Perceived calm ahead of European trading

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Light changes across asset classes so far today

I’d argue that if anything else, the market is looking indecisive rather than emanating calmer and steadier tones as we look towards European trading.

The PBOC stepped in with quite a big chunk of liquidity injection earlier while Evergrande is said to make coupon payments for its onshore bonds tomorrow. But as Eamonn mentioned earlier here, there’s still many more of these to watch for in the weeks ahead.

Chinese equities are marginally lower, recovering losses going into the lunch break, while US futures are little changed up roughly 0.1%. Meanwhile, 10-year Treasury yields are up a touch by 0.7 bps to 1.33%.

On the balance of things, there is a perceived calm in the market right now.

But I’d argue that sentiment remains fragile and given how US equities struggled in trading yesterday, I wouldn’t be surprised to see similarly sluggish tones later today.

In FX, the yen is the laggard early on with USD/JPY keeping a slight bounce near the mid-August lows from 109.13 to 109.48 currently.

USD/JPY D1 22-09

That said, the pair remains largely rangebound since July, mirroring sentiment in the bond market, so there’s not much to extrapolate from price action.

The 100 and 200-hour moving averages rest at 109.61-70 and will be key near-term levels to watch as that may limit any short-term bounce on the day.

Not forgetting, it is Fed day so there’s that to contend with in the sessions ahead too.

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