Dollar headed down
Last week’s volatility in equities spurred investors into safe-haven US treasuries, pushing the 10-yr yield from 2.8% down to 2.6%. This Wednesday’s US consumer price data, we believe, will come in lower than expected, thanks to easing energy prices. The US economy is growing, but softly, and the bull market, while now wounded, still has room to run.
All told, risk aversion and a downturn in real yields suggest a higher greenback is unlikely near term.
Asian markets to recover
After last week’s carnage, we foresee an Asian recovery this week. Hang Seng is now trading at 29’706 points (+0.70%), Shanghai Composite at 3’145 (+0.78%), Kospi at 2’385 (+0.91%) and S&P/ASX 200 at 5’820 (-0.30%), Japan’s market is closed for a holiday. Three announcements this week are crucial for maintaining our optimism: US January Consumer Price Index (expected to remain below December’s at 2%), Japan’s 4Q GDP and Australia’s January employment report.
Last week the Dow Jones Industrial Average endured its worst week in two years, decreasing two days by more than 1’000 points, ending the week at 24’190 (-5.50%). Hong Kong’s Hang Seng Index lost -9.49%, its biggest decrease since 2008, weakened by energy (-5.21%), real estate (-4.07%), telcos (-3.95%) and financials (-3.87%). China’s Shanghai Composite Index was down by -9.60%, its largest weekly loss in a year. Japan’s Nikkei 225 Index fell by -8.13%, with losses in most sectors. Korean Kospi index fell by -6.40%, and Australia’s S&P/ASX 200 declined 4.63%.
