OPEC+ And Powell Are Awaited

Overview:  Equities are under pressure following yesterday's sharp losses in the US.  The MSCI Asia Pacific Index suffered its biggest decline of the week today as Japanese, Chinese, and Hong Kong benchmarks slid by more than 2%.  The Dow Jones Stoxx 600 Index in Europe is buckling under the pressure and is posting its first decline of the week.  US stocks remain soft, but the futures on the major indices are off their lows.  The US 10-year yield is around 1.47%, while European yields are 1-2 bp lower.  Australia and New Zealand benchmark yields jumped 10-11 bp.  The RBA did not step up its bond purchases and the 3-year yield, targeted at 10 bp, is near 16 bp.  The dollar is mostly firmer.  Among the majors, the dollar-bloc currencies are off the least,  and within the emerging currency complex, the Mexican peso, Russian ruble, and South African rand are a little stronger.  Gold fell to nearly $1700 yesterday and is consolidating in the lower end of yesterday's range.  Oil prices are trading lower ahead of the OPEC+ meeting outcome.  Output is expected to rise by 1.2-1.5 mln barrels next month.

 

Asia Pacific

Australia reported a record trade surplus for January of a little more than A$10 bln, which was about a quarter more than the Bloomberg survey's median forecast.  Exports rose by 6%, doubling from the 3% increase in December and better than expected.  Imports fell by 2% after a 1% decline in December.  Of note, the export value of commodities fell, except for alumna and natural gas.  Iron ore exports fell by 7.1% after a record was set in December.  Coal exports were off 7.5%.  By destination, shipments to China were off 8.2%, to Japan down 16.6%, and to South Korea off 1.6%.  Given the Lunar New Year holiday in China and elsewhere in the region, the February data may see a further decline in exports to the region.  

China's annual "two sessions" began earlier today and runs through March 11.  Today is the Chinese People's Political Consultative Conference ahead of tomorrow's National People's Congress. The former US Secretary of State Pompeo appeared to call for regime change in China.  The helpfulness of such arguments aside, the Chinese Communist Party has 90 mln members.  One commentator noted that it would be the fifteenth largest in the world and well ahead of Germany's 80 mln people if it were a country.   

If China has emerged from the COVID crisis stronger, it is primarily because the US and Europe have not comported themselves particularly well. China appears to have weathered the US tariffs and made adjustments, including the sale of Huawei's cell phone manufacture business, which once was the world's largest. China-based producers scramble for chips after the sanctions on Huawei and SMIC, and US pressure on Taiwan's TSMC (TSM) not to sell chips to sanctioned companies, even though it has a fabrication facility on the mainland.  Huawei used to be one of TSMC's largest customers.  

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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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