A look at the day ahead in European and global markets from Wayne Cole.
Asian share markets are looking to end July with a bang as hopes for new policy steps have Chinese blue chips up 4.8% for the month and on track for their best performance since January.were mixed with manufacturing steadying at 49.3 but services slowing to a disappointing 51.5. Yet that merely stoked wagers Beijing would have to dole up sizable stimulus at some point or risk social unrest, particularly with youth unemployment rising.
The Nikkei is trying for a seventh straight month of gains and is just barely in the green with a rise of 0.2% for July, though it's still up 27% year-to-date.lifted the lid on yields last week, essentially doubling it to 1.0%. That's seen 10-year yields climb 16 basis points 0.60% in two sessions, the sharpest move since the BOJ last remade its yield curve policy in December.
Any rise in Japan's paltry yields should, theoretically, be a plus for the yen and a negative for yen-funded carry trades. Yet after its initial rally to 138.05 on Friday, the yen has since backtracked at pace to 141.68 per dollar. This in part reflects the still huge gulf between Japan rates and emerging markets and the fact that many carry trades are funded at one month rates and rolled over. Right now, investors can still borrow yen for one month at -0.1% to buy pesos and earn 11.1%.
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