The U.S. Dollar remains the strongest currency over the week, followed by Yen, as people are avoiding risk. European stocks cautiously inch higher. Sterling rebounds slightly, with some support the new jobs support scheme.
The U.S. Dollar Index, that measures the strength of the U.S. dollar against a broad basket of currencies, rebounded from a low of 91.75 to 94.50. The rebound happened since the Federal Reserve keep the interest rates at the bottom until the end of 2023. The uptrend of US dollar has put significant pressure on commodities like gold and silver. Metals has suffered a significant decline from the recent highs.
Recent rising COVID-19 cases and threats of lockdown in Europe, along with US general election on November will be the main concern in the market. Right now, the unclear direction over coronavirus policy and lack of new fiscal stimulus plan are causing a new level of uncertainty in the market. Concerns and anxiety have been rising about the second lockdown in the world especially in Europe, contributing more anxiety of renewed restrictions in the US.
Broad-based benchmarks dragged down globally by banking following a report released by Buzzfeed alleging rampant money laundering practices between 1999 and 2017. Suspected amount of activity equated to $2tn. Declines on Wall Street were further exacerbated over deteriorating prospects that a secondary stimulus bill will fail to reach an agreement by September’s end as the U.S. Senate remains in stalemate over the size of the relief package. European indices fell their most in 2 months over renewed piecemeal restriction measures in the U.K, Demark, Greece and Spain. Sparking fear that it may lead to a second nationwide lockdown. Travel and leisure shares felt the brunt of concerns. Despite a cascade of negative news, Australia and Hong Kong gapped higher on Asia’s open with Japan edging down.
A lack of optimistic news ended Fridays’ session risk-off as global indices continued to slip. Investors remained watchful over the weekend amid a persistent virus pandemic, rising geo-political spats between China versus the world and U.S. election risk as rhetoric between both parties intensify. Asia’s off to a mute start with Japan on holiday, embracing Respect for the Aged Day.
Mixed results left the U.S. dollar index relatively unchanged against G10 currencies. Yuan retreated as China kept the lending steady for 5 straight months. Hong Kong Monetary Authorities sold another 3.31bn HKD in defending the lower 7.75 band. Elsewhere, the consolidation in gold continues to tighten whilst Bitcoin settles above the 10,000 level.
Recovery in crude oil prices was halted on Friday as news of inventory gluts and lackluster global demand grabbed headlines. China, the second largest oil import is expected to cut imports by 10% for the coming month. While recent data out of U.S. sees fuel consumption down 13% year on year. News of Libyan oil fields restarting production further added to the headwinds.
Bad news is good is news as Wallstreet recovered ground from a mid-session drop despite less than ideal jobless claims and housing data. Slump in banking weighed down European benchmarks. Record low near zero interest rates and continuing quantitative easing have squeezed traditional banking margins. The gradual acceptance of alternative online banks offering digital wallets have also chipped away at market share. For the lack of data ahead, Asia is off to a mute start as investors digest the weeks monetary policy decisions and await further clarity from government contemplating additional fiscal stimulus.
Yesterday’s session ended with the greenback losing all gains from Wednesday. For the past 2 months, the U.S. dollar index has consolidated between the 92’s and 93’s since the initial stimulus measures began expiring in August. Reluctance by the Federal Reserve to expand bond-purchases beyond short-dated securities is further fueling lackluster volatility. Upon the horizon however, aid negotiations are back on the table as President Trump diverged from Republican views signalling his willingness to sign a $1.5tn stimulus to plan. House Democrats have urged Speaker Pelosi to bring up a new relief bill to the floor for a vote. Swing district members have pressed for a $2.2tn deal whilst hard liners want a vote on a $3.4tn deal instead.
Wallstreet reacted poorly to Federal Reserve Jerome Powell’s FOMC remarks as broad-based benchmarks retreated. Despite signalling rates will be left near zero through till 2023 ensuring 2% inflation over time will be achieved, the Fed fell short on implementing additional easing, targeting long-dated bonds. European indices ended the session mixed. Disappointing U.S. investor sentiment flowed into Europe however was offset by a continuing strong retail sector quarterly result. Indices and futures fell on Asia open as time allowed markets to sufficiently digest the implication of Powell’s press conference. Thus far, Australia has slid 1.1% while Hong Kong fell 1.6%, and Japan edged 0.8% lower.
