Wednesday , November 20 2019
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Marc Chandler

Marc Chandler

He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.

Articles by Marc Chandler

Hong Kong Stocks Rally as Stand-Off Continues

16 hours ago

Overview: The run-up in equities continues to be the dominant development in the capital markets. Although the Japanese and South Korean bourses fell, the rise in Australia, China, Hong Kong, and Taiwan underpin the MSCI Asia Pacific Index. The Hang Seng’s gains  (1.5% on top of yesterday’s 1.3% rise) are notable as the situation on the ground remains intense and unresolved. European markets are higher, and the Dow Jones Stoxx 600 is at new four-year highs, while US shares are firmer in Europe, pointing to new record highs for the S&P 500. Debt markets are quiet. Asia Pacific yields slipped, while European rates are a little firmer, and the US 10-year is hovering around 1.82% yield. The foreign exchange market is subdued, and the dollar is largely confined to a +/- 0.15% band

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Sterling Shines in Subdued Start to the New Week

2 days ago

Overview: Equities in Europe and the US look to extend their six-week rally, while the MSCI Asia Pacific Index gets back on the winning way after stumbling last week. Despite the escalation of the conflict in Hong Kong, the Hang Seng rose 1.35% to lead the region and recoup a chunk of last week’s 4.8% slump. The Dow Jones Stoxx 600 puts the European benchmark within spitting distance of the four-year high set recently. The S&P 500 gapped higher at the start of last week to new record highs. It is poised to gap higher again today. Equities are where the movement is today as bond yields and the currencies markets are quiet.  Core bond yields, including US Treasuries, around a basis point firmer, while peripheral bond yields in Europe are a little softer. Against the majors, the dollar

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Make it or Break It Week for the Dollar?

3 days ago

The US dollar was little changed for most of last week and then weakened against most of the major currencies ahead of the weekend.  The consensus narrative is that comments by the US Administration fanned optimism on a trade agreement with China, and that encouraged a rally in risk assets.  We are skeptical, in part because earlier worries failed to entice much of a market reaction.  Also, bond yields fell last week, with the 10-year yield on US Treasuries leading the way with an 11 bp decline.   The dollar fell against all the major currencies last week except the Australian dollar (~-0.6%), unable to fully recover from the sell-off in response to the disappointing jobs data.

Broadly speaking, the dollar trended lower in October and corrected higher in the first half of

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Economic Entrails in the Week Ahead

3 days ago

The exaggeration of the significance of a few data points led many observers to posit a synchronized global economic rebound.  Disappointing data from China, Japan, and Australia last week suggested that the Asia Pacific region is not experiencing it. 

Japan’s export prowess is a thing of the past.  Net exports were a drag on Q3 GDP. The October trade balance is likely to show that there has been little improvement.  Japan has recorded an average monthly trade deficit of about JPY157 bln.  In the first nine months last year, the average monthly surplus nearly JPY3 bln.  In the first nine months of 2017, the average monthly surplus was almost JPY241 bln.  In September exports were off 5.2% year-over-year, and imports had fallen by 1.5%.  

Japan will also report October CPI and

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Market Runs with US Line that US-China Deal is Close

5 days ago

Overview: Comments by US presidential adviser Kudlow playing up the prospects of a trade agreement between the US and China, with other reports suggesting a key call will be held today, is helping to underpin sentiment into the weekend. The MSCI Asia Pacific Index pared this week’s loss today, with China the only main market not participating, despite the PBOC’s unexpected injection of CNY200 bln of the Medium-Term Lending Facility. The regional benchmark snapped a five-week advance. Europe’s Dow Jones Stoxx 600 is firmer today but practically unchanged on the week. A five-week advance is in tow, and its performance in the afternoon will determine whether this can be stretched into a sixth week. The same is true for the S&P 500. Benchmark 10-year yields are firmer on the day, but

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Unexpected German Growth Fails to Buoy the Euro

6 days ago

Overview: Rising trade anxiety and disappointing economic reports from the Asia Pacific region helped unpin the profit-taking mood in equities, while bond yields continued to pullback. The MSCI Asia Pacific Index and the Dow Jones Stoxx 600 are in the red for the fourth time in the last five sessions. Germany reported a surprise 0.1% expansion in Q3, but it has done little for the DAX or the euro. The S&P 500 eked out a small gain yesterday but is trading heavier again now. Benchmark bond yields are mostly 2-5 bp lower, though the disappointing Australian jobs report fueled nearly a 10 bp decline in the Aussie bond yield. The dollar is mixed, with the risk-off mood aiding the Swiss franc and Japanese yen. Gold is edging higher for the third consecutive session, while oil is

