Fri, Oct 22, 2021 @ 00:35 GMT

It’s Good To Talk

You know it’s a quiet week when the weekly US Initial Jobless Claims spurs Fed tapering fears and leads to a stock market sell-off. That’s pretty much what happened, though. This was despite a strong US 30-year bond auction sending yields lower and the US dollar falling. All-in-all it sums up what I had telegraphed earlier in the week, a lack of tier-1 data points would lead to a choppy market dominated by intra-sentiment.

Perhaps the only theme I can glean from this week is that despite the nightmare Non-Farm’s last Friday, high-frequency surveys and the JOLTS Job Openings data suggest there are a vast number of jobs in America, the problem is getting Americans to take them. Thus, the headline Non-Farms may not be telling the whole story, and the Fed taper could still be on at year’s end.

However, sentiment has abruptly reversed in Asia today as news that President Biden and President Xi had had their first phone call in seven months. China state television is also running a story saying that President Xi wants better trading relationships with ASEAN countries. China has also sent an olive branch letter to Australia’s government, asking them to support China’s application to join the CPTPP, the old Trans-Pacific Partnership.

All of that is music to the ears of the Asia-Pacific, improved trade with the region, tick. Potentially thawing relations with Australia; tick. President Biden and President Xi talking in person as the first step to warming relations between the two superpowers; tick, tick, tick, tick, my pen has run out of ink. Unsurprisingly, Asian equities are following the China charm offensive and heading north. It certainly has more substance than using the weekly Initial Jobless Claims to justify a mini taper-tantrum.

ECB reduces PEPP bond-buying

Last night’s ECB policy meeting was a bit of a non-event. The ECB didn’t taper (ask Christine Lagarde), but they decided to reduce the front-loaded pace of PEPP bond-buying and extend it over a longer period into the programme’s termination around March 2022. What they didn’t say was by how much they would reduce their bond-buying to. Still, it left the hawks and the doves with their dignity intact, and its impact on markets was minimal to non-existent.

Later today, German Inflation and US PPI might spark some intra-day volatility. However, today’s Asian calendar is more threadbare than my tee-shirt today (none of Mrs Halley’s online shopping lands on this pauper’s back), leaving markets in Asia to bask in the warm afterglow of hope that is improving US/China, ASEAN/China and Australia/China relations. As good a reason to fill ‘yah boots on the global recovery trade as any. Happy Friday.

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