Keep an eye on CNY
Turkish assets and the TRY are stabilising but the Chinese yuan is again climbing towards the key 7.00 area, placing the Sino-US trade war and general EM concerns in focus.
The People's Bank of China came out with a surprise round of economic stimulus late Tuesday, lending $31 billion to financial institutions via its medium-term lending facility. According to Saxo bank fixed income specialist Althea Spinozzi, the Chinese central bank said that it will back the Chinese economy via whatever tools it deems necessary as the Sino-US trade war deepens with new tariff threats from President Trump.
Saxo Bank Head of Equity Strategy Peter Garnry reports that the cash injection saw equities rise in the mainland with the benchmark Shanghai Composite gaining 0.27% after days of losses.
"Emerging market stocks remain only 5% north of an official bear market and we expect the pain to continue as the US Federal Reserve continues along its path of policy normalisation," says Garnry.
Saxo Head of FX Strategy John Hardy is watching US yields where the recent dip does not appear to have held; Hardy is keeping an eye on the Swiss franc and Japanese yen as potential beneficiaries of a renewed rise in US yields.
In the commodities space, oil remains in contention ahead of the Opec summit in Vienna. According to Saxo commodities head Ole Hansen, Iran remains staunchly opposed to any rise in production while Russia seeks an increase of 1.5 million barrels/day.
"We see production rising by 300-600,000 b/d irrespective of Iran's wishes," says Hansen.
In the agricultural space, Hansen tells us that the grains sector looks set to stabilise after a four-day decline on trade war fears. Soybeans, he adds, have proven one of the incipient conflict's biggest casualties as half of US farmers' production goes to China.
In single stocks, Garnry says that Oracle's latest earnings release showed an EPS miss while Starbucks's fell short on revenue. On the data front, today sees the UK holding a key vote on Brexit that could see Parliament gaining a bigger say in the proceedings should a 'hard' or 'disorderly' Brexit scenario emerge.