In this report, we standardise price changes across different markets to allow for cross-market comparisons.
In our last report, we had suggested watching copper prices after a large price gain and sure enough it plunged last week. It was one of the biggest movers (Chart 1). The largest move, however, has been in US 2y yields which experienced a 2.2 standard deviation jump last week (Chart 2). We’ve added a new market, US breakeven inflation, and that also saw a large jump (1 standard deviation). So, markets have started to price greater inflationary pressures in the US and expect the Fed to act more aggressively as a result.
The other big moves were in China-related markets. The Chinese yuan jumped with a 1.6 standard deviation move, and the Hang Seng saw a 1.2 standard deviation move (Chart 3). Interestingly, mainland Chinese stocks and China bond yield barely moved on the week. Elsewhere, German 10y bond yields saw a large rise.
So, for the week ahead, we would monitor US and German rates markets and the Chinese yuan.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)
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