Citi

European Open

Asian equities traded in the red, with USD retaining its strength from the NY session. Quarter-end and month-end distortions are playing a part, as well as the broader backdrop of the approaching US Fiscal deadlines. Closely watched Fedtalk yesterday did not yield any surprises, with speakers sticking to the script. Oil continued to fall in the Asian session following a report by the American Petroleum Institute pointing to a build in stockpiles

Looking ahead, we look forward to the JPY LDP elections, which we do not expect to move markets. The first vote results have been released, with Kishida and Kono to have final battle. The results of the subsequent runoff is likely to be released around 08:40 BST. We also see a THB rate decision (08:05 BST) in which Citi Economics expects a close call, but predicts no rate cut with a 60% probability. Major data prints are light outside of a EUR economic confidence release (10:00 BST), which is not expected to move markets. Later in the day, we flag a host of central bank speakers from the G10 set to debut in the ECB’s forum (13:00-16:45 BST).

Credit Agricole

Asia overnight

Further rises in UST yields and concerns about inflation and even stagflation weighed on investor sentiment in the Asian session. The approach of another interest payment on Evergrande’s debt is also weighing on sentiment. Fed Chair Jerome Powell indicated that only decent jobs growth is needed next week to trigger the Fed’s tapering of its asset purchases in November. Scenes of queues for basic necessities in the UK and newswire reports of electricity rationing in some provinces in China, have raised concerns about stagflation. Evergrande is selling a stake in a regional bank to free up cash flow.

While most Asian bourses were trading in the red at the time of writing, S&P 500 futures were trading in the green. G10 FX was trading in tight ranges. Rising Covid infections in NZ led to a short squeeze in AUD/NZD. So, the AUD was the outperformer during the Asian session and the NZD the underperformer. In Japan, the LDP Presidential election will go to a second round of voting between the two lead candidates, Taro Kono and Fumio Kishida. Both candidates failed to garner a majority of votes in the first round. The JPY has been steady during the vote.

CIBC

FX Flows

In terms of currencies, risk sentiment was somehow dictated by the e-minis. Initial move up and AUDUSD rose to 0.7250, USDCAD slipped to 1.2670. All reversed when equity futures pared gains. For rest of the morning, it was all the same pattern. One thing we realised this morning was the strange demand for AUDNZD during the risk-on part. The cross was bought, heard on long-term strategic account bought a round this morning. But yield spreads of the 2-year AU-NZ bonds remained wide. Our trader Jon said expectations of RBNZ waned and this is causing bit of profit taking from across.