Equity

According to BofA, the equity wipeout has triggered a ‘contrarian buy signal.’

Bank of America’s ‘Bull & Bear’ indicator drops to “unambiguous contrarian buy”

This is primarily regarded as a sentiment indicator, but it suggests that market bearishness is nearing its peak.

That doesn’t necessarily mean the selloff is over, but given the rate of the market’s decline in recent weeks, one could argue that we’re due for a technical break as well. According to BofA, $5.2 billion left global equities funds last week, while $12.3 billion left global bond funds, marking the seventh consecutive week of outflows. When the BofA ‘Bull & Bear’ indicator falls below 2.0, it indicates a “unambiguous contrarian buy.”

USD/JPY

• USD/JPY Volatility Rises, Dollar Index Falls
• AUD, NZD Rebound, EUR, GBP Rise, Stocks Hold
• Just another day in paradise, er, FX land for you and me. In early Sydney, bid-offer spreads widened as FX volatility continued, picking up where it left off yesterday. US bond yields fell at the close of trading, while stocks recovered their losses.
• Another day of risk-on, risk-off trading, with the ongoing debate over inflation and recession dominating sentiment. The majority of the US economic data released yesterday fell short of expectations.
• Weekly unemployment claims increased to 218,000, exceeding expectations of 200,000, while the Philadelphia Fed Manufacturing PMI fell short of expectations, falling to 2.6 from a previous 17.6 and falling short of expectations of 14.9. In this environment, the Swiss Franc performed best.
• The USD/CHF exchange rate fell 1.6 percent to 0.9720 from 0.9863. The New Zealand Dollar (NZD/USD) increased 1.37 percent against the US Dollar to 0.6380 from 0.6300 yesterday, finishing as the second-best performing currency.
• The Dollar Index, which measures the value of the US currency against a basket of six major currencies, fell 0.9 percent to 102.87 (103.64 yesterday), extending a week-long decline from a 20-year high (105.01).

Russia

Russian gas supplies to Finland will be cut off on May 21 at 0400 GMT.

According to the Finnish energy company Gasum, Russia is taking “countermeasures” in response to Finland’s decision to join NATO.

The above move has been widely publicised over the last two days, and while Finland does import the majority of its gas from Russia, gas accounts for only about 5% of its annual energy consumption.

Russian gas exports to Finland averaged around 3.2 million cubic metres per day, according to data from 1 January to 16 March.

China

• USD/CNY closes the domestic session at 6.67, the highest close in over two weeks
• Chinese yuan poised for biggest weekly gain since 2005 As the yuan battles back this week, poised for its strongest weekly showing since 2005 – when China de-pegged the yuan from the dollar – it appears that we may have found the line where Chinese authorities are comfortable drawing for the time being, and that appears to be around 6.80.
• This may have contributed to the dollar’s lack of momentum in recent days, as yuan movements influence risk and dollar sentiment and vice versa.
• Beijing has already responded with additional easing measures to support the economy this week, and the relief for Chinese equities is certainly welcome. The efforts to revive the housing market are also boosting confidence, which is aiding the yuan’s recovery this week.

Dollar

• The dollar loses ground as risk appetite rises.
• The greenback and yen are the session’s laggards.
• A more positive risk mood is pinning the dollar lower to start the session, with the greenback giving up most of its earlier gains. The euro and yen are still slightly weaker against the dollar, but most other major currencies are rising.
• GBP/USD is trading near 1.2500 once more as buyers continue to probe the figure level this week
• Meanwhile, the more traditional risk currencies are gaining ground against the dollar. USD/CAD has fallen 0.3 percent to just under 1.2800.
•  while the AUD/USD is up 0.2 percent to 0.7070 after trading close to 0.7000 earlier in the day The slight dollar retreat comes as equities continue to surge higher, with S&P 500 futures now up 1% and European indices up 1.3 percent to 1.6 percent on the day.

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