Today's Markets

The US dollar trading higher just as the North American session is about to start. However, position squaring in Asia and Europe had pushed short-term technical indicators into an over-extended condition and near-midday in Europe, the dollar began recovering. The euro has been sliding across the board. One trigger may have been the collapse in the euro against the Swiss franc when the CHF1.40 level gave way. Yet there is some risk of ‘buy the rumor, sell the fact’ activity after the jobs data. New Japanese Prime Minister Kan is talking a tougher fiscal line but has not distanced himself from previous soft yen comments. The dollar has made a new marginal high against the yen for the week and reached its best level since May 18, but resistance in the JPY93.00-30 area remains intact. The Canadian jobs data were better than expected with 24.7k jobs created compared with 15.0k expected, but the key is a whopping 67.3k full time jobs.

Global equities are mixed today after yesterday’s recovery in the US. The MSCI Asia-Pacific Index was fractionally, nearly fully recovering earlier losses. In fact those bourses that are open the latest, like India, Thailand and Singapore did best—gaining around 0.5%. After gapping lower, the Shanghai Index fully recovered to eke out a marginal gain by closing near its highs. European bourses are mostly higher, with Spain and Greece the main exceptions. Financials are easily the weakest sector in Spain, but in Greece consumer goods, telecom and utilities are doing worse than the financials. In the Dow Jones Stoxx 600, financials are higher, but is the sector with the smallest gain.

Despite the relative calm in the other parts of the capital markets, the bond markets suggest strains below the surface. It is not simply in the periphery of Europe, where 10-year bond, where premiums over Germany are widening, but also in core countries. For example, the 10-year spread between Belgium and Germany is the widest in a little more than a year. Dutch-German spread is the widest in 4 months. Consider that the French-German spread has widened 14 bp this year, 8 of which has taken place this week. It is true that there has been some reduction in funds parked overnight at the ECB to 299.47 euros from the record 320.37 bln previously, but this is still running some thing like ten times greater than normal.