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Asian markets opened broadly higher following the 100 point rebound in the DOW overnight.
Sentiments were lifted by a late statement from the Peoples Bank of China on Tuesday
on addressing liquidity squeeze. The Central Bank said it injected funds into some financial
institutions and would make similar moves in the future. It also urged lenders to handle
liquidity fluctuations in calm and rational ways and said it will "take corresponding
measures according to circumstances" to ensure market stability. That's the first official
statement addressing the cash squeeze in China which sent the overnight repo rate to a record
high last week. and the sharp fall in market rates, including one-day and seven-day rates
this week. The news eased some worries in the markets but the rebound in Asian stocks
is quite weak so far and might not be able to sustain long.
In the currency markets, the dollar consolidated in tight range against other major currencies
this week so far. Even the relatively stronger USD/CAD turned sideways at around the 1.05
level. Yen crosses lacked momentum on either side. It should be noted that 10 year US yields
retreated after hitting another high on Monday at 2.657%. But the retreat was very shallow
as it quickly rebounded to close at 2.589%. Gold's selloff resumed today and dropped to
as low as 1251.2 so far and it's still heading south towards the 1200 psychological level.
The broad sentiment is still favoring more upside in the greenback.
In Europe, European Central Bank president Draghi said that "price stability is assured,
and the overall economic outlook still warrants an accommodative stance." He expected "monetary
stimulus and improvements in financial markets will support a recovery later in the year."
Meanwhile, he noted that the yet-to-be-used Outright Monetary Transactions Program is
"even more essential now" because there are potential changes in the monetary stance "with
associated uncertainty in other jurisdictions of the integrated global economy."
On the data front, Swiss UBS consumption indicator and German Gfk consumer sentiment will be
featured in the European session with the Bank of England's financial stability report
and UK CBI reported sales. Q1 GDP final reading from the US will be the main focus in the
US session and is expected to be unrevised at 2.4%.