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Markets continue to show signs of calm into month-end, can it last?

Good morning

Equity markets show signs of calm as the panic over Deutsche Bank last week seemed to stem from one CDS trade. While this may be a good thing for now it does show how stocks prices of multi-billion dollar firms can come under pressure from one trade in a relatively illiquid instrument. Credit defaults swaps are supposed to be about mitigating risk, or rather passing the risk from one entity to another, they should not increase volatility of the underlying.

US dollar is still close to its recent lows, EURUSD at 1.0825 and GBPUSD 1.2320. BoEs Mann speaks this evening. AUD moved a touch lower overnight on weaker CPI. I didn’t see that on my calendar. It is possible RBA will look to keep rates unchanged at 3.6% at their meeting next week as a result of the inflation print.

JPY was a bit weaker overnight as Kuroda confirmed he thinks monetary easing has boosted the economy and that the benefits of the program exceeded the costs. He added that they were getting closer to the 2% inflation target but still had a way to go. Kuroda has just about one more week in office until he is replaced by Ueda. Regardless of Ueda’s recent comments, his appointment will bring more uncertainty to the path of BoJ policy.

Markets are quite excited about the surprise news that Chinese firm Alibaba is looking to split into six entities which was partly responsible for the near 2% increase in the Hang Seng overnight. This restructure is likely to go some way to appease the China government who have previously criticised online firms such as Alibaba.

The SNP members have voted Humza Yousaf as their new leader to replace Nicola Sturgeon. I’d looked the odds a while back and Yousaf was a bit of an outsider, with his two rivals Regan and Forbes ahead of him at the bookies. Yousaf has since been confirmed as Scotland’s new First Minister. He becomes the first Muslim to lead a major UK party

The BBC website yesterday had some quite incredible footage of London’s super sewer, a 25km long, 7m diameter tunnel underneath the Thames that is due to be finished in 2025. It will provide much needed help to the Victorian sewers London still relies on. Let’s hope the new one lasts as well as the old ones have.

Make a note in your diaries for 23rd April. The government have announced they will send an emergency alert test message to all mobile phone users in the UK. The system will be used to alert citizens of life-threatening situations. We are not the first country to adopt such a system and it does make a lot of sense to have a rapid way of contacting the vast majority of the population. False alarms are going to be a bit of a problem though, as and when they happen which surely they will.

- 13.00 SNB quarterly bulletin

- 15.00 US pending home sales

- 17.30 BoCs Gravelle speaks

- 19.50 BoEs Mann speaks

- 21.45 NZ building permits

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