerging Market Currency Index is giving back most of yesterday's 0.2% gain. Gold is holding above $1800 for the first session since June 16.August WTI is firm but sitting on the $74-handle, inside yesterday's range. Iron ore rose 2%, while copper is softer pinned near yesterday's low (~$429). September lumber posted an outside down day, falling for the fourth consecutive session. Yesterday's 5.5% drop brings the four-day slide to a cumulative 14% decline. The US Department of Agriculture cut its projection of the soy, oat, and wheat harvests while boosting corn. The CRB Index rose for the third consecutive session yesterday.  

Asia Pacific

Booming exports helped to unexpectedly lift China's June trade surplus by over 13% to $51.53 bln, the most since January.  China's monthly trade surplus averaged $42.5 bln in H1 21, and $27.4 bln in H1 20, and $29.4 bln in H1 19.Exports, which economists had projected to fall, accelerated to 32.2% year-over-year from 27.9% in May. Imports held in better than economists had expected, falling to 36.7% from 51.1%.Export growth to the US slowed (17.8% year-over-year) while the trade surplus widened to $32.6 bln. Exports to East Asia accelerated. Beijing will report Q2 GDP early Thursday, and today's trade figures seem to limit the risk of a downside surprise, which last week's unexpected cut in reserve requirements had fanned fears of.  

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Read more by Marc on his site Marc to Market.

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