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Investors Temper Euphoria

7 days ago

Overview: The recent rise in equity markets and backing up in yields spurred many observers to upgrade their macroeconomic outlooks rather than the other way around. Yet we continue to see may worrisome signs. It is not just trade, though, of course, that is part of it. Sentiment itself is fragile and will likely follow prices. Led by Hong Kong, where the confrontation is intensifying, and the Hang Seng’s 1.8% drop, regional markets tumbled. The MSCI Asia Pacific Index fell for the third time in four sessions. In Europe, shares are also moving lower. The Dow Jones Stoxx 600 is off by around 0.6% in the morning session, which, if sustained, would be the largest loss in a month. Financials and energy are the largest drags. US shares are trading lower, and a decline today by the S&P 500

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Farage Declares Truce with Tories after being Offered a Peerage, Underpins Sterling

8 days ago

Overview: Global
capital markets are calm as investors look for a new catalyst. The MSCI Asia
Pacific Index snapped back after posting its first back-to-back decline in a
month. All the equity markets were higher, but Australia. The Nikkei, Kospi,
and Taiex led the advance with about a 0.8% gain. European shares closed firmly
near session highs yesterday, even if still lower on the day, and there has
been some follow-through buying today. The S&P 500 is little changed after
ending a two-day advance yesterday with a 0.2% loss. Ten-year benchmark yields
are firm near three-month highs. US 10-year Treasurys are flat near
1.93%. The dollar slightly firmer against nearly all the major
currencies. The New Zealand dollar and the British Pound are paring
yesterday’s gains. Emerging market

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Dollar Consolidates and Equities Follow Asia Lower

9 days ago

Overview: Escalating violence in Hong Kong and the continued fall in Chinese producer prices weighed on equities in Asia Pacific trading. The MSCI Asia Pacific Index has risen nearly 7% during the five-week rally and is off to a weak start this week. Hong Kong’s Hang Seng fell around 2.6%, its biggest loss in three months, and China’s CSI 300 was off 1.75%. Nearly all the local markets fell but Australia. European shares are also under pressure. The Dow Jones Stoxx 600 has also rallied for five consecutive weeks and is off about 0.25% through the morning. US equity markets will trade today, though the bond market is closed. In electronic trading, the S&P 500 is about 0.3% lower. Bond markets are narrowly mixed, though the risk-off mood has weighed on European peripheral bonds. We note

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The Dollar Snaps Back after the October Pullback: Who has the Big Mo’ Now?

10 days ago

The US dollar had a solid week as the recovery from the October slide began.  We had a high conviction it was coming, but we thought the technical indicators gave scope for one more marginal new low, which in the end did not materialize.  It is difficult to say that there had been much new information or progress on the three macro issues that have captivated investors:  US-China trade, Brexit, and global economic outlook. 

The UK is headed for the December 12 election, and that is the key Brexit focus.  Developments around that include both major parties promising to open the public purse with new spending plans to entice voters.  From the outside,  it is not clear this is an effective means to increase one’s base as opposed to reward those who were going to vote for you in any

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Caution: Prices Diverging from Macro Drivers

11 days ago

Sometimes the news drives the markets and but now it seems that the markets are driving the news.  The dramatic swing in market sentiment from fearing a repeat of Q4 18 and the pessimism of World Bank/IMF forecasts have been cast aside for a few data points and a tease from the world’s two largest economies that an agreement may be near to begin a de-escalation process not just extending the third tariff truce.

The Federal Reserve, the European Central Bank, the People’s Bank of China and many emerging market economies have eased monetary policy in recent weeks.  The Bank of Canada and the Bank of England did not join the party, but they softened their neutrality.  The Bank of Japan hinted it could cut rates, while Prime Minister Abe has promised a JPY5 trillion supplemental

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Risk Appetites Satiated Ahead of the Weekend

12 days ago

Overview: The capital markets are consolidating the recent moves ahead of the weekend. Equities are paring this week’s gains, though the Nikkei, which was closed on Monday, extended its advance for the fourth consecutive session. Despite the profit-taking today, the MSCI Asia Pacific Index rose for the fifth week. Europe’s Dow Jones Stoxx 600 is snapping a five-day rally, but it is closing in on the fifth consecutive weekly advance. US shares are trading softer. It is up a modest 0.6% this week coming into today, where a five-week rally is on the line. The dramatic equity rally is being matched by just as dramatic sell-off in bonds. French, Belgian, and Swedish 10-year yields moved above zero for the first time in several months, The US 10-year benchmark yield pushed above 1.90% to

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The End of Economic Primacy

12 days ago

Periodization is an under-appreciated part of political and economic narratives.  What are the broad patterns that determine before and after?  What marks different phases or epochs?  In Capital Alone, Branko Milanovic’s new book, he suggests a social-democratic form of capitalism dominated after WWII. At the start of the 21st century, a liberal meritocratic version emerged in the US.  He suggests the current period is marked by a conflict between this liberal meritocratic form and political capitalism that China illustrates.

