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Marketmind: Seeing the good in the markets

Image: Reuters Berita 24 English -  There's a lot going on in markets today. Yields on 10-year U.S. bonds are back above 3%, which has p...

Image: Reuters

Berita 24 English -  There's a lot going on in markets today. Yields on 10-year U.S. bonds are back above 3%, which has pushed the dollar to its highest level in two weeks. Then, the yen fell to its lowest level in 20 years, Australia raised its interest rates by 0.5 percentage points, and the pound fell after a vote of confidence by the ruling party failed to get rid of Prime Minister Boris Johnson.

Stocks in the U.S. and Europe are, as expected, under pressure.

But if you look past the surface, there are some good things.

The biggest reason for the rise in yields is not a new rise in inflation fears, but the fact that $96 billion in new Treasury bonds are coming out this week.

More importantly, China's re-opening of trade is in full swing, with Beijing following Shanghai's lead by easing COVID restrictions even more.

So, blue-chip stocks in Shenzen are close to their highest levels in seven weeks, and Chinese stocks listed in the U.S. are set to rise for a fourth week in a row, helped by better trade relations with Washington.

JPMorgan, which is optimistic about Chinese stocks, says that lockdowns now affect about 10 percent of China's GDP, down from 40 percent in April.

In nearby Japan, the fall of the yen caused the finance minister, Suzuki, to speak out again. He said that the weakening of the yen was being watched with "a sense of urgency." However, this message was immediately watered down when the governor of the Bank of Japan, Haruhiko Kuroda, said that ultra-easy monetary policy would continue.

But Kuroda is becoming more and more different. Investors were caught off guard when the Reserve Bank of Australia raised interest rates by 50 basis points. This was the biggest change in 22 years. Rates are currently at 0.85%, and raising them to 2.50%, which is the level that Governor Philip Lowe has said is neutral for Australia, means a busy tightening cycle is coming.

Lastly, UK PM Johnson will stay in Downing Street for now because he barely won the vote on Monday. The pound is down 0.7% because people are once again paying attention to how bad the economy is. Another big drop in retail sales in the UK may cause investors to rethink how long the Bank of England can keep raising interest rates.

Tuesday should see a number of important events that should give the markets more direction:

-Japan's household spending drops more quickly than expected

-PMIs everywhere at the end

-Euro zone Sentix index

-Chile will raise interest rates by 75 basis points to 9%

-The Argentine Central Bank meets

-U.S. trade balance

-Sale of U.S. 3-year notes

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