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Markets Commentary

Global stocks and US futures rose around the world as oil prices climbed toward $44 a barrel, with risk-sentiment pushed higher by another plunge in the Yen which has now soared 300 pips since the Friday post-payroll kneejerk reaction, and was trading above 109.20 this morning.

At the same time base metals regained some of Monday’s steep losses following Chinese CPI data that came in line while PPI declined for 50 consecutive months however showed a modest rebound from the prior month on the back of China’s recent, and now burst, speculative commodity bubble.

The weaker yen was the main driver of overnight action: “The weakening yen is acting as a boost to stocks,” Yoshihiro Okumura, general manager at Chiba-Gin Asset Management told Bloomberg. “We’re seeing some risk-on moves overall. The key going forward is whether we’ll get a sense that all the negative earnings are over with now.”

The yen weakened for a second day after Japan’s Finance Minister said the government can intervene to stabilize foreign-exchange markets if necessary. Japan’s currency fell against all its Group-of-10 peers after Taro Aso, speaking in parliament in Tokyo Tuesday, reiterated that the U.S. doesn’t object to the Asian nation’s policy. His comments came a day after he said “it’s natural that Japan has means to intervene” in the foreign-exchange markets.

“Japanese officials run the risk being ‘the boy who cried wolf’ if they keep talking without acting.” Considering they have been crying wolf all of 2016 after the disastrous NIRP experiment, one would assume the market has had enough, and yet here we are with a 300 pip squeeze in two days.

The MSCI All Country World Index’s 0.4 percent gain was its biggest in three weeks as Credit Suisse Group AG boosted European banks and Japanese shares rose.

  • Nickel led a rebound in a Bloomberg measure of raw-materials prices as Japan’s largest supplier forecast a widening shortage.
  • Philippine’s peso jumped the most in six weeks after Rodrigo Duterte called for “healing” after claiming victory in a presidential election and trading Europe signaled Brazilian markets would rebound as the move to oust President Dilma Rousseff appeared back on track.
  • Optimism was dented by the latest industrial output print in Germany which declined more than expected in March while France’s unexpectedly fell highlighted the uneven nature of the recovery.

Market indicators summary 

  • S&P 500 futures up 0.6% to 2066.5
  • Stoxx 600 up 1.3% to 337.5
  • Eurostoxx 50 +1.5%
  • FTSE 100 +0.8%
  • CAC 40 +1%
  • DAX +1.1%
  • IBEX +1.9%
  • FTSEMIB +2%
  • MSCI Asia Pacific up 0.7% to 127.4
  • Nikkei 225 up 2.2%
  • Hang Seng up 0.4%
  • Kospi up 0.7%
  • Shanghai Composite up 0%
  • ASX up 0.4%
  • Sensex up 0.3%
  • Euro up 0.01% to $1.1384
  • Italian 10Yr yield down 4bps to 1.42%
  • Spanish 10Yr yield down 3bps to 1.56%
  • US 10Yr yield up 2bps to 1.77%
  • German 10Yr yield up 0bps to 0.13%
  • Gold spot up 0.2% to $1265.9/oz

Media Digest:

  • World stock markets rise while yen falls back (Reuters)
  • Yen Falls a Second Day as Japan Reiterates Ability to Intervene (BBG)
  • Say goodbye to OPEC, Russia’s Sechin says (Reuters)
  • European Stocks Buoyed by Banks (WSJ)
  • Fed’s Dudley: More Reserve Currencies Would Make for Stronger Financial System(WSJ)
  • Dead-of-Night Reversal Puts Brazil Impeachment Back on Track (BBG)
  • The Recession’s Economic Trauma Has Left Enduring Scars (WSJ)
  • China angered by U.S. navy patrol in South China Sea (Reuters)
  • FDA Seeks to Redefine ‘Healthy’ (WSJ)
  • Pro-Clinton Super-PAC to Start Anti-Trump Ad Barrage Before June 8 (BBG)
  • Saudi Aramco to press ahead with oil expansion (FT)
  • The World’s Most Extreme Speculative Mania Unravels in China (BBG)
  • Credit Suisse Posts Loss as CEO Signals Cost-Cuts Progress (BBG)
  • Record-Breaking Container Ship Ends Brief U.S. Service (WSJ)
  • China Railway Materials says company will try to pay debts in time  (Reuters)
  • Berlin opens way to Greek debt relief talks (FT)
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