Asia Stocks Bounce On Better China Services PMI

NBS manufacturing PMI fell slightly to 51.0, but further improvement in new orders points to a continued recovery in demand. Non-manufacturing PMI rose notably to 55.2, the highest level since January 2018, reflecting a recovery in household demand for outdoor services.
 
The print provided a  significant lift the CSI 300 but fell just short of taking out the critical psychological 5000 levels before interday profit-taking set in. At the same time, the northbound inflows provided and inflow boost the CNH, which sliced through the vital 6.85 level on a generally weaker USD dollar backdrop.  The fundamentals remain ripe for RMB appreciation in 2H with the PBoC having little reason to slow the appreciation. The potential adverse tail risk to the worsening of US-China relations due to the upcoming US election seems to be wagging less frequently of late, which has opened the door wide open to a more pronounced  CNH rally.
 
Its been a slow grind higher for oil in Asia supported by the FOMC reflationary bounce and better than expected services PMI data out of China. Indeed the later is a most favorable reopening boost as it suggests the fear of the virus is gradually ebbing as it is across the world as people are taking better precautions while hoping that a trip to the clinic for the ultimate recession stopper, a vaccine shot will happen sooner than later. As far as volumes are concerned, its crickets in Asia again. But the US reflation trade now supported by improving the consumer side of the equation in China should prove favorable.
 
The Fed dovish function is excellent for stocks but still not sure if it's strong enough to send the US dollar significantly weaker, and gold higher short term as the market is not pricing sufficient positive risk premia for the increase in net US Treasury supply, nor the potential for medical innovation.
 
We have Clarida talking later today, so it's holding some back from buying the US dollar in size as I'm sure a lot of traders are having reservations about going total bear on the dollar ahead of this week's payrolls. If we get another positive surprise, it will trigger a further bear steepening in the curve. At some point, US rates will count, but at the same time, it's hard work being long US dollars these days especially with the election approaching, a new Fed policy framework that explicitly allows for inflation to moderately overshoot the 2% target to catch-up on previous undershooting, and very depressed US real interest rates, some long-term investors will likely continue to want to diversify away from the greenback. And we possibly see this in the Berkshire Hathaway (NYSE:BRKa) rotation.