It has been a relatively subdued session, with not much action in either stocks or bonds – European stocks rise for the second day on US market momentum from yesterday; Asian stocks are mixed advance while metals decline with Brent, WTI crude, U. S. equity index futures. The biggest highlight in overnight action, however, was once again the Dollar whick climbed to a fresh 4-year high, on pace to strengthen for 2 straight months for first time since March. The reason: ongoing sentiment that there will be a major dispersion between central banks, with the USD tightening just as other central banks join the liquidity fray. To wit, ECB data showed that lending decline in Europe slowed to -1.5% y/y in Aug. vs -1.6% in July and the latest statement from Draghi who said in Lithuania that economic reform possible without devaluing currency.
We are seeing a slightly more mixed performance in the Asian session overnight. The Nikkei is over 1% higher helped by further weakness in JPY. Chinese equities are just barely firmer too with the Shanghai Composite up about one-tenths of a percent despite news reports of potential change of Governor at the PBOC. The WSJ first reported the story during yesterday’s US session saying that Chinese leaders are discussing replacing the current Governor Zhou Xiaochuan amid disagreements over the direction of financial policy and as part of a wider personnel shuffle that comes after internal battles over economic overhauls. The WSJ said that these changes are expected around a major party meeting in October although no final decision about Zhou has been made. Zhou has been leading the move to liberalising interest rates and market reforms so any changes there would be followed closely by the market. Away from China, equity markets in Korea, Taiwan and Hong Kong are all weaker. In brief: Asian stocks mixed the TOPIX outperforming and Taiwan’s TAIEX underperforming. MSCI Asia Pacific up 0.1% to 143.3. Nikkei 225 up 1.3%, Hang Seng down 0.6%, Kospi down 0.1%, Shanghai Composite up 0.1%, ASX up 0.1%, Sensex down 0.7%. 5 out of 10 sectors rise with consumer, industrials outperforming and energy, financials underperforming.
European equity markets have gained further today after the strong close on Wall Street, however the benchmark DAX remains lower by approx. 0.6% on the week. Gains today have been further cemented by the market’s underlying belief that the ECB will be backed into a corner by the market and conduct sovereign bond purchases in order to lift credit to southern Europe. Airbus Group perform strongly today, as their 20yr jet demand forecast was raised, lifting shares by as much as 2.8%. Nonetheless, retailer H&M temper the gains in Scandinavia as poor a sales update knocked shares lower by close to 4%. 16 out of 19 Stoxx Europe 600 sectors rise; travel & leisure outperform, basic resources, retail underperform. 70% of Stoxx 600 members gain, 26.5% decline. Eurostoxx 50 0.3%, FTSE 100 0%, CAC 40 0.3%, DAX 0.4%, IBEX 0.7%, FTSEMIB 0.4%, SMI 0.4%
Looking at the day ahead, durable goods orders, initial jobless claims, flash Markit services PMI and the Kansas Fed manufacturing survey are the key releases in the US. We also have a 7yr UST auction. In Europe we expect a relatively quiet day for data watchers with the Eurozone money aggregates for August perhaps noteworthy. Draghi will speak this morning on ‘Single Market, Single Currency, Common Future’ at a ECB conference in Lithuania.
This post was published at Zero Hedge on 09/25/2014.