Asia’s off to a quiet start as indices await the Federal Reserve’s economic projections and policy statement scheduled today. Wallstreet found support posting 2 days of consecutive gains anticipating a more flexible dovish tone given Chairman Powell’s greater tolerance to above norm inflation. An unexpected jump in ZEW economic sentiment coinciding with quarterly profit beating forecast in fashion retailers saw European indices boosted higher. Luxury good stocks like LVMH, Kering and Hermes also gained on the back of China’s first positive retail sales figure since January.
Apart from the yen, other G7 currencies eased off against the greenback ahead of tonight’s Fed meeting. As Yoshihide Suga cements his position as Japan’s new prime minister, repatriation in the yen is steadily growing with USDJPY at 105.44 by yesterday’s session end. Though Suga has reiterated in continuing his predecessors “Abenomics”, many doubt whether additional easing can be pursued considering the BOJ is already overextended. Debt to GDP is also one of the highest among developed countries, a concern for Suga given his first point of order is ponder whether an extension of fiscal aid is warranted.
Wallstreet bounced on the back of mega multi-billion-dollar deals from Softbank’s sale of chip designer Arm to Nvidia for $40bn, to Oracle outbidding Microsoft for social media platform TikTok. Both Nvidia and Oracle gapped above 5% on open, with the former ending the session up 5.82%. Likewise, the latter held onto most gains, up 4.32%. Europe ended the session relatively unchanged as gains in tech and travel offset losses from energy. Despite optimistic retail sales and production data out of China this morning, Asia is off to a mute start. Nikkei unchanged on news of Yoshihide Suga’s landslide victory in becoming Japan’s next prime minister with his win already priced in.
Backlash against Boris Johnson’s proposed internal market bill by high-profile ex-prime ministers halted the pounds freefall. Voicing in opposition, Tony Blair, Gordan Brown, John Major and Theresa May as they see Johnson’s unilateral amendment risking the country’s standing and reputation. The bill is currently making its way through parliament whereby later in the week Commons will vote. Elsewhere, the Hong Kong Monetary Authority sold 388m HKD as USDHKD attempted to breach the lower end of the 7.75 – 7.85 band during the U.S. session. Despite geopolitical rising geo-political tensions, China’s yuan has confidently settle’s above a 16-month high. Among developed nations, China is expected to be the only one to post positive economic growth at years end. Release of today’s positive leading economic indicators further propelled the yuan’s rise intra-day.
Broad-based benchmarks off to an optimistic start to the week, as Wall Street and Asia – Pacific lost ground for two consecutive weeks. Europe and U.K. fared better, ending last week’s sessions higher despite escalating Brexit tensions between Brussels and Britain. Global indices and futures rallied on Asia open with Nasdaq recovering 1.3% and Australia reaching as high as 1.2%. Nikkei climbed 0.8% as Softbank sells chip designer Arm to Nvidia for $40bn while Yoshihide Suga is poised to win leadership elections today for the ruling Liberal Democratic Party. Consequently, making Suga the next Prime Minister of Japan. Though analyst only see Suga winning 37% of regional party votes, he is expected to obtain 70% of party lawmaker votes, making the overall vote tally over 60%. Thus far, Japanese markets have been receptive of Suga’s appointments especially as he pledges to continue “Abenomics” of his predecessor.
Better than expected but nonetheless disinflationary data saw the U.S. dollar lose ground against majors and gold on Friday. Recent U.S macroeconomic data leaves the precious metal in a conundrum. Previous expectations illustrated price growth as rising amid monumental money supply and a deluge of fiscal stimulus. As such, gold broke historic highs reaching beyond $2,000 as investors looked towards safety against the inevitable inflation. Geo-political tensions between China and U.S. further fueled the rise. However, despite an ever-improving U.S labor market, CPI data has been lackluster. Of interest since late August gold remains in a tight slumber as it awaits further economic clarity.
Price action for the on-going week sees global indices choppy following previous week’s tech-rout, where broad-based benchmarks declined as much as 10%. Evident as Nasdaq saw average daily trading ranges of 4%, though week to date the benchmark has only declined 2.9% and down 1.7% yesterday. S&P500 and Dow also retreated 1.5% and 1.4% respectively. European shares fell on the back of rising tensions between Brussels and U.K as well as ECB’s unchanged policy announcement. For the lack of data ahead, Asia is off to a quiet start, though Nikkei rallied 0.8% on open as Chief Cabinet Secretary Yoshihide Suga outdistances other PM candidates with polls showing he is widely expected to win the title in the ruling LDP leadership election. Suga intends to continue implementing Abenomics, of which entails aggressive monetary and fiscal reform to boost inflation.
The American greenback regained lost ground while EURUSD initially spiked 70 pips over a less dovish tone from the ECB’s monetary policy statement. Only to be stifled by ECB Presidents Christine Lagarde’s Euro dollar remark’s that the central bank is carefully evaluating implications of a strong Euro. Especially as Europe’s economic recovery loses steam. Across the English Channel, P.M. Boris Johnson stoked further tensions as the U.K. government broke international law by overriding Northern Irelands Brexit protocol. The protocol would have allowed goods to travel freely between Northern Ireland (Non-EU) and Republic of Ireland (EU) without custom checks. Amid rising political risk, the pound sank over 200 pips by the end of session. A no-deal Brexit would leave trade between continents in absolute chaos.
Wall Street leading benchmarks snapped their losing streak as investors took advantage of tech darlings deemed heavily discounted from recent highs. Tesla rebounded 10% after sliding 20% into their biggest single-day loss since inception. Pandemic-immune winners Apple, Amazon, Facebook and Google also climbed. The S&P500 rallied 1.7% with Dow trailing at 1.5%. Most European indices erased all losses seen on Tuesday as the market awaits ECB’s monetary policy decision today.
Momentum seen in U.S. did not follow through into Asia, with Australia dropping 1.3% since open while Nikkei edged up slightly. Hong Kong fell on Yum China Holding’s IPO, of whom are operators of well-known brands like KFC, Taco Bell and Pizza Hut. Shares fell as much as 4.1% on their debut today. An utter contrast to Nongfu Spring’s bottled water IPO performance on Tuesday, whom rallied 85%.
Improving risk sentiment saw money flows back into major G7 currencies as the dollar index retreated from a 3-week high. Bitcoin and gold saw bounce off major levels while oil earned reprieve bouncing back from low 36’s to 38 dollars. Elsewhere the central bank of Russia forecast the initial bump in recovery will slow down in coming months with deflationary risk offset by a depreciating rubble.
Tech-rout in Nasdaq leaves no markets unscathed, headlined by Tesla, as the company lost 34% of market cap since the stock split. Nasdaq losing 4% and down four consecutive days. Followed by S&P and Dow posting losses of 2.9% and 2.6% respectively. Brexit negotiations undermined UK and European indices as the deadline looms. U.K. PM Boris Johnson ratcheted up the notion, if a withdrawal agreement with respect to Northern Ireland is not agreed upon by today, he walks. If a no-deal Brexit occurs, at stake is $1tn in trade. As news spread of Masayoshi Son’s $4bn option gambit on U.S. tech through Softbank and the ensuing rout, the company declined 4.81% yesterday, dragging down the Nikkei a moderate 0.8%. Asia set to resume declines felt during U.S session, as Australia, Hong Kong and Japan edges lower on open.
Brexit back in the headlines with the pound sinking 0.9% on a quiet day more or less as the U.S. celebrates Labour Day. Against other majors and gold, the greenback gained slightly. U.K PM Boris Johnson publicly stated on Monday if a withdrawal agreement is not met by Oct. 15th, he’d rather a no-deal Brexit than compromise on conditions seen favourable to the E.U. Markets were reminded of the risk of UK leaving without a deal, especially as the Dec. 31st deadline looms, where the standstill agreement expires.
Elsewhere President Trump ups the ante against Beijing, as he intends to decouple economic relationships between China and the U.S. Tariffs will be imposed on American companies creating jobs in China, as well as forbidding such companies from obtaining federal contracts.
Risk-off sentiment continued into Friday as global indices fells sharply during the first half of the U.S. session before recovering lost ground in the latter half. Wild swings on Nasdaq with the tech benchmark losing 4.8% however ending the session down only 1.5%. Similar price action was observed in other Wall Street and European indices. Speculation afloat after Softbank grabbed headlines with their recent regulatory filings unveiling a $4bn option bet on U.S. tech darlings like Amazon, Microsoft, Netflix and Tesla. The $4bn in options is roughly equivalent to $50bn in stock exposure. With an aggressive option bet of that size, an ensuing feedback loop can drive stocks higher as options sellers are forced to hedge by purchasing the same shares. As experienced in the recent bull market. Hong Kong and Japan were little changed on Asia open, while Australia rallied as much as 1%. Upcoming U.S. Labour day is expected to keep futures relatively mute for the rest of Monday.
