
Risk assets are moving higher, with stocks and sovereign bonds moving higher overnight, while the U.S. dollar is mixed versus its major peers with modest prices changes across the board. Concern about Chinese interbank liquidity is abating, with overnight Shibor down to 5.5% from the high of 13.44% on June 20, after the PBoC said it will safeguard money market stability. Anxiety over China’s economic growth is still weighing on markets, with industrial metals moving lower overnight; front-month copper futures are lower by -1.1%. S&P 500 futures are trading higher by +0.5%, joining euro-area stocks, with the Euro Stoxx 50 climbing +2.25% on the day. U.S. Treasury yields are lower by -4bps to 2.57%, while across the pond most sovereign spreads to the German Bund are narrowing.
Today is mostly risk-on, but this market observer is not sleeping better at night just because the PBoC says it will “safeguard” money markets; investors must continue to weigh the real global economic picture.