Stocks Recover While The Greenback Consolidates

Overview: Following the strong finish in the US before the weekend, global equities are paring last week's slide. The MSCI Asia Pacific Index rose to for a second session. Markets in Japan, Taiwan, South Korea, and India rose by more than 1%. China and Australia were notable exceptions. Europe's Dow Jones Stoxx 600 is gapped slightly higher and hasn't looked back. Its 1.85% gain in the morning, if sustained, would be the largest advance since early August. US shares are also trading more than 1% better, pointing to a gap higher opening. Interest has been drained from the debt market, where the US 10-year is hovering around 67 bp, and European bond markets are narrowing mixed. The dollar is mostly softer against the majors. Sterling, which closed firmly end the end of last week, leads today's move, rising more than a cent to test the $1.29 area. Emerging market currencies are mostly softer, and the JP Morgan Emerging Market Currency Index is off about 0.2% in what would be the sixth decline over the past seven sessions. Gold remains pinned near its recent lows near $1850, while November WTI is straddling the $40 a barrel level in quiet trading.  

Asia Pacific

While US courts are stymying the Trump administration's efforts to force a sale of TikTok and shut WeChat, it has taken a new step to undermine Beijing's economic push. It is imposed export restrictions on its largest semiconductor fabrication company SMIC. It has been discussed for several weeks and is not a surprise. The US claims that there is an unacceptable risk that the chip military-end use, though the company denies it. Reports suggest Huawei bought a fifth of SMIC semiconductors, and Qualcomm uses SMIC fabrication for some of its chips. It impacts European producers such as ASML, which has been unable to obtain a license to exports to SMIC. There appears to be some discretion in the implementation, but this represents a new escalation in the US-China confrontation.  

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Read more by Marc on his site Marc to Market.

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