Risk Markets Consolidations, Investors Stay Cautious On Syria

Asian markets recover today to digest recent losses, following the mild 48.38 pts rise in DOW overnight. But, upside is so far capped by worries over Syria's situation. Crude oil is back trading at around the 109 level at the time of writing, after spiking above 112 yesterday, as markets calmed down a bit. Gold is also heading back towards $1,400 after climbing to $1,434 yesterday. US yields, on the other hand, are mildly higher as 10-year yields closed at 2.782%, and 30 -year yield at 3.754%. In the currency markets the yen and the swiss franc retreated as risk aversion receded mildly. the euro and dollar remain mixed against other major currencies.

Conflicts between the US and Syria continued to dominate headlines with latest news reporting that the US was able to confirm that Syria did use chemical weapons against its civilians because of intercepted "panicked phone calls" between Syrian officials and the commander of chemical weapons. The intercepted phone calls, together with photos and local accounts, would be evidence that the US would put forward to support its use of military action against the MENA country. Though US President Barack Obama has not yet decided whether to take any action military, he has made discussion with his allies, such as the UK. UK's Prime Minister David Cameron announced that the country's Security Council has agreed "unanimously that the use of chemical weapons by Assad was unacceptable - and the world should not stand by". Yet, there's no agreed position among member nations in the UNSC.

BoJ board member Morimoto said today that investors are withdrawing funds from emerging and resource-rich nations as a result of expectation of Fed's tapering. And he warned that the trend might continue. As "global economic recovery remains fragile", Morimoto warned that "huge uncertainty on how a sharp outflow of funds could affect financial markets and global growth." He expected global economy to resume a "moderate recovery", but the pace would be dragged down by struggling emerging economies. Regarding Japan he noted that, "corporate and household sentiment is improving on the back of the correction to the yen's appreciation and higher stock prices." And he also stated that, "the ripple-effects of our quantitative and qualitative easing on the real economy will become clearer."

In his first policy speech as the BoE Governor yesterday, Mark Carney announced measures to loosen UK banks' liquidity requirements so as to free up more funds for lending. The move signaled that the BoE does not treat QE as the only measure to boost the economy, but rather as one of the strategies to achieve its goal. Indeed, relaxation in liquidity requirements should help improve the supply of credit and eventually lift the economy. Carney also addressed the rise in short-term rates following the last monetary meeting and warned that actions would be takes if the increase in interest rates proved to be detrimental to the economic recovery. More in Carney Relaxed Lending Rules For UK Banks, Clarified That 7% Jobless Rate Not Trigger For Rate Hike.

On the data front, Japan retail sales dropped -0.3% yoy in July. New Zealand NBNZ business confidence dropped to 48.1 in August. German employment, the CPI will be released in European session. The US will release Q2 GDP revision and jobless claims. Canada will release IPPI and RMPI.