In my 2017 book, Political Economy of Tomorrow, I draw on a different periodization.  It is also based on how capitalism is organized.  While Milanovic’s focus is on types and extent of inequality, my periodization is based on how capitalism is organized.

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Trade Optimism Boosts Sentiment but Weighs on the Dollar

13 days ago

Overview: Indications that a phase one agreement between the US and China would include rolling back some existing tariffs is boosting risking appetites, sending stocks higher, and pushing up yields. However, this appears to be simply a restating of China’s views rather than a new breakthrough. The dollar is paring its recent gains. The MSCI Asia Pacific Index rose for the fifth time in six sessions to reach its best level since August 2018. Europe’s Dow Jones Stoxx 600 is pushing higher and is at new four-year highs. The S&P 500 pulled back yesterday to fill the gap created by Monday’s higher opening but is set to make new record highs today. Benchmark 10-year bond yields are mostly 2-3 bp firmer, while the dollar is weaker against most of the major currencies, but the yen and Swiss

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Markets Catch Collective Breath as Dollar Consolidates Yesterday’s Advance

14 days ago

Overview: Investors seem to be catching their collective breath today, and the global capital markets are consolidating recent moves. A notable exception is the Chinese yuan, which has continued to strengthen, and the dollar has slipped back below CNY7.0. Asia Pacific equities were mixed, and the four-day advance in the regional benchmark stalled today. That said, India has rallied to new highs. In Europe’s Dow Jones Stoxx 600 is firm but struggling to maintain the upside momentum that has lifted it for the past three sessions. US shares are little changed. Benchmark 10-year yields played catch-up in Asia after the US surge yesterday. European yields are narrowly mixed, and the US 10-year yield is hovering around 1.85%. The dollar is consolidating yesterday’s gains against the major

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Animal Spirits Remain Animated

15 days ago

Overview: The prospects that the US-China deal could include some rolling back of existing US tariffs helped underpin risk appetites. After new record highs in the US S&P 500 and NASDAQ, Asia Pacific markets marched higher, and the MSCI Asia Pacific reached its highest level since August 2018. A small rate cut by China and catch-up by Tokyo, which was on holiday on Monday, helped extended the regional rally for the 14th session in the past 17. India, on the other hand, was an exception, and its minor loss snapped a seven-day advance. Europe’s Dow Jones Stoxx 600 is little changed but made a marginal new three-year high. US shares are trading with a firmer bias in the European morning. Bond yields continue to back up, with most 2-5 bp higher. Of note, at minus 32 bp, the 10-year

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November Monthly

16 days ago

Two main developments drove the foreign exchange market in October.  First, the market grew more confident that a hard Brexit could be avoided.  This drove sterling sharply higher.  It rallied from $1.22 on October 10 to a little above $1.30 on October 21 before doubts grew about the likelihood that Parliament will approve the new agreement.  

The other development was a heavier US dollar after strong gains over the past three months.  The prospect that the US-China tariff truce could be solidified with an agreement between Trump and Xi in November may have encouraged some risk-taking. US September economic data consistently was disappointing, but Q3 GDP was a little firmer than expected, and the October employment data was a bit better than expected. .The dollar fell against

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Investor Optimism Carries into the New Week

16 days ago

Overview: Investor optimism is reflected by the risk-taking appetite that is lifting equity markets and bond yields. With Japanese markets closed for a national holiday, the MSCI Asia Pacific Index was led higher by more than 1% gains in Hong Kong, Taiwan, South Korea, and Thailand. The regional benchmark advanced for the seventh session in the past eight and is approaching the year’s high. European shares extended their rally, and the Dow Jones Stoxx 600 has risen in nine of the previous 11 sessions. It is within spitting distance of last year’s high. US shares are also trading higher, and both the S&P 500 and NASDAQ set new records at the end of last week.  Benchmark 10-year yields are mostly 2-4 bp higher, which puts the US Treasury yield near 1.75%. The dollar is mixed in mostly

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Synchronized Emergence from Soft Patch?

