- Australia, New Zealand, UK markets closed for Boxing Day.
- After rallying last week, oil prices are off 2%, base and precious metals lower.
- The US dollar is mixed. European currencies are a little firmer while the dollar-bloc is softer. The dollar is also slightly higher against the Japanese yen. Last week, the dollar eased against the Chinese yuan every day on a closing basis, but bounced back smartly today after the PBOC fixed it higher. The close (CNY6.4873) represents a new four-year high.
European core and peripheral bond markets are highs, with yields slipping mostly 2-3 bp. No end to the political uncertainty in Spain, but Spanish 10-year bonds are matching regional performance.
Equities have a heavier bias. Asian shares were mixed. The Nikkei rose 0.6% while the Shanghai Composite fell 2.6%. Reports suggest that the anticipation of the end of the sales ban on large investors and a new IPO regime, weighed on Chinese sentiment. This is the biggest decline in a month for Chinese shares. Weak industrial profits, especially among state-owned enterprises (-9.5%) also took a toll. Asia markets open late, like India, Malaysia, Thailand and Indonesia advanced. European equities are lower, with the Dow Jones Stoxx 600 off 0.25%, led by the energy sector, consumer staples, materials and financials. Volume in Europe is about a third of the recent average. An opening loss of around 0.3% is currently anticipated.
Japanese data disappointed. November industrial output fell 1.0%, twice what the consensus expected. It was the first decline in three-months. However, due to base effect, the year-over-year rate improved to 1.6% from -1.4% in October. The increase in the inventory ratio (2.9%) reflected a decline in shipments and an increase in inventories, which will have to run down later. Retail sales fell 2.5% in November. The Bloomberg consensus was for a 1.4% decline. The year-over-year pace fell to 1.0% from 1.8%. The data raises concern that the economy has yet to find traction even though the initial contraction in Q3 (after a decline in Q2) was revised away due to a pick-up in capex.
The only US data today is the Dallas Fed’s Manufacturing survey. The Bloomberg consensus is for a -7.0 reading, a deterioration from -4.9 in November. It has been negative all year, weighed down ostensibly by the energy-related activities. It averaged -14.6 in Q2 and -10.0 in Q3. Assuming a consensus report, it would average -8.2.
The Indian rupee rose for an eighth consecutive session to a new five-week high. The anticipation of new foreign inflows appears to be a key driver. Starting with the New Year, India will give a higher quota (INR165 bln or ~$2.5 bln) for foreign purchases of sovereign and state-government bonds. India bonds advanced for the third session, with the benchmark 10-year bond yield of 7.7%.