Despite better than expected jobless numbers, the US dollar ended mostly unchanged amid the whipsawing price seen throughout Friday. Gold has seemingly found a sweet spot between $1,900 and $2,000 for the past 3 weeks, while bitcoin tumbled, briefly touching 10,000. Seen by many as an important psychological level.
Risk-off with Nasdaq leading the declines, tumbling 4.9% yesterday, followed by S&P500 down 3.2% and Dow sliding 2.4%. Since March lows, Wall Street has powered ahead on unprecedented levels of fiscal and monetary liquidity. Technology stocks made the quickest recovery as many firms were set to benefit from the new work-from-home culture and social-distancing norms. Thursday’s euphoria waned, pulling back tech heavyweights Amazon, Apple, Microsoft and Tesla as investors reassess recent record-breaking price action. Following the US tech rout, European indices lost most, if not all gains made on Wednesday. Asia’s opening fared no better, with Hong Kong gapping down 0.6% and Australia sliding. Though Nikkei rallied on open as uncertainty surrounding Japan’s next prime minister becomes clearer.
Sentiment on America’s economic recovery remains weak as the Federal Reserve keeps their pedal on the printing press. Nonetheless the dollar has managed to rebound back gaining ground against other G7 currencies as global central banks consider further easing. Analyst expect the ECB to add an additional 350bn to the existing 1.35tn bond-buying program by the end of the year. While RBNZ Adrian Orr and BOE Deputy Dave Ramsden remarked the need to increase quantitative easing, BOE Governor Bailey is exploring the utility in negative rates. BOJ Masazumi Wakatabe spoke of vigilance against deflationary pressure with more stimulus.
Momentum continues to push Wall Street higher with S&P and Nasdaq closing at record high. Gains were seen in the broader market and away from recent tech-focused firms like Apple, Tesla and Zoom signalling greater confidence in the overall economy’s recovery. Though lagging, Dow is now only 1.6% below historic highs made back in February. Following suit, European indices snapped a 4-day losing streak on the back of technology firms. Benchmarks gained on average 2.6% across the board. Asia off to a relatively mute start for the lack of data during the session.
Elsewhere, the greenback held onto gains across major currencies despite disappointing ADP non-farm employment numbers. As inflation risk subside, gold dropped 1.3%. Recent deflationary data out of Europe and a rising Euro has the ECB’s chief economist Philip Lane concerned, implying potential measures might be taken. After briefly breaching 1.2000, EURUSD has retreated to the 1.1800 level.
ASX200 rallies on Asia open despite GDP figures cementing Australia first recession in around three decades. Lack of news leaves Japan and Hong Kong relatively mute. Wall Street continues to benefit from Apple’s stock split while Zoom quarterly profits double as more corporate paying clients embrace work-from-home culture. Both S&P500 and Nasdaq again extending grounds into fresh territory by the end of the session. Conversely, European indices ended poorly with four consecutive days of declines. Weak performing blue-chip companies in Britain and lacklustre inflation in the Euro Zone is hampering returns.
Solid manufacturing data out of America halted the dollar’s decline as the currency gained against majors. Oil continues to have trouble holding above key psychological level $43 after briefly touching before retreating, while gold settles below $2,000 after momentarily surpassing just only a month ago.
Apple’s 4-for-1 stock split propels Nasdaq above 12,000 psychological level, while Dow nursed losses weighed down by a delaying TikTok deal. Concerns arose when China implemented new rules impeding the app’s sale to foreign companies like Microsoft and Walmart without Beijing’s approval. European indices retreated by the end of US session on deflationary data coming out of Germany and Spain.
Following summer bank holiday, UK futures gapped down 1.6% on Asia open but has since recovered some ground. Asia-Pacific markets looking at a mixed session, with Australia down as much as 1.5%, Hong Kong up 0.4% and Japan up 0.6%.
Disappointing performance from the American greenback continues after Fed Vice Chair Richard Clarida elaborated on Powell’s remarks from last week. Clarifying the new framework allows leeway in not triggering higher policy rates even amid a low unemployment rate environment.
