As traders and investors alike take the last call at the Last Chance Coronavirus Aid Saloon, stimulus optimism and positive vaccine news finds an echo across global markets where even the much-maligned oil markets are holding their own this morning in early Asia trade. And S&P E-minis extend gains in early morning Asia session feeding of that very same echo.
THB Protest announcement due at noon
The THB should strengthen today after the cabinet supported a proposal for a special parliamentary session on Oct 26-27, pending royal endorsement. That is positive & in line with expectations. And coupled with the fact there were NO formal protests yesterday, and leaders asked supporters to rest. The detente should boost the THB sentiment in line with broader gains in Asia FX this morning.
Market Should Look Through Lower 20-day Korean Exports.
Korea's 20-day exports declined sharply in October, at -5.8% y/y vs. +3.6% y/y in September. I would not put much weight into this print, as there were fewer working days in October this year than last year due to more public holidays.
Export data for North Asia more broadly remain positive, too, suggesting that the FX market will look through this latest 20-day export data. There were broad-based declines on a y/y basis by-product, although chip exports rose 12.1% y/y. By country, exports to China fell 4.6% y/y, while shipments to the US declined 2.3% y/y.
US Rates activity boost gold
USD rates are trading a bit weaker in Asia, but volumes indicate some significant dip-buying in T10. Ten-year spreads have also been offered lower, suggesting that there may have been some receiving taking place as well. Which is finding a considerable echo in Gold markets this morning
Control Of US Senate Key For Equity Longs
Prospects for US stimulus remain a precondition for markets to rally. So far, no deal. Reports suggest the White House's offer of $1.88 trn runs short of the $2.2 trn that House of Representatives Speaker Pelosi is holding out for. Irrespective, Senate majority leader McConnell reportedly told a closed-door event on Tuesday that the Republican-majority Senate would not vote through a package beyond a more targeted $500 bn relief bill ahead of the Nov. 3 election.
With US equities, the US dollar, and the UST curve (5s30s) trading in relatively tight ranges month-to-date, the stimulus debate's ebb, and flow should matter less than what different election outcomes mean for stimulus prospects in 2021. On that front, the potential stimulus is most extraordinary under a Democratic sweep (presidency, Senate, and House), followed by a status quo Trump re-election with split Congress. The weakest scenario for fiscal stimulus is under a Biden presidency and split Congress.
Why is the EUR so bid
Real flows do matter, and this makes sense to explain where the large order came from that was sweeping the stack the past two days in London.
This story below (large EU social bond issue) is probably the best explanation for the random EURUSD strength yesterday and today. The answer is incredibly convincing because the EUR and EUR move crosses 100% like transaction/flow and 0% like macro/fundamentals.
When people cared about BTP, the big BTP auction days often saw large TWAP EUR buying from 4 am to 11 am, and that is the exact pattern we saw Monday and yesterday. Those BTP issues were 5-10B; this issue is 17B EUR.
There may be some residual left to be done today so If you need to sell EUR, look to sell between now and 11 am. NY / 4 pm LDN as we are likely to peak around then.
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower