Holidays in mainland China and Hong Kong are once again slowing activity in Asia, which seems content to watch this session from the sidelines. Elon Musk made headlines yesterday when he announced with a swipe of his debit card the purchase of a 9.20% stake in Twitter (NYSE:) worth $2.90 billion . That was enough to ignite the fires in the tech space with the NASDAQ booking decent gains, Musk’s feel-good feeling spilling over to the broader US equity space. Chinese ADRs also performed well, following Hong Kong’s rally after the mainland government appeared to ease auditing restrictions, significantly reducing Chinese ADR delisting risks.

Oil markets have also rallied, as calls grow in Europe for broader eurozone sanctions against Russia after evidence of civilian atrocities in northern Ukraine. The French president went further by calling for a ban on Russian oil. Of course, saying and doing are two different things. However, even the slightest chance that Europe could actually do something like this was enough to send oil prices 4.0% higher, picking up again in Asia. I believe there is very little chance that Europe will sanction Russian energy, as there is no immediate alternative and the effect would plunge Germany into a recession. We will have to wait another time.

Threats of Russian energy sanctions by Europe also torpedoed the euro, and the re-election of Viktor Orban in Hungary, a notorious Putin fan, likely added a European disunity discount to the euro. Barring a peace deal with Ukraine, we may have seen the highs of the single currency for a while. On the other side of the Atlantic, US rates and the Fed continue to climb. The interest rate differential between the United States and Europe can have effects on the euro, which Vladimir does not.

In Asia, Japanese officials have been on the wires to talk about the yen today. The usual watch of currency movements closely and with concern was enough to send USD/JPY down 20 points in early trading, but for once the reaction they got today was lackluster by compared to last week. Diminishing marginal utility. Further comments regarding the potential unlimited buying by the BOJ to cap JGB yields offsets any impact from the currency jaw. Japan can’t have their cake and eat it too and once again the yield differential with the US means that USD/JPY is not going back below 120.00 any time soon.

Data from Japan was mixed. Jibun Bank for March surprised, rising to 49.4, within shouting distance of expansion. Most of the gains can be attributed to an easing of virus restrictions. Elsewhere, the picture was less rosy. YOY average cash gains were just 1.10%, no great resignation here. YOY for February was also seriously disappointed, dropping just 1.10%, with a drop of -2.80%, so we can rule out base effects. The decline in the yen and the surge in energy prices in March will not help the cautious trend in Japanese consumer confidence. However, this somewhat justifies Japan’s monetary position.

In contrast, the South Korean YoY for March rose to 4.10%, well above the 3.80% expected. Philippines YOY ​​Mar also rose 4.0%, above estimates. While the Philippines BSP will postpone rate hikes for as long as possible, South Korean data should soon set the stage for a BOK rate hike.

Whatever premium Chinese stocks were likely to gain after the government’s audit concerns eased over the weekend, is likely to be eroded when China returns to work tomorrow through the Shanghai lockdown. The authorities have apparently finished testing everyone in the city, a feat that seriously impressed me. Cases soared to 13,000 and the lockdown was extended indefinitely. This is probably one of the factors weighing on Asian markets today, holidays in China aside. Fears are growing that China’s COVID-zero policy could lead to wider and more prolonged shutdowns against Omicron, which will not only impact growth in China and Asia, but will have training all over the world.

The highlight of today’s data will be the . He was analyzed to death in this part of the world this week. Australian markets have already priced in plenty of rate hikes from mid-year through to the end of 2023. They look set for the RBA’s policy statement to undo some of its ultra-stubborn rhetoric, but not to announce a large-scale retreat like the RBNZ. This should be bullish for the AUD and a near-term headwind for equities. With the market so unbalanced now, the risk seems to be that the RBA won’t change its outlook. Any sort of hike would be a huge surprise, but a standing slap from the RBA could see the UAD take a sharp, albeit temporary, downward move.

Later in the day, we get the services PMIs from Europe and the UK for March. For obvious reasons, they probably won’t make pretty reading. This could add more pressure on the currencies, especially if the US and the sub indices show a US economy still running at full steam.

Otherwise, markets will be watching for headlines about Ukraine or headlines about European sanctions. If the energy is left to its own devices, European equities and the euro could begin a temporary rally. We also have Brainard and Kashkari from the Federal Reserve talking. So there are plenty of noise makers ahead for financial markets today, although I suspect that when the dust settles, volatility, not direction, will once again be victorious.

