In today’s briefing:
- Olympics/ Bonds/ US-China/ China-Stans/ Graft
- Japanese Yen – Myths and Realities
- Predicting the Impact of a Russia-Ukraine Conflict on Wall Street
Olympics/ Bonds/ US-China/ China-Stans/ Graft
- China approved new rules to further connect the interbank and exchange bond markets, marking a step closer to unifying its fragmented $20 trillion bond market.
- We expect US-China relations to remain fractious and difficult – with fewer major dramas, while China remains determined to keep the Stans sweet – and focused on stability and security.
- Xi Jinping’s years-long anti-corruption campaign won’t slow down in 2022 as he told the Party’s top disciplinary watchdog to take a “zero tolerance” approach to corruption.
Japanese Yen – Myths and Realities
- Yen depreciated about 13% vs Dollar in 12 months to 4 January but has since rebounded about 1% in NEER terms. We expect trade deficit to stabilise in coming months.
- “Safe-Haven” Yen also driven by capital outflows and global sentiment, as proxied by S&P 500. But perception that Yen is funding currency for EM has not held true since mid-2020.
- Our near-term scenario, premised on lower US equities, is of modest Yen NEER appreciation. Monthly seasonality has historically been negligible in February.
Predicting the Impact of a Russia-Ukraine Conflict on Wall Street
- A new threat to financial markets may be on the cards, with a potential incursion of Ukraine by Russia.
- While the probability of war remains slim at best, such an event could still lead to extreme movements across every sector in the market, including stocks, commodities and bonds.
- Energy Markets could be the primary source of volatility if tensions between the two countries turn into conflict
Before it’s here, it’s on Smartkarma
