Risk Rallies Despite Turmoil in Emerging Markets
Zurich-Switzerland (Mar 16) Despite the turmoil in many emerging markets, risk appetite rallied in the Asian session. While events are escalating in Venezuela, Turkey, and Russia (short list), traders took advantage of recent pullback to cut USD positions. There was plenty of price action overnight with the antipodeans, having dominated movement in the G10. The more hawkish RBNZ and better than expected Austrian employment rates helped fuel risk appetite. In addition perhaps it was China's Premier Li Keqiang's soothing statement that local debt is under control and the government is monitoring risks from shadow banking. He stated that some isolated cases are unavoidable but the government would "enhance monitoring and ensure timely handling to make sure that there are no systemic or regional financial risks."
The slightly lower USDCNY also gave equity markets a boost as the Shanghai composite rose 1.07% and Kospi up 0.3% yet the Nikkei and Hang Seng failed to hold early gains dropping -0.1.% and -0.56% respectively. AUDUSD was able to shrug off disappointing China industrial production (8.6% vs. 9.5% exp) as Australia’s employment rose 47.3K in February, significantly higher than the market expectation for 15K. AUDUSD quickly rallied to 0.9077 from 0.8990 levels. The number shows some notable improvements including a jump in full time employment 80.5k (highest read since 1991).
Elsewhere in Asia, Japan’s machine orders climbed 13.4%m/m in January vs. 7.1% exp rise and following a 15.7% drop in December. EURUSD made new two-year highs reaching 1.3984 at the start of the European session. CHF continued to gain strength as we near Crimea elections Sunday falling to 1.2154 and 0.8713 against EUR and USD respectively. Commodities were mixed with Gold regaining its footing after yesterday’s sell-off, climbing to $1371 while copper was further hurt by the weak Chinese data which continued to slide.