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Morning Brief
Financial markets traded in a relatively tight range during the Asian session as market jitters remain in place, following an increase in market volatility on Monday after the Biden administrations stimulus bill faced opposition in US Congress.
The mood towards the proposed stimulus bill has improved somewhat after reports this morning suggested that Minority leader Mitch McConnell signalled that he would step back from an ultimatum over Senate rules that sparked a partisan showdown, which threatened to obstruct President Biden’s legislative agenda.
Antipodean currencies and US futures have taken hit after China announced that they will be conducting military exercises in the South China sea this week. The move is seen as a counter measure after a US aircraft group entered the South China sea on Sunday.
US Treasury Secretary Janet Yellen recently commented that she will take a hard stance towards China. Secretary Yellen offered harsh words towards China during for confirmation ceremony.
China also reported an improvement in new COVID-19 infections and vaccine roll-out. Japan has also announced that they will be considering extending the ongoing state of emergency. The Bank of Japan meeting minutes showed that the central bank stands ready to act if the economic situation in Japan worsens.
The VIX volatility index has settled back to 26 after sparking to 27, following major moves in the stocks and the foreign exchange market during the latter part of Monday’s US trading session.
US stocks incurred a major bout of market volatility yesterday after video game stock had a wild trading session and get many traders and hedge funds -off-guard after it exploded to the upside.
The euro currency is notably weaker this morning as Italian Prime Minister Conte is set to resign, leaving the Italian government without a leader to effectively guide the country during the COVID-19 pandemic.
Traders will be keeping a close eye on the ITA40, Italian bond market, and the euro currency today. It is noteworthy that the EURUSD is doing relatively well, considering the scale of the bearish news at the moment, however, the ITA40 is starting to breakdown and has suffered three consecutive days of heavy losses.
The British pound continues to erode recent gains against the US dollar at the start of the Europeans session. UK Jobless Claims came in at 7,000 against last month’s 64,300 headline number.
Many analysts and economists are arguing that the UK jobs figures are increasingly distorted due to the ongoing furlough scheme. Currency traders have taken a cue from risk-off market sentiment and continue selling sterling despite the better-than-expected jobs numbers this morning from the UK economy.
Microsoft is set to kick-off earnings US season later today on the Nasdaq, expect plenty of volatility around the stock. Consumer Confidence and API US weekly crude stockpile data headlines the economic docket during the European trading session.
All eyes will be on Capitol Hill later today as the Democrat party attempt to pass the new stimulus bill into law. Any negative developments or fresh push-back from the Republican party is likely to take another toll on risk sentiment.
