The global capital markets are subdued today; a dearth of fresh news and tomorrow’s FOMC meeting are making for light activity and limited price movement. The US dollar is little changed against most of the major currencies. The net change on the day through most of the European morning is +/- 0.15%. The exception is the Norwegian krone and Swedish krona, which is about 0.25% stronger.
Benchmark sovereign 10-year yields are mostly firmer but by less than a single basis point, with some pockets, like Italy, Portugal, and Greece that are doing a bit better. Equity markets are mixed. The MSCI Asia Pacific Index fell 0.2%, its second day of losses, after a ten-day advance.It continues to trade in a narrow range at its best level in nearly a decade. Japanese, Chinese, and Korean shares eased, while most other markets in the region posted small gains. The disappointing news from Alphabet may have weighed on some technology shares in Asia.
In Europe, the Dow Jones Stoxx 600 is trying to snap a three-day fall and is up 0.5%, led by the financials and materials. All sectors are higher. The German DAX has been underperforming for about a month, and that pattern continues today.
German business confidence remains strong. Even though the flash PMI suggested momentum was moderating, the IFO business survey found that the evaluation of the business climate has never been better (116.0 vs. 115.2). This is not just a function of the current assessment (107.3 vs. 106.8), but also expectations improved (125.4 vs. 124.2) to a new record high, as well.
The UK-US trade talks continue today, but there less here than meets the eye. First, the UK make any agreement while it is still a member of the EU, and this is not going to change for 18 months (at least). Second,a new trade deal with the EU may limit what the UK can offer the US. Third, the UK enjoys a trade surplus (merchandise and services) with the US. This runs smack into the US administration’s “America First” thrust and its drive to reduce the US trade deficit.
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