Markets Mixed, Oil Down

Market Catch Up

• Asian markets traded mixed today, despite Wall Street's gains on Friday, while oil prices slipped as the ship blocking the Suez Canal was re-floated, raising hopes that the vital waterway could reopen and ease global shipping backlogs.

• Markets were positively affected by President Joe Biden's infrastructure spending plans, which are expected this week. The plan, which is expected to stand at around $3 trillion, involves spending in renewables, is expected to address inequality issues, and improve American manufacturing as well as high-tech industries as more and more US computer chips are being built in China. The plan is envisaged to supercharge an already accelerating US recovery.

• Analysts note that they expect the global economy to expand at around 6.4% this year, fueled by a large US fiscal stimulus, with positive spillovers for the rest of the world. At the same time, this is also seen as a base effect following last year's negative performance.

• Others also note that rising inflation over the coming months should be transitory, and core central banks seem committed to looking through it. Nonetheless, yields remain elevated, with 10-year Treasuries easing slightly to touch 1.66%, close to the 13-month high of 1.754% reached in March.

• European yields have been restrained by active buying from the European Central Bank, widening the dollar's yield advantage over the euro.

• In the stock markets, the CSI300 was up 0.14% and the Nikkei rose by 0.53%, losing ground after Nomura reported that its US unit could face a $2 billion loss related to a client. On the other hand, the ASX shed 1.18% , the Hang Seng lost 0.44%, and the KOSPI was down 0.18%.

• Similarly, the US500 futures and the DAX futures lost 0.70% and 0.54% respectively.

Currencies and Commodities

• The bond buying by the ECB resulted in the Euro losing more ground against the US, as the single currency was last at $1.1786, having hit a five-month low of $1.1760 last week.

• Analysts noted that the euro had failed to find any benefit from a very strong German IfO survey on Friday that showed business morale at a near two-year high and signs of recovery in the service sector.

• As they suggested, this indicates that market positioning still remains skewed to the short side in EURUSD, as spot FX prices have seen a meaningful decline through the 200-day moving average.

• The Dollar held at 109.50 against the Yen, having reached its highest since early June on Friday at 109.84. The dollar index stood at 92.774, after reaching its highest since mid-November.

• The lift in yields has weighed on gold, which offers no fixed return, and left it at $1,730 per ounce.

• Oil prices eased as markets assumed the re-floating of the Ever Given, the ship stuck at the Suez canal, would allow tankers to use the waterway again. There were over 300 vessels waiting to pass through the shipping route which accounts for 12% of global trade.

• The market will also be cautious ahead of an OPEC meeting this week, which will have to decide whether to extend supply limits, or increase production. In other supply news, ExxonMobil and Chevron have both scaled down production of shale oil compared to 2019, with neither company likely to boost spending until next year.

• As a result, Brent crude futures fell $1.4 to $63.19 per barrel, while WTI crude lost $1.48 and reached to $59.49 per barrel. Analysts noted that Brent could be moving towards $60 per barrel this week if no OPEC support takes place.

The Look-Out

• Quiet day on the data front, with UK mortgage approvals and net lending expected to have shown a decrease in both in the amount and the number of mortgages.

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