Third Vote On Withdrawal Bill Scuppered Until After EU Summit

Overview: The capital markets remain subdued. Many Asian equity markets eased after a strong two-day advance. European equities are slightly firmer. The S&P 500 closed at new five-month highs yesterday. Benchmark 10-year yields are mostly a little softer. Australian 10-year bond yield fell five basis points, and the discount to the US widened to a new high since the early 1980s. The minutes from the Reserve Bank of Australia underscore the importance of this week's employment data. The dollar has a heavier bias today but is confined to well-worn ranges. In emerging markets, the high-flying Indian rupee succumbed to a bout of profit-taking, while Hungary and Poland are leading the emerging market complex higher today.  

Asia Pacific  

Minutes from the Reserve Bank of Australia's March 5 meeting did not show a central bank that was on the verge of cutting interest rates. It underscored the importance of the labor market and recognized uncertainty over the outlook for consumption given the risk of further decline in house prices. The central bank recognized the pressure for funding that has lifted money market rates. There are steps shy of a rate cut that the RBA can do to relieve that pressure. Australia reports February employment data on Thursday. Job creation slowed over the course of 2018. The 12-month moving average eased from around 36k at the beginning of last year to almost 22k. The median forecast in the Bloomberg survey called for a 15k increase. The unemployment rate is expected to be steady at 5%.  

Pressure on the Hong Kong dollar remains. The Hong Kong Monetary Authority intervened for the third time this month yesterday as the US dollar threatened to push above HKD7.85. The intervention (HKD2.01 bln yesterday), bring the intervention in this operation to HKD7.4 bln or almost $1 bln. The intervention works because it reduces the liquidity for the Hong Kong dollar and pushes up interest rates.  However, the intervention thus far is seen as relatively modest and not aggressive enough to snug liquidity. One-month rates in HK are nearly 100 bp below US rates. Some observers see the rally in Chinese mainland shares as a cause of the Hong Kong dollar's woes, but interest rate differentials alone can explain its weakness. Moreover, without having a view on the direction of Chinese stocks, HKMA will probably have to continue to show its hand. Indeed, intervention needs to turn more aggressive it official are to succeed in lifting the HKD off its floor.   

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Read more by Marc on his site Marc to Market.

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