US And Canada Report On Jobs As G7 Fin Mins Talk Taxes

Overview: Stronger than expected US employment data, ahead of today's monthly report and compromise proposal on corporate tax by the White House to help secure a deal on infrastructure sent US bond yields and the dollar high. Late dollar shorts were forced to cover. The greenback is mixed now, with the yen, sterling, and Antipodeans slightly firmer. The Norwegian krone, Canadian dollar, and euro are still heavy. The dollar is rising against most emerging market currencies, though, of note, the Turkish lira is stabilizing after losing about 1.25% yesterday, its largest loss in four weeks. The JP Morgan Emerging Market Currency Index is slipping for the second consecutive session and is practically flat on the week. China, Australia, and New Zealand equities rose ahead of the weekend, but most other markets in the Asia Pacific region fell, while Tokyo was mixed. European bourses are mixed, with the Dow Jones Stoxx 600 hovering around the record high set on Tuesday.US futures are little changed, and the 10-year Treasury yield is around 1.63%, about a three basis point increase on the week. The two-year yield is poking above 16 bp for the first time in three weeks. European bonds are quiet. Note that rating decisions are expected today from Moody's for Russia and Turkey, while Fitch assesses Italy and DBRS, Germany. Gold, which had traded as high as $1910 yesterday, extended the biggest drop in four weeks and fell to almost $1856 before finding a bid in Asia. Even if little changed, oil prices are firm, with the July WTI contract hovering around $69 a barrel, consolidating a 4.25% gain this week.  

Asia Pacific

Japan's household spending in April was stronger than expected, rising 13% year-over-year. The acceleration from 6.2% in March illustrates the powerful base effect. On a seasonally adjusted basis, spending rose by a minor 0.1%, though it is the third consecutive monthly increase. The extended emergency into June and the weakness in income point to continued challenges ahead. Many economists expect the world's third-largest economy may be contracting still. On the other hand, the pace of vaccinations is accelerating, and a stronger recovery is expected in H2.  

As widely anticipated, the Reserve Bank of India kept its repo at 4% but adjusted other dimensions of its monetary policy. It announced a Q3 bond-buying of INR1.2 trillion (~$16.4 bln) after completing INR1 trillion purchases this quarter. The central bank also extended its liquidity facility for businesses especially hit hard by the pandemic. As a result, the fiscal year's GDP forecast was cut to 9.5% from 10.5%. The RBI now sees inflation finishing the year just above 5%. The latest print, for April, stood at 4.3%.

The US will prohibit new purchases of equities in 59 Chinese companies as of August 2. This looks like a net add of 11 new businesses from what was inherited from the previous administration. The Biden administration has put the initiative on a stronger legal footing and made the policy clearer and more transparent. It will be run by the US Treasury, with input by State and Defense Departments. It will be updated on a rolling basis. 

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Read more by Marc on his site Marc to Market.

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