Japan rallies on Asia open, recovering back lost ground from Friday as cabinet members of Abe’s Liberal Democratic Party vie for the country’s top position. Current front-runner so far is chief cabinet secretary Yoshihide Suga. A self-made politician, loyal to Shinzo Abe since 2006 and on occasions serving the duties of chief whip. Among other notable candidates, ex defense minister Shigeru Ishiba, popular with voters but lacks sway with fellow lawmakers. And Fumio Kishida, previously thought to be Abe’s successors, but lacks favorability among the populace.
Elsewhere, the S&P500 closed 7 consecutive days higher into fresh grounds. Following suite, Nasdaq and Dow ended the session up. The industrial average just a little over 3.1% below historic highs made back in February. Oil remained mute despite Hurricane Laura’s aftermath, Gold rallied and in turn, the America greenback resumed weakening against majors after Fed Chair Powell’s remark on Thursday.
An interest to pair to watch for the week, USDTHB as the currency consolidates within a technical triangle. Being one of the worst performing currencies in Asia, the nation suffered substantially form a lost in tourism income, which contributes a fifth of GDP. Recent comments by Thailand’s finance minister see the economy bottoming out in the second half of 2020 and recovering early 2021.
Mixed reaction from Jerome Powell’s speech as the Federal Chairmen unveiled a new monetary framework in achieving inflation and full employment goals. While the S&P500 and Dow etched out gains, Nasdaq ended the session slightly lower as the market digest remarks by the Fed chair. Despite the new policies implication in overshooting inflation beyond 2%, Gold retreated 1.3% as investors questioned whether existing tools will be able to achieve such a scenario.
In Asia, breaking news of Japan’s Prime Minister Shinzo Abe’s resignation shocked markets with the JP225 index declining as much as -2.9%. JPY crosses rallied on the announcement.
Elsewhere, the dollar index though volatile throughout the Jackson Hole forum, ended relatively unchanged. Though the Aussie and Kiwi rallied against the greenback, losses in Yen offset much of the gains. The Euro and Pound mute from previous sessions close.
ASX 200 rallied on open whilst Hong Kong and Japan dipped despite continual record-breaking gains on Wall Street. Mega-cap tech firms like Apple, Alphabet, Amazon, and Microsoft led the charge as the S&P500 and Nasdaq recorded their fourth day all-time high. Investor sentiment thus far seemingly unfazed by COVID-19 as tech has proven resilient throughout the pandemic. Europe also followed suit, notching higher just under 1% at the end of their session.
The US dollar resumed its declines after durable goods far exceeded expectations. In spite of a deteriorating labour market, forward looking indicators remain healthy raising concerns over inflationary pressures. Gold rose as geopolitical tensions between US – China grabbed headlines with Beijing testing four missiles in South China Sea. US in turn announced trade and visa sanctions on 24 companies over their role in constructing islands for China in disputed waterways.
Dow diverges from Wall Street ending the session lower as Apple’s 4-to-1 stock split prompted a reshuffle in the benchmark. American juggernauts Exxon Mobil, Pfizer, and Honeywell ousted by Salesforce, Amgen and Raytheon. Euphoria in the S&P500 and Nasdaq continues as both indices hit fresh highs for 3 consecutive days as the market lacked negative news. Despite a record-breaking US session, Europe was mute whilst indices in Asia are off to a quiet start, though Australia dipped on open from poor performance in banks and coal.
As Hurricane Laura (a category 3) is set to engulf America’s Gulf Coast in the next 48 hours, crude oil celebrates a breakout to the upside after a prolong period of consolidation. Concerns over fuel shortage are rising as numerous refineries in the hurricane’s path have either been shut down or are in the process of closing. 80% of refinery lines across the Gulf of Mexico has also been shut, accounting for 1.5m bpd. Depending on the aftermath, they may not re-open for a while.
Optimism on a phase 1 trade deal and development on vaccine treatments boosted bullish bets on global indices. With Moderna Inc. negotiating a deal across Europe to supply atleast 80m doses and Trump expanding FDA approved blood plasma treatments, markets have seemingly shrugged off mounting sentiment COVID-19 would stall recovery efforts.
Speaking over the phone, US – China officials suggest a trade deal is likely to be achieved by January 2021, though concerns have been raised over the pace of existing purchases, standing at $77bn. China would need to buy another $123bn to comply with terms originally signed back in January 2020.
Alongside the RNC convention, President Trump announced an additional $1bn food purchase program to aid families dealing with economic hardship, unable to meet subsistence levels. The existing $3bn program is set to expire by the end of August.
