New Record Cases In Sydney Casts A Pall Over Australia

Overview: The combination of the dovish ECB's forward guidance and the unexpected rise in weekly US jobless claims to a two-month high sent bond yields tumbling. The US 10-year pulled back from 1.30%, and benchmark yields in the eurozone fell to new 3-4 month lows. The $16 bln 10-year TIPS auctioned yesterday resulted in a record low yield of a little more than -1.0%. The bond market is quieter today, with the US 10-year yield little changed at 1.29% and European bond yields mostly 1-3 basis points higher. Equities were mixed in the Asia Pacific region. China's crackdown on Didi may be scaring investors. Chinese, Hong Kong, and Taiwanese markets fell, while South Korea, Australia, and Indian markets advanced. European shares are higher for the fourth consecutive session, lifting the Dow Jones Stoxx 600 to around 0.2% from record levels.US futures are firm. The dollar is firm against most of the major currencies. On the week, the Canadian dollar is the strongest of the majors, up about 0.35%. The Swedish krona is the only other major currency to have gained against the greenback this week. Emerging market currencies are mixed. South Africa's central bank did not hike rates yesterday, and the rand was the weakest emerging market currency yesterday and retained that distinction today. The JP Morgan Emerging Market Currency Index is slightly softer for the second consecutive session. The dollar is falling for the fourth consecutive session against the Russian rouble as the central bank announces as expected that is hiking rates 100 bp to 6.50%. Gold is consolidating between $1800 and $1810, but it needs to get back above $1812 if it is going to extend its recovery for the fifth week. Crude oil is softer after three strong advances that recouped most of Monday's sharp losses. September WTI stalled near $72 and is little changed on the week. Canadian wildfires are raising concerns about lumber supply, and the September futures contract rallied 10% yesterday on top of 7.7% on Wednesday. Copper is up for the fourth consecutive session, and the CRB Index is up about 1.8% this week, coming into today.  

Asia Pacific

New record virus cases in Sydney cast a pall over Australia. The preliminary PMI's weakness gives a sense of the economic impact. Manufacturing slowed to 56.8 from 58.6, but it was services that are bearing the brunt. The service PMI fell to 44.2 from 56.8. This was sufficient to drive the composite below the 50 boom/bust level to 45.2 from 56.7. This is the lowest since last May. The poor report will fuel ideas that the RBA will provide more support through increased bond purchases at its meeting in early August.  

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Read more by Marc on his site Marc to Market.

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