Risk appetite started to improve and a 2% bounce in the Hang Seng led Asian markets higher overnight. China Premier warned that economic barriers will lead to confrontation, while he promised the roll out of more effective measures to boost demand. China meanwhile set its daily reference rate for the managed currency at a higher level which for a second day helped the offshore yuan to advance. European and US futures are also finding buyers, after the US100 suffered again yesterday with markets preparing for a Fed hike in July. The 2-year finished fractionally lower at 4.680% after a well bid auction. It was as rich as 4.635% earlier. The 10-year was off 1.5 bps at 3.719%. The curve was at -102 bps.
Along with concerns over events in Russia, a plunge in German Ifo business confidence added to angst over the bearish impacts of central bank tightening, while more signs of a flagging Chinese economy added to risk-off flows.
- FX – The USDIndex to 102.14, EUR at 1.0935, Pound retests at 1.274. USDJPY at 143.45, which will keep intervention talk alive, especially after Japan extended the term of its top currency official for another year, which will be taken as a sign that officials remain determined to stem the weakness of the currency.
- Stocks – Nikkei underperformed but China bourses were buoyed. Wall Street settled in the red with the US100 and US500 at the day’s lows. The US100 tumbled -1.16% and the US500 was off -0.45%. The US30 was down -0.04%.
- Commodities – USOil higher due to Russian turmoil and currently at $70 per barrel.
- Gold slightly higher as markets lower but steady at $1922.13. Iron and Copper jump as China stimulus optimism.
Today – The ECB’s conference on central banking in Sintra really gets underway today and comments from Lagarde will be watched carefully.
Biggest Mover @ (06:30 GMT) EURAUD (-0.68%) dipped to 1.6256. Fast MAs aligned rebounded in the last hour indicating the potential end of the decline.
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Andria Pichidi
Market Analyst
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