Both S&P and Nasdaq settled at records highs whilst Dow led gains yesterday, is still 4.5% below all-time highs. On Monday, the CAC40 rallied by 2.29%, EuroStoxx600 by 1.58% and DAX30 by 2.36%. With Japan rallying 1.1% on Asia open, Australia and Hong Kong looked towards a modest start, however later in the session, gains have subsequently retraced back. US dollar holds steady as the next likely driver of direction will be Powell’s speech on Thursday.
For the week ahead, the most anticipated event will be the Federal Reserve’s annual Jackson Hole symposium on Thursday. Across the globe, central bankers, finance ministers, academics and bankers will convene virtually to discuss economic policies and options in a COVID-19 ridden world economy. Investors hope for further clarity over the Fed’s response measures if an additional stimulus package fails to be negotiated. Others await whether overshooting inflation beyond 2% is on the cards. If Eurozone’s recovery stalls, would an increase in quantitative easing be warranted. Many are also keen if Mr Bailey would elaborate on utilizing negative interests as one of BOE’s monetary tools if Britain’s recovery loses momentum.
Though little to watch out for today, global indices gapped up on Asia open with Hong Kong rallying 1.3% within the first hour. Buoyed by news of an FDA approved convalescent plasma treatment for COVID-19. However, among patients treated clinical success has been rather mixed. Concern have also been raised over long-term side effects of the transfusion.
Against most G-10s, the dollar parred back some losses on Friday. Thus far, the Sing has enjoyed a steady appreciation against the greenback. Almost retracing back an 8% depreciation since the start of the year. Throughout the pandemic, Singapore has benefited from a government with deep fiscal reserves relieving monetary authorities of lowering the currency band to manage growth concerns. Just recently the government announced a further $100bn aid package in support of recovery efforts
Tesla pulls Nasdaq to record highs as the electric vehicle company recently reinvigorated investor interest by announcing a 5-to-1 split. The stock settling just above $2,000 has gained 45% in the past 7 days, whilst the tech benchmark rose a modest 4.5% the same period. Despite poor jobless claims figures, the remainder of Wall Street followed suit though Asia rallied on open, optimism fizzled mid-session.
Elsewhere, the US dollar lost ground against other majors after yesterday’s unemployment claims. In turn, gold retraced back some losses from Wednesday’s $75 drop.
Surprisingly, the Turkish lira remained steady after the central bank left interest rates unchanged at 8.25% on Thursday. Markets had anticipated a possible rate hike to 10%, but instead was left with fringe policies to cease funding on one-week repo’s and an increase in mandatory reserve ratios for lenders. Turkey’s leader President Erdogan had always repeated a view that high interest rates leads to high inflation, a belief other central banks oppose.
Muddled messaging and lack of clarity from yesterday’s Federal Reserve minutes has tempered recent gains in global indices. Wall Street reacted poorly when meeting minutes revealed a dovish tone short of market sentiment. Asia follow suit with Australia gapping down 0.6%, both Hong Kong and Japan sold off at open. The US dollar parred back losses, sharply appreciating against most majors. While risk-haven assets, bitcoin and gold failed to hold above key psychological levels $12,000 and $2,000 respectively.
Wall Street upbeat as the S&P500 caps off a 50% percent rally from March lows and sits comfortably above record highs made back in February. The bounce back marks the fastest bear-market recovery in the index’s history. Following suit, global indices and futures rallied higher in Asia’s open whilst Hong Kong slumps on news the US State Department has informed university administrations to divest their endowment holdings away from Chinese companies. A letter was sent to university boards as a warning that further sanctions and restrictions towards Chinese firms is currently in the mix.
NASDAQ remain in favour with the tech benchmark again settling at record highs. Amid a global pandemic, investors continue to see tech focused innovation firms as the main beneficiary. Likewise, Golds’ decline last week has transitioned into a correction with the precious metals resuming its rally yesterday. The S&P500 ended up but still a hairline short of February highs whilst Dow Jones was weighed down on news Berkshire Hathaway slashes holdings in US banks.
Global indices off to a soft start, whilst Hong Kong outperforms in Asia session. Hang Seng opened higher fueled by news the central bank of China will inject 700bn yuan in lending facility loans to financial institutions. A further 50bn yuan was also injected in reverse repos. Last Friday close, European indices slid lower and Wall Street remained mute with the S&P500 reluctant in attempting to break record highs.
