Markets Tread Water Ahead of Jobs, USD Slides

Asia Pacific markets were firmer after a lackluster performance in US equities saw the Dow and the S&P close virtually flat on the session, while the Nasdaq posted a marginal gain of 0.3%. With no economic data on the calendar, markets have been driven by corporate earnings and M&A activity, with mining giant BPH Billiton's hostile bid for Potash Corp making global headlines. The Nikkei 225 was the strongest performer in the region, advancing by more than 1.3% on speculation that the BoJ may implement additional monetary easing measures in an effort to stem deflation and combat recent strength in the yen. The Hang Seng index and the Shanghai SE composite were higher by 0.8% and 1.0% respectively, while the S&P/ASX 200 index nudged higher by a meager 0.1%.

Also worth noting is China's decision today to allow the yuan to trade in the domestic market against the Malaysian ringgit for the first time. The move suggests China is taking steps towards a free floating currency, which would undoubtedly see the yuan appreciate considerably against most of the major currencies, save the yen. Having recently surpassed Japan as the world's second largest economy, a stronger yuan could have significant implications on global inflation as the cost of Chinese goods increases. The subsequent domestic slow down could also put pressure on the nation's closest trading partners, as weaker Chinese demand weighs on commodities and commodity backed economies.

Commodity prices were mixed, with crude oil gaining 1.0% to trade at $76.00 per barrel and gold holding just beneath the $1230 mark. Commodity backed currencies were firmer, with the aussie and the loonie advancing nearly .25% against the dollar to trade at .9000 and 1.0270 respectively. The greenback is weaker across the board, with the dollar index falling to 82.30. Bond yields have continued to slowly recover, with the 5-year at 1.477 and the 10-year at 2.67.