Asian equities tread water

US stocks surged overnight as the announcement of Elon Musk’s participation on Twitter sent its shares soaring 27.0%, with Tesla (NASDAQ:) up more than 5.0%. Where Elon goes, the rest of us follow, and the battery-powered billionaire has managed to lift all of Wall Street. The rose 0.81%, the jumped 1.90%, while the added 0.30%. Futures on all three edged down 0.10% in Asia as fast money posts profits.

Vacations to mainland China and Hong Kong, with Taiwan also absent, set Asia up for a quiet day. Any bullish spillover from Wall Street is offset by increased nerves around the COVID situation in China. That of Japan is stable, while that of South Korea is down 0.10%. is 0.35% higher, down 0.20%, up 0.15%, down 0.65% and up 0.25%.

Australian markets rose ahead of the RBA, expecting no chance of a rate hike today and merely following Wall Street’s lead overnight, helped by the rally in oil prices. The and rebounded 0.60%. Expect some volatility following the RBA’s policy statement.

European markets rose yesterday, despite energy concerns, as German rose to 11.4 billion euros, shattering expectations. With oil now up 5.0% from yesterday morning, European markets will be hard pressed to repeat that feat today.

The US dollar continues to appreciate

The US dollar rose overnight, notably making strong gains against the euro. US yields were quiet in the short term, although they eased slightly between maturities and the 2-10 year deepening . Rising 0.43% to 98.99 where it remains in Asia. The index continues to move towards resistance at 99.45, while major support is now distant at 97.70.

fell 0.70% to 1.0970 as concerns mounted over European sanctions on Russian energy. The overnight drop left the single currency in the middle of the range between major support/resistance at 1.0800 and 1.1200. A drop through 1.0950 sets EUR/USD for a retest of 1.0900. A steepening of the US yield curve will continue to limit the euro’s gains from here, even if a breakthrough in negotiations with Ukraine occurs.

traded sideways overnight, rising slightly to 122.70 as US bonds had a relatively narrow range. Comments from Japanese officials pushed USD/JPY slightly lower to 122.50 this morning but otherwise had minimal impact. The downward correction has now run its course and the US/Japan rate differential will now continue to create upward pressure. Key levels are 121.25 and 123.25.

recorded a solid gain of 0.70% to 0.7520 overnight as energy prices surged again. It is now in a holding pattern before the RBA’s rate decision shortly. A surprise rise and a change in the political outlook will cause resistance at 0.7550 to break down and UAD/USD to rebound towards 0.7700. An unchanged RBA and policy outlook could see a pullback to 0.7450, but that is likely to be short-lived as markets turn their attention to future meetings and a change in tone.

A public holiday in China today dampened trading volumes in Asian currencies. The US Dollar saw small gains against Asia FX overnight, mostly on growing nerves surrounding the COVID situation in China. Overall, Asian currencies continue to stall until China returns tomorrow, or we see another big move in US bond yields.

Oil prices up amid EU sanctions fears

Oil prices started to climb in Asia yesterday after Europe indicated tougher sanctions against Russia. Fears are growing that Europe will eventually target Russia’s energy sector, further cutting supplies. ended up 3.50% at 107.95 a barrel and was up 4.35% at 103.60.

Early Asian trades saw both contracts gain more than 1.25% in reduced trade over the holidays as European sanctions nerfs continued. However, some calm returned and oil pared its gains. That leaves Brent and WTI around 0.80% higher at $108.70 and $104.50 respectively.

Europe sanctioning Russian energy is not my base case and I still expect Brent to trade in a choppy $100.00-$120.00 range in the coming weeks, the WTI rebounding in a range of $95.00 to $115.00 a barrel. US SPR and monthly OPEC+ production increases were offset by geopolitical tensions elsewhere.

Gold strengthens slightly

appeared to catch some geopolitical offers yesterday, challenging a stronger US dollar to rise 0.39% to $1,932.50 an ounce. Despite the overnight gains, gold remains stuck in a range around $1,915.00 to $1,950.00 per ounce, with no signs of a directional breakout one way or the other.

Risks are still on the downside for gold, especially if US yields and the US dollar continue to climb. Only a rally to $1970.00 temporarily changes this outlook. Gold has resistance at $1940.00 and $1950.00 per ounce. Meanwhile, a sustained breakout of the $1880.00 region will likely trigger a sellout trade, potentially sending gold down to $1800.00 an ounce.

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