A lack of major macroeconomic news in Asia leaves indices and futures actionless. Gold resumed its rally yesterday after finding support as recent filings from Bridgewater revealed the hedge fund had increased holdings in Gold ETF’s by $340M. Rising geo-political tensions between two powerhouse states, an uncontained virus propagates and stimulus induced reflation sees investors holding the precious metal as a hedge against such bleak uncertainties. Oil surprisingly continues to hold its ground amid a report by the International Energy Agency forecasting global demand for oil to stagnate as air travel remains subdued.
Elsewhere, Turkeys finance minister admits expectations of expanding 5% is unlikely to be achieved by the end of 2020. Recent IMF and World Bank forecast instead see the country contracting 3.8% - 5% by years end. It is estimated approximately $65bn in central bank foreign reserves had been spent in defending the depreciation.
US dollar decline resumes after getting a little reprieve these past 2 days. Gold too has found support just above the 1,860 level, bouncing back from its single 1-day biggest decline. Despite the increase in volatility, the precious metal is still one of the best performing assets this year. In focus is still stimulus talks in Washington. Accusations have been thrown between President Trump, the Republicans and the Democrats in not wanting to negotiate.
Nonetheless, S&P500 ended the session up just a hair below record highs from February. A third of the indices rise attributable to gains in Apple, Amazon and Microsoft. As we move towards US presidential elections in November, market sentiment had been cautious to potential risk. Only to be relieved as Democratic ticket Joe Biden, announced Kamala Harris as his running mate. Both of whom seen as centralist, with policies friendly to financial markets.
Gold tumbles over $100 in a single day as the stalemate in Washington continues. Deteriorating relationships between congressional parties has seen a lack of talks since last Friday. Wall Street followed the decline as markets become increasingly concerned a compromise in further fiscal aid is getting harder to achieve. Expectations now see a deal more likely to be struck in September.
Asia though has opened choppy with investor sentiment mixed. Nikkei rose as exporters benefited from the recent depreciation in the yen whilst Hong Kong and Sydney ticked lower on weakening household sentiment.
Off to a positive start for Asia with indices up over yesterday’s session highs, shrugging off an ever-deteriorating relationship between America and China. In response to US placing sanctions on 11 Chinese and Hong Kong officials, China retaliated with 11 sanctions of their own. The list avoided direct personnel from Trump’s administration but did include allying US senators such as Marco Rubio and Ted Cruz.
China thus far has remained ahead of the curve in their economic recovery. Recent auto sales data illustrated a 16.4% year on year increase alongside four months of consecutive gains. Crude oil responded upbeat to the data on top of announcements by Iran to cut output by 400,000 bps in compensation for overproduction for the past 3 months. Vacancies in oil storage are also rising as energy companies begin taking back product to meet renew demand.
For the week ahead, initial focus will be on the four executive orders Trump signed in providing temporary relief to the US economy, bypassing congressional law makers. Among other nuances, a difference of $2.4tn currently divide Democrats and Republicans from signing a deal. Thus far, Asia has opened slightly upbeat with US, UK and EU futures looking to edge higher. The American greenback experiences one of few reliefs, halting its depreciation and ended up on Friday close. Much of market sentiment still sees the dollar depreciating over the long term amid continuous quantitative easing by the Fed and expectations on top of Trump’s aid relief, US congress will etch out another stimulus package.
Turkish lira continues to hold ground as attempts to settle above the 7.3000 level fails. Moves from Turkish authorities suggest they will be taking a step back from active intervention when over the weekends regulators announced tax exemptions for foreign exchange trades. Elsewhere, Mexico’s central bankers will convene on Thursday, likely to cut policy rates for the 10th consecutive time, while Peru, Egypt and Serbia expected to hold rates steady.
Global indices slip in Asia as market participants await non-farm payroll due to be announced today. Mix US employment data has left most benchmarks directionless. Whilst ADP on Tuesday saw deteriorating labor markets, yesterday’s claims data showed sizable improvements. Wall Street though remains buoyant on talks of additional fiscal stimulus as opposed to the progress of a deal itself.
Selling in Turkish lira intensifies as USDTRY reaches record highs with attempts by Turkeys central bank to prop up the failing currency. This year alone the lira has depreciated more than 18% against the American greenback. In defending the lira, authorities are burning through dollar cash reserves, of which is nearing depletion. Without raising interest rates soon to stifle the currency’s weakness, the nation will be opening its doors to rising inflation on top an already dysfunction money market.
