Bonds fell and triggered significant Treasury sales when US 10-year returns lifted 8bps to 1.64%, 2-year highs 5bps to 1.59% after reports emerged that Germany is considering making a " shadow budget "which will be able to increase public spending" beyond the limits set by the strict national debt rules. " (Reuters)
Indeed, the prospects for fiscal stimulus in Europe's largest economy have triggered a significant squeeze across bond markets. Although Asian stock futures are pointing rather openly, it's best to tie in as the turbulence on Tuesday comes from Asian government bond discs that are likely to have a painful day catching up with their American and European peers. [1
However, it supports the positive trade talk vibe, Finance Secretary Steven Mnuchin previously said that the US and China have made "a lot of progress" with talks.
Historically, when the US bond yields higher, systematic and momentum stock market strategies will pause to think if they do not switch into capital rotation mode. However, given the uncertainty surrounding trade and central bank policy that continues to complicate the capital market landscape, concern may remain the dominant theme.
Despite the bad data from China on Sunday, Asian currency is picking up exactly where it dropped last week – the market is reducing its length in USD in the early cases. The JPMorgan Asia Dollar Index has come back significantly since the beginning of the month, suggesting that global investors are growing appetite for riskier assets, strengthening ASEAN's foreign exchange markets.
Yuan is, of course, still the epicenter of the currency debate and People's Bank of China efforts to curb Yuan weakness have a calming knock-on effect in ASEAN currency markets. In fact, ASEAN investors are extremely sensitive to a stronger USD that tends to act as a wrecking ball moving across Asian capital markets, as a strengthening of US currency means higher interest costs for servicing foreign debt.
However, where the main benefits of a stable to stronger Yuan play out is that it has the soothing effect of escalating trade war hostilities given the US trade administrations focus on all things Yuan.
Make no mistake, it is not only President Trump that what a stronger Yuan, but the rest of the world does too.
Oil markets continue to revel in the aftermath of newly appointed Saudi Energy Minister Prince Abdulaziz bin Salman arriving on the cusp of key members of the OPEC and OPEC + coalition will meet in Abu Dhabi this week to review the progress of the K agreement. All this raises hopes of further cuts in supply after the International Energy Agency has reduced its forecast for global oil demand growth, and the blame for the trade war and now forecast demand is about 10% lower than the agency's previous estimates. [19659003For ConfidentialOfficeOnThe Forecast remains oil marketcontinuedbyOPECandOPEC +currentlycompetentwiththecreasingthatthecompanywithintheSelf ValveReturn to Neutrality in the 1945Charts [G-20consciously positivelightofthe oilmarket
Gold has traded relatively poorly since news that US-China trade talks would restart, along with easing "no deal" Brexit risk as markets have relied on significant levels of support ($ 1490-1500). Gold markets received little support from US exchange markets as UST returns moved higher overnight.
However, one constant pillar of support continues to be high when the trade war rages on. China has added almost 100 tonnes of gold to its reserves since it resumed its purchase in December 2018. The beauty of central bank purchases, however, is that it sits in the vault and collects dust for decades, so little fear that the power would reverse
G-10 foreign exchange markets
Much of the housework in front of the European Central Bank's (ECB) policy decisions taking place while the debate continues to shift back and forth as the idea begins to emerge that the ECB could disappoint even more after German fiscal policy news broke that saw EURUSD run higher
This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader