Whatever order there was in the global capital markets has broken down. They did not stabilize in Asia, but there is an attempt underway in Europe. Asian shares were mostly lower, with the MSCI Asia-Pacific Index off more 1.1%, though China's Shanghai Composite recouped much of yesterday's loss rising almost 3% today. European stocks are higher. The Dow Jones Stoxx 600 is up about 0.5% near midday in London.
Interest rates mostly fell in Asia-Pacific catching up with yesterday's moves in North America. In Europe, peripheral bond yields are higher, and the heightened political uncertainty in Greece continues to push yields higher. Oil prices are around $1 lower today.For its part, the dollar is consolidating yesterday's losses. The dollar is well within yesterday's broad range against the yen, but conditions remain choppy.The greenback was capped in front of JPY120. Support was seen in Asia near JPY118.70. The euro has been back and forth in about a third of a cent range below $1.24.
Two key events this week remain ahead of the market. The ECB's second TLTRO and US retail sales are both tomorrow. We look at these two events to put the dollar on surer footing again. A low take down of the TLTRO would increase speculation of a sovereign bond buying program, while a stronger participation would not exclude it. At the same time, strength of US consumption, without much use of credit cards, when allowances are made for the drop in energy prices should underpin speculation that the Federal Reserve will drop or dilute the “considerable period” forward guidance.
In addition, the Reserve Bank of New Zealand meeting results will be announced later today. Norway's central bank meets tomorrow. Earlier today Norway reported a tick down in CPI as expected to 2.4% in November from 2.5%. The core rate eased to 1.9% from 2.0%. Norges Bank is concerned about the non-oil economy. The market has moved to discount a good part of a rate cut in the first part of 2015. For its part, the RBNZ has already toned down its signals of additional rate hikes in its mini-tightening cycle.
