Please Stay Seated, The Ride Is Not Over

Overview: Powerful corrective forces continue to grip the market. After a large rally to start the New Year, the correction is punishing. Most Asia Pacific equities markets were off again today to bring the week's loss to 2.5% to 5.5% throughout the region. Europe's Dow Jones Stoxx 600 is a little more than 1% lower on the day. The 2.4% loss for the week would be the largest since October and wipes out the month's gain.US shares are trading heavily, and the S&P futures point to around a 1% drop, which is marginally lower for the year. Bond markets are not drawing a safe-haven bid, and yields are mostly 2-4 bp higher. Italian bonds are performing best as the market anticipates some kind of resolution to the political turmoil without resort to disruptive and distracting elections. The 10-year US Treasury yield is about 1.07%, a four basis point increase on the week. Only the Norwegian krone is stronger against the dollar today among the major currencies. Of note, despite risk-off, the weakest of the major currencies today are the Australian dollar and Japanese yen, off around 0.5%. Emerging market currencies are mixed, and the JP Morgan Emerging Market Currency Index is up a little today but is still off about 0.25% for the week. If sustained, it would be the sixth consecutive weekly decline. Gold is firm but continues to consolidate around $1850 (200-day moving average). Silver has reportedly drawn interest from the swarm of retail investors. The metal was up nearly 5% yesterday and is up nearly another 1% today. Near $27.10, silver at three-week highs. March WTI is a little changed and is in the lower end of its recent consolidative range ($52-$54).  

Asia Pacific

Japan's economy finished 2020 on a weak note. Retail sales fell by 0.8% in December, a little more than expected, and follows a 2.1% decline in November. Industrial output tumbled 1.6% in December for a 3.2% year-over-year contraction. Unemployment was unchanged at 2.9%. The preliminary PMIs show economic activity is still contracting, and areas that account for around 60% of GDP are in a formal state of emergency. The BOJ does not meet until March. Talk that it would pull back from its ETF buying has been dampened by the recent volatility, while some speculate that officials could tolerate a wider range for the 10-year yield.  

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Read more by Marc on his site Marc to Market.

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