Markets Stabilize Ahead Of The Weekend And The Dollar Pares Gains

Overview: Market sentiment appears to be stabilizing ahead of the weekend. The MSCI Asia Pacific Index halted a five-day slide, with all the large bourses, but Australia advancing more than 1%. Europe's sawtooth pattern of alternating gains and losses remains intact for the eighth session. Yesterday was a down day, so today is higher. US equities are also trading with a firmer bias. Yields are firm as this week's decline is pared. The US 10-year yield is near 1.66%, leaving it off about four basis points on the week. European benchmarks are 2-3 bp higher on the day and 3-5 lower on the week. For its part, the dollar is surrendering some of its gains against most of the major currencies, though it is making new highs against the yen and Swiss franc. Emerging market currencies are also mostly higher. The Turkish lira the chief exception. It is off about 0.5% on the day and almost 10% lower on the week following the dismissal of the governor of the central bank. For the first time in two weeks, the JP Morgan Emerging Market Currency Index is posting back-to-back gains, but it is still off about 1.8% on the week. Gold is stuck in the lower end of this week's range (~$1721-$1747). Resistance is now being encountered ahead of $1730.Oil's dramatic volatility this week is calming down gradually. May WTI is within yesterday's trading range, which itself was inside Wednesday's (~$57.30-$61.30). It is testing the $60-area in Europe. It is estimated that the Evergreen ship, carrying around $9.5 bln in goods stuck in the Suez Canal, may not be extricated for several more days. About 10% of the world's trade goes through the canal, according to reports.  

Asia Pacific

It has not been a good week for China.  The US, EU, UK, and Canada imposed sanctions for human rights violations in Xinjiang, and China has rarely looked so isolated. Its closest ally maybe Russia, continues to help arm India. India has ordered the same air defense missile system from Russia as Turkey did to the chagrin of NATO but also has longstanding military hardware relations, including co-development with Russia. China's other allies are North Korea, which it does not appear able to control, and Iran. China has struck back with counter-sanctions, first on the EU, and today on the UK. The sanctions on the EU seem clumsy and puts the lauded investment agreement struck at the end of last year, after seven years of negotiating, at risk. China denies the accusations and could resolve the dispute with greater transparency and allowing some international observers (e.g., UN) to enter Xinjiang.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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