17 days ago

There have been plenty of developments warning of a global economic slowdown. Yet, seemingly to justify the continued advance in equity prices, there has begun to be talk of possible cyclical and global rebound.  

That is the new constellation, connecting the better than expected Japanese, South Korean, and Chinese September industrial output figures,  a slightly stronger than expected Q3  GDP reports from the US and the eurozone.  Ahead of the weekend, China reported an unexpected increase in the Caixin manufacturing PMI and a sharp rise in the forward-looking new orders component.  The US labor market, which helps drive consumption and 70% of the economy, is faring better than expected.  Not only was the October job growth more than expected, but the past two months had

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Charts Suggest Scope for One More Push Lower for the Dollar before a Correction

17 days ago

The US dollar traded heavily last week, falling against all the major currencies but the Canadian dollar.  The Bank of Canada softened its neutral stance a few hours before the Federal Reserve signaled a pause after delivering its third rate cut to complete its midcourse correction.

The Federal Reserve’s real broad trade-weighted dollar index, which arguably is the single best measure when considering the economic impact of changes in foreign exchange prices, eased in October by a little more than 0.5%.  With two months left in the year,  it up by a little less than a quarter of one percent here in 2019.  This index has risen in only three months this year thus far after falling in three months all of last year.

The move against the US dollar was led by those currencies that

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Dollar Remains on the Defensive Ahead of Jobs Report

19 days ago

Overview: An unexpected increase in China’s Caixin manufacturing PMI helped lift Asia Pacific equities after the S&P 500 stumbled yesterday amid concerns that there will not be a phase 2 in US-China trade negotiations. The MSCI Asia Pacific Index rose 4.3% in October, and with the help of gains in China, Hong Kong, Korea, and Taiwan began November with a gain. European stocks posting modest gains after the Dow Jones Stoxx 600 rose a little less than 1% last month. US shares are firm, and the S&P 500 is up about 0.5% on the week coming into today’s session. It rose by about 2% last month. Benchmark 10-year yields are narrowly mixed. Last month, yields rose around 15 bp in core Europe and 7-8 bp in Spain and Italy. The US 10-year yield rose about five basis points in October  Japan was

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No Good Deed Goes Unpunished

20 days ago

Overview: The equity and bond rally in North America yesterday carried over into today’s session. With some notable exceptions, like China, Taiwan, Australia, and Indonesia, most bourses in Asia Pacific and Europe traded higher. US shares are little changed in early Europe after the S&P 500 rose to new record highs. The US 10-year Treasury yields fell six basis points yesterday, and benchmark yields eased in Japan, China, and South Korea. HSBC cuts Hong Kong’s prime rate for the first time in eleven years, and several Middle East countries (Saudi Arabia, Kuwait, UAE, Bahrain) cut also cut key rates today. In Europe, bond yields are mostly 3-4 bp lower. The US dollar has softened against most of the major currencies but the Canadian dollar. The South Korean won, and Chinese yuan lead

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All About Perspective

21 days ago

Overview: The global capital markets are mostly treading water ahead of the Federal Reserve meeting. Asia Pacific and European equities drifted lower. The MSCI Asia Pacific Index appears to have snapped a four-day advance, while the Dow Jones Stoxx 600 was trading slightly lower for the second consecutive session following a six-day rally. The S&P 500 gapped higher on Monday did not enter the gap yesterday. It is found between 3027.4 and 3032.1. Benchmark 10-year yields fell in Asia but are narrowly mixed in Europe. The US 10-year yield is around 1.83%, having begun the month closer to 1.66% and settled last week a little below 1.80%. Note that the US Treasury will provide details of the quarterly refunding. While the size of the refunding may not change much, some are expected a

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Calm before the Storm

22 days ago

Overview: The more prominent events this week still lie ahead, and the capital markets are trading accordingly.  The rally that lifted the S&P 500 to new record highs yesterday carried over into Asia, where most equity markets rose, though China, Hong Kong, and South Korea were notable exceptions. European shares are struggling in the early going after the Dow Jones Stoxx 600 set new highs for the year yesterday. US equities are trading with a slightly softer bias in Europe. Benchmark 10-year bond yields are consolidating after Asia Pacific bonds played catch-up with the continued backing up in the US benchmark. Still, marginally weaker yields in Europe and the US, suggest consolidation may be in order ahead of the outcome of the FOMC meeting tomorrow. The dollar is firmer against

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Cool Video: Dollar and Fed

22 days ago

I joined Tom Keene and Marty Schenker (chief content officer) on the set of Bloomberg TV this morning.  Schenker discussed some of the geopolitical issues in the Middle East, and Keene asked about the impact on the dollar.  

