The global capital markets are mostly quiet. US sanctions on Turkey and Russia are pressuring their respective currencies, and the New Zealand dollar has slumped nearly 1.5% on the back of a dovish hold by the central bank. The Kiwi is at 2.5-year lows near $0.6650. Sterling is lower for the sixth consecutive session amid no-exit Brexit fears and made fresh lows since last October before recovering to little-changed levels in late morning turnover in London. 

The euro is consolidating within yesterday’s range. The euro has mostly been in a 20 tick range on either side of $1.16, where an 823 mln euro option expires today. There is a billion euro option at $1.1550 that will also be cut. European bonds are firmer and Italian bonds are outperforming. Although there have been some intraday moves, Italy’s 10-year yield is off about six basis points this week, and four are being recorded now.  European shares are heavy, with only the consumer discretionary sector showing some mild gains. Energy is the worst performing sector. Oil prices are stabilizing after sliding 3.2% yesterday, where trade tensions and Chinese action on US refined products took the entire complex down. US oil stocks did not fall as much as had been expected.

The dollar was sold to JPY110.70 near midday in the Asian session, a two-week low, before recovering toward JPY111.20.  There are some options expiring that will influence activity. There are around $1.8 bln in options struck at JPY111.00-JPY111.05. There is another $1.06 bln in JPY111.25-JPY111.30 options and another ($1.9 bln) JPY111.50-JPY111.55 that expire today  Japan’s 30-year bond auction (JPY700 bln or ~$6.3 bln) was well received, which helped to ease the long-term Japanese yields, while yields in the belly of the curve edged higher, while the short-end eased. 

Japanese stocks eased but most bourses in the region edged higher, and the MSCI Asia Pacific firmed a minor 0.1%, but it is the third consecutive advance. Chinese shares continued to recover with the Shanghai Composite up 1.8%. The Chinese yuan firmed slightly and is now a little higher for the week. China reported July inflation figures. CPI rose 2.1% after a 1.9% rate in June. It is the second gain in a row. Producer prices slipped to 4.6% from 4.7%. The market had expected slightly lower readings of both reports, but they were understood as benign.