Archives of “March 26, 2019” day

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US treasury to auction off US$40 billion of two-year notes at the top of the hour

  
  Analysis

The WI is trading at 2.27% ahead of the auction

The U.S. Treasury will be want to of US$40 billion of two-year notes at 1300 ET/1700 GMT.
The current WI (when-issued) yield is trading at 2.27%.
The last auction was auctioned at a high yield of 2.503% (on Februeary 25th).  Since then, the Fed has taken out the tightening bias in 2019, and yields moved sharply lower. The low yield yesterday moved to the lowest level since March 2018 (see chart below).
The WI is trading at 2.27% ahead of the auction
Other information from the last auction(s).
  • Bid to cover (a measure of demand) came in at 2.5x. The last 6 auctions has come in at 2.52x
  • Directs came in at 22.6%
  • Indirects came in at 38.6%

European shares are ending the day higher

  
Analysis, Global Indices

Spain flat though

The major European stock indices are ending the day higher. The section is the Spanish ibex which is ending flat
  • German DAX, +0.65%
  • France’s CAC, +0.90%
  • UK’s FTSE, +0.37%
  • Spain’s Ibex, flat
  • Italy’s FTSE MIB, +0.38%

In the 10 year note sector yields are ending the session mixed.  Germany, UK and France yields are higher, while Spain Italy and Portugal are lower.

Spain flat though

Macron, Merkel and Juncker urge China to open up domestic markets

  
Analysis, Economy

France, Germany and the European Commission pushed Chinese president Xi Jinping to open his country’s protected domestic market to foreign business, with German Chancellor Angela Merkel insisting on “a certain amount of reciprocity” from Beijing to seal a future EU-China investment agreement.

French President Emmanuel Macron invited Ms Merkel and Jean-Claude Juncker, head of the European Commission, to join him at the end of a bilateral summit with Mr Xi in Paris, in an attempt to underscore EU unity and Europe’s role as a commercial superpower on a par with the US and China.

Mr Macron said Europe’s openness had aided the spectacular transformation of the Chinese economy and helped lift 700m people out of poverty but also generated “deep tensions which lead to the need for legitimate protection” — an apparent reference to recent restrictions placed by some EU member states on Chinese acquisitions of high-tech companies.

Mr Macron and other EU states have complained in particular about the near-impossibility of foreign companies winning public procurement contracts in China, for example in railways or other transport infrastructure.

In his public statement, Mr Xi made no specific commitments on reciprocity, but said China would “continue to push forward with reform and opening up because China has been pursuing reform and opening up for the past four decades” in its high-speed modernisation and industrialisation since the 1970s.

The Chinese leader also issued a warning against mutual distrust in the China-EU relationship.

“We cannot let natural suspicion get the better of us,” he said. “We cannot always be guarded against each other and worry that they may do something behind our backs.”

Nikkei 225 climbs 2.15% as Asian stocks post rebound

  
Analysis, Global Indices

The Nikkei closes higher at 21,428.39

Nikkei 26-03

Risk sentiment is generally upbeat to start the day with Asian equities faring better after losses sustained yesterday. That said, Chinese stocks took the shine off gains seen in the region as global growth worries continue to weigh on sentiment there. The Shanghai Composite is trading down by 1.3% currently but that remains a rather isolated event in trading today.
US equity futures are also on the up, trading higher by 0.3% while Treasury yields have recovered from a significant drop yesterday. 10-year yields fell below 2.40% for the first time since December 2017 but is now back up to 2.43% ahead of European trading.
Looking ahead, risk sentiment should reflect a slightly more positive mood at the start of the European morning but cautious tones are likely to prevail throughout. Currencies aren’t likely to pick up too much from early trades so let’s see if there will be a focused theme to settle on ahead of US trading later.

Japan’s FSA urging financial markets to get ready for the 10-day holiday coming up

  
  Analysis

Japan’s Financial Services Agency is warning of possible increased volatility in financial markets.

  • The holidays run from April 27 to May 6
They’ve also warned on what happens when markets reopen ,,,,
  • trading volume and price levels may be more volatile post-holiday
The agency said they will be monitoring closely for any market manipulation before the holidays begin when liquidity is expected to be thin.
—
 Yeah … everyone ready for a flash crash or two??? the super-thin liquidity period each morning when its only Australia and New Zealand markets trading will be extended a good few hours each one of those 10 days.
—-
ICYMI, the holidays will close Japanese financial markets for a week, the break runs together holidays for the abdication of Emperor Akihito and the annual Golden Week break.
10 days off!

No relief for EM equities as growth worries offset Fed boost

  
Analysis, Global Indices

Those hoping for a respite in the sell-off in emerging market stocks were left disappointed on Monday.

The MSCI Emerging Market Index — a benchmark for developing country equities — fell for a second straight session, dropping 1.2 per cent to 1,046.49 as concerns over sputtering global economic growth continued to unsettle investors.

Monday’s decline — which adds to a 0.9 per cent fall on Friday — threatens to drag the gauge back below its 50-day moving average, a key short-term momentum level often watched by traders. The last time the index fell below its 50-DMA, which sat at around 1,040 on Monday, was in early January.

The flight from risk — which also drove a sharp rally in sovereign bonds — took hold on Friday after a run of surprisingly weak eurozone economic data and the inversion of a closely watched part of the Treasury yield curve triggered fears of a deepening slowdown.

The sell-off reached Asia in full force on Monday, with mainland China’s CSI 300 tumbling 2.4 per cent and Hong Kong’s Hang Seng sliding 2.2 per cent.

The two-day decline effectively wiped out the boost the Federal Reserve gave to the MSCI EM index last week when — in a more dovish than expected policy shift — it ruled out further rate hikes this year and announced plans to halt its balance sheet shrinkage by September.

“The sell-off validates our scepticism that a dovish Fed will be sufficient for capital inflows into risky assets witnessed over the past few months to prove sustainable,” said Rabobank in a note to clients on Monday.

“We believe this is especially so considering the outlook for the global economy is clouded by uncertainties caused by trade tensions, Brexit and prevailing vulnerabilities in various emerging markets.”

Adding to the macroeconomic headwinds are country specific issues — including fresh economic turmoil in Turkey and political developments in Brazil that threaten to derail the new president’s reform agenda.

EM currencies were steadier on Monday however amid a broader dollar retreat. The JPMorgan Emerging Market Currency Index, having tumbled 1.7 per cent for its biggest one-day decline since last August on Friday, was 0.7 per cent higher.

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