Risk Appetites Start The Weekend Early

Overview: Disappointing revenue and sales figures by Amazon shortly after the US close yesterday set the tone for today's equity sell-off. Many large markets in the Asia Pacific area fell by more than 1%, including Japan, Hong Kong, South Korea, and New Zealand. New lockdown measures around the capital sent the Philippines bourse down nearly 3.5%. Singapore, India, and China's Shenzhen Composite were notable exceptions and posted minor gains. After reaching record highs yesterday, the Dow Jones Stoxx 600 has retreated, led by energy and consumer discretionary sectors. The S&P 500 is poised to gap lower after it too set record highs yesterday. The US Treasury market is bid, and the 10-year yield is below 1.25%, while European yields are mostly a little firmer. China's 10-year benchmark yield is off about 2.5 bp to 2.85%, the lowest level in nearly a year. The poor equity showing and risk-off are finding the normal expression in the foreign exchange market. The US dollar is mostly mixed, with the Scandis and Antipodean showing heavier tones. However, the yen is also softer and the Canadian dollar is the best performer through the European morning. The JP Morgan Emerging Market Currency Index has edged higher, and if sustained, it would be the fourth session this week that it has advanced. Barring a reversal, the benchmark is set to snap a four-week decline. Gold is firm near $1830 and is up around 1.5% on the week, the fourth advance in the past five weeks. Oil is firm, and the September WTI contract is near two-week highs, around $73.50.It has gained about 2% this week, which leaves little changed on the month. The CRB closed at new six-year highs yesterday. Coming into today, it is up a little more than 2% for the week, which is the eighth gain in the past 10 weeks.  

Asia Pacific

Japan's economy is showing sufficient resilience, and rather than contract in Q2, the world's third-largest economy may manage to eke out a small gain. Helped by foreign demand, industrial output rose by a stronger than expected 6.2% in June. Economists had projected a 5% gain after a 6.5% decline in May. For the quarter, industrial production rose by around 2.5%. June retail sales also rose more than expected. The 3.1% gain last month follows a revised 0.3% decline (initially -0.4%). Retail sales fell by a little more than 1.5% in the quarter, showing the fragility of domestic demand and the absence of tourism. Separately, Japan's unemployment rate unexpectedly slipped to 2.9% from 3.0%, and the jobs-to-applicant ratio kicked up to 1.13 from 1.09. This was better than expected and the highest since last May.  

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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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