US Market Closure May Be A Firebreak

Overview: The 3%+ drop in the S&P 500 yesterday kept global equities under pressure today, though losses in Asia and Europe were milder. In Asia, only Hong Kong and Taiwan benchmarks lost more than 1%. In Europe, the Dow Jones Stoxx 600 is off about 0.8% in late morning turnover. Although US markets are closed today, in electronic trading the S&P 500 is up about 0.5%. The US 10-year yield is off 14 bp over the past five sessions to 2.91%. Asia and Pacific yields fell a few basis points, while the 10-year JGB yield fell to nearly five basis points, a five-month low. European benchmark yields are slightly lower, while Italy's yield is off four basis points to trade near 3.10%, the lowest in more than two months. The dollar is mostly a little softer against the major currencies and is largely consolidating yesterday's gains. The Australian dollar is the biggest mover of the majors. It is off about 0.6% following a disappointing Q3 GDP.

Asia Pacific

China has acknowledged the 90-day period that absent from its initial summary of the G20 meeting, but it is still not clear when the period begins. Trump has indicated that it began immediately, while Kudlow said the 90-days began January 1.  Talk about which statement, the US or China's, was more accurate miss two points. First, procedurally, with no joint statement, the meeting lends itself to "he said, Xi said." Second, there are differences between the US team. Trump initially said there was an agreement on autos. Kudlow said no. It seems like it may have been an "aspirational truth" (what you wish) not what was agreed, and it now seems to be greater recognition of this. Meanwhile, reports suggest that China may have already begun buying US LNG and soy. There is talk too that China was buying US Treasuries.

Many investors are suspicious of the accuracy of Chinese economic data, and often prefer private sector data, though the private sector in China is a bit blurry, with informal state influence too. The Caixin PMI is thought to offer a more accurate picture than the official measures. The official measures showed weakness while Caixin measures showed improvement. The better than expected manufacturing PMI has been followed with a jump in the Caixin non-manufacturing PMI to 53.8 (a five-month high) from 50.8, led by new orders. The composite rose to 51.9 from 50.5.

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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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