OVERNIGHT NEWS
# S&P 500 closed below 4,000 last night at 52-week low. 10y UST yield skids to 2.98% before recovering to 3.06%, compares with 3.20% intra-day high yesterday. Brent crude down 7% in last 24h to $105.1/bbl.
# Day ahead: Fed speakers Williams, Waller, Kashkari and Mester, Treasury 3y auction. Germany ZEW survey. Czech and Hungary CPI, Romania CB forecast to raise 50bp to 3.50%.
# Fed FSR (Financial Stability Report) warns of further adverse surprises in inflation and interest rates, if accompanied by decline by economic activity could negatively affect the financial system (FT).
# Japan FinMin Suzuki says he won’t comment to ‘what levels we can tolerate on weak yen’. BoJ rules out widening the yield band to stem yen fall, widening 10y yield target would be equivalent to rate hike and is not favourable.
# Nikkei -0.6%, Euro Stoxx futures +1.1%, EUR 10y IRS unchanged at 1.95%, , Gold +0.3% at $1,860/oz.
Swiss franc forfeits safe-haven tag
Bated breath
By Rui Ding
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Markets are trying to take a breather after Monday volatility. Macro conversations remain much the same, with focus on central banks and also China growth prospects. Today’s calendar sees a number of ECB/FOMC speakers scheduled and a 3y UST auction as we wait for US CPI on Wednesday. Barkin, Mester and Waller are likely to sound hawkish compared to the likes of Williams and Kashkari while ECB speakers should also offer a variation.
It’s not quite turnaround Tuesday but US equities look to have a better trading day following European peers. Overnight, inflation data was interesting, with overshoots across the board for NOK, CZK and HUF. Germany ZEW showed that investor expectations were starting to improve, while retail sales remains an afterthought for the likes of AUD and BRL.