Market News
- USD (USDIndex 93.25) holds gains, Evergrande will pay some local debt on Thursday, but major doubts remain. Strong Housing data helped USD. AUD recovers lifting NZD, JPY slips post BOJ. CAD holds gains. $3.5bln infra. bill goes to Senate, Biden doubles Climate crisis investment.
- Yields moved two ticks higher (10yr closed at 1.32%) trade at 1.33% now.
- Equities remain weak, Evergrande worries persist. (USA500 -3 (-0.08%) at 4354. USA500.F flat at 4358. No Tuesday turnaround. ; Dow -0.15%, Nasdaq +0.22%. Nikkei & China down VIX cools to 23.42.
- USOil continues to recover breaks $71.00 yesterday to $69.69, since recovering to $70.50.
- Gold also recovers to $1780 but remains shy of key resistance at $1788.
Overnight – BOJ – no change and if anything a more Dovish outlook on economy – “picking up as a trend, although it remained in a severe state due to the impact of the pandemic.” No sign of tapering any time soon. AUD back to 0.7250, AUDJPY up to 79.50. Evergrande will only pay local bond holders tomorrow but that was enough to ease concerns, at least for now. The PBOC injected more funds into the local credit market. FT report that there are enough empty apartments (new and unsold) in China to house 90 million people (30 million Chinese families) …-FT
European Open – The December 10-year Bund future is down -22 ticks, underperforming versus Treasury futures. In FX markets both EUR and GBP corrected against the dollar, leaving EURUSD at 1.1718 and Cable at 1.3647. USDJPY recovering to 109.56 from 109.10 pre-BOJ. Risks from China and the realization that global supply chains will take longer to recover from Covid disruptions ( BBG report chip shortage getting worse lead time now now 21 weeks, Honda in Japan working at 40% of capacity for 2 mths) have seen investors scaling back tapering concerns and we expect the Fed to stick with a cautious wait and see stance for now, which should help to keep stock markets underpinned.
Today – US Existing Home Sales, FOMC rate decision and Fed Chair Powell press conference, more new supply from UK & Germany.
Biggest Mover @ (06:30 GMT) CADJPY (+0.65%) The oscillations continue capped at 86.00 and back to 85.00 yesterday trades at 85.75 now. Faster MA’s aligned higher, MACD signal line and histogram below 0 line but rallying. RSI 61 and rising. H1 ATR 0.150, Daily ATR 0.695.
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Stuart Cowell
Head Market Analyst
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