I expressed my concern that the chief threat to the dollar’s role in the world economy is the several administrations have increasing weaponized access to the dollar and the dollar funding market. It used to be a public good, a utility if you will.  However, since 9/11 or so, the US has increasingly used it to punish behavior, it does not like and reward friends.  This provides a significant incentive to find an alternative.  

The second issue that we discussed was the outlook for the US economy and the Federal Reserve.  I see the end of the record-long

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Politics Dominate Start of the Week before Yielding to Policy and Economics

23 days ago

Overview: The pre-weekend rally in US shares, with the S&P 500 flirting with record highs and the back-up in US yields, set the tone for Asia Pacific trading earlier today. Nearly all the equity markets advanced, and bond yields rose. Europe’s Dow Jones Stoxx 600 took a five-day advancing streak into this week, but shares are struggling to sustain the upside momentum. US stocks are trading a little firmer in Europe. Benchmark yields have continued to rise, and the US 10-year yield is near 1.83%, closing in on last month’s high near 1.90%. Hopes that S&P upgrades the outlook for Italian bonds at the end of the week is offering little reprieve for Italian bonds today, where the 10-year yield is almost six basis points higher as the yield pokes above 1.0%. The dollar is mixed but mostly

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Greenback’s Recovery has more Room to Run

24 days ago

After a three-week decline, the dollar was over-extended in our view, coming into the past week.  A correction began in recent days, and the greenback rose against the major currencies but the Canadian dollar last week.  Among emerging market currencies, Latam provided the bookends.  Ahead of today’s elections (October 27), the Argentine peso fell about 2.8% to finish near two-month lows.  On the other side was the Brazilian real, which was up as much as the peso was down.  Pension reform is projected to save BRL800 bln (~$190 bln) over the next decade.  The Bovespa rallied to new record highs and the credit default swaps, which insure against sovereign default, have fallen for the 13th consecutive session ahead of the weekend to its lowest level in about 6.5 years.  At about 120 bp,

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Fed’s Mid-Course Correction to be Challenged while ECB Resumes Bond Purchases

25 days ago

The week ahead will help shape the investment climate for the remainder of the year.  The highlights include three central bank meetings (Federal Reserve, Bank of Japan, and the Bank of Canada).  Among the high-frequency data, the US and the eurozone report the first estimates of Q3 GDP, and the US October jobs data and auto sales will be released.  Investors will also get the preliminary Oct CPI for EMU.

A few hours before the FOMC meeting concludes on October 30, the US will publish its first estimate of Q3 GDP, and two days later, October jobs data and auto sales will be reported.  Federal Reserve Chairman Powell has acknowledged that some of the downside risks have already materialized. Still, he has also stuck to his framing of the challenge as a mid-course correction.  We

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Limping into the Weekend both Fighting and Talking

26 days ago

Overview: Amazon and Intel earnings offered conflicting impulses for Asia Pacific equities, but Japanese, Chinese, Australian, and South Korean shares advanced. This will allow the regional MSCI benchmark to solidify its third consecutive weekly gain. Europe’s Dow Jones Stoxx 600 is little changed, and it too is closing in on its third weekly advance. US shares are little changed, and the S&P 500 is up about 0.8% this week, coming into today’s session. It has finished a week above 3000 only once since the end of July and closed at 3010 yesterday. Except for Australia and New Zealand, major 10-year benchmark yields are higher today to pare this week’s decline. China’s 10-year bond is an exception. Its 10-year yield rose a few basis points on the week and just below 3.25%, it is at

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Flash PMIs Disappoint Despite Negative Interest Rates

27 days ago

Overview: As the UK awaits the EU’s decision on its request, disappointing flash PMI readings Japan, Australia, and Germany have filled the news vacuum. Sweden’s Riksbank retained a hawkish tone while keeping rates on hold, and Norway’s Norges Bank also stood pat. The market expects Turkey to deliver a rate cut, while the ECB meeting is Draghi’s last at the helm. Encouraged by US equity gains, the Nikkei rose to new highs for the year. India and China were notable exceptions to firmer equities in Asia Pacific. Japan and South Korea have agreed to a rapprochement after a political dispute was expressed in trade relations. Europe’s Dow Jones Stoxx 600 also recorded new highs for the year. US shares are little changed, with the S&P 500 hovering around 3000. Benchmark 10-year bond yields

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