Wall street pushes higher with earnings season on its last legs whilst Asia starts off mixed. For the data ahead in the remaining week, topic of interest for global indices will remain on progress in stimulus talks in America. Recent Central Bank announcements have illustrated most policy makers reluctant to expand monetary easing programs as many sit tight and observe. With fresh outbreaks, cracks in the global recovery is appearing but have yet to unhinge the positive momentum in recent manufacturing statistics.
Growing concerns as investors worry China may trip itself over their own feet. China thus far, has been a global exception in GDP growth. Prices in base metals have jumped to multi month highs on China’s renewed demand boosted by government financed infrastructure and construction projects. Supply shortages resulting from coronavirus have also contributed to the price rise. Nevertheless, recent crackdowns in shadow bank lending have small and medium businesses fearful. Most of whom, do not qualify for traditional banking. Plans to cap rates at 15% have been announced the Supreme Court will cut such enterprises off from crucial finances.
Gold settles above $2,000 on the back of plummeting Treasury yields. Concern surrounds the lack of progress in stimulus talks between the two US congressional parties. The longer the delay to reach a deal, the greater the cost over time for the US economy. The more the Federal Reserve will be required to continue its various quantitative easing measures. And with it, the continual debasement of the dollar. Investors worried of subsequent inflation have been forced to seek safety in precious metals.
NASDAQ continues to outperform global indices as the index closes at record highs. Amid rising tension between the US and China over TikTok, a Chinese-owned video social media app. The White House has taken a step back. As opposed to an absolute ban, the administration will allow a deal between Bytedance (TikTok’s owner) and Microsoft. Microsoft will be able to acquire the full operation of the app in the US. Both American and Chinese tech stocks surged on the prospect that geopolitics will force further buyouts in the horizon.
Gold edges closer to 2,000 with inflation expected on the horizon as Asia opens mixed. Initial improvements in sentiment is waning. Previous boosts in global macroeconomic figures from pent-up demand when economies re-opened back up seems more likely a one-off now. With re-surging global cases continuing to hamper recovery, tourism which represents 10% of global output is left decimated. Recent attempts to restart the industry met with failure when an Arctic expedition cruise was hit with a large-scale Corona-virus outbreak.
Asia continues to falter despite Big Tech from Wall Street smashing earning estimates after hours. Amazon, Apple and Facebook saw surging second quarter revenues pulling Nasdaq higher with only Google recording it’s first revenue decline. What is becoming more evident is the gap in dual economies. Traditional stores and services have seemingly suffered from the on-going virus pandemic, whilst millennial firms catering to the new-age, thrive.
Initial relief in Global indices with the Fed pledging a “full range of tools” to support America’s lethargic economy. Nonetheless, much of the optimism fizzled with Asia opening mixed. Weighed down by the constant stream of Coronavirus updates. Europe and Hong Kong face alarming surges in cases after easing restrictions. Australia on tilt with additional state border closures in Queensland. Fatalities in the US topped 150,000 as California records 200 deaths in a single day.
Global indices lost ground as they await the Federal Open Market Committee’s announcement due today. Yesterday’s disappointing earnings announcements in Wall Street from blue chips further exacerbated the declines. Expectations see no rate changes from the Fed, of whom have already implemented a super-accommodative monetary policy. With the Fed just yesterday announcing further extensions to emergency lending facilities till the end of the year. Originally, the program was set up to help support struggling businesses requiring access to short-term funding and corporate debt. Acting as a backdrop. Results so far has seen an improvement in the flow of credit.
Confidence in the dollars continues to wane. An outbreak yet to be contained, a Fed in unprecedented supply of money and a Congress in talks to unleash a further $1 trillion top-up stimulus package. As investors seek a hedge against the inevitable inflation, Bitcoin broke past 11K heading towards 12K after a prolong period of consolidation. Alongside the digital currency, Gold continues its record-breaking highs.
On the back of history’s most accommodative monetary stance by the Federal Reserve, Gold sets record high briefly touching 1944 before settling lower. With inflation expectations rising, real yields are becoming negative making precious metals an attractive asset as the dollar continues it decline. Alongside precious metals, bitcoin breaks 10K. Wall Street on disappointing earnings, whilst Asia opened relatively mute.
Global indices lower on a foray of pessimistic news. Asia led the decline as China steps up geopolitical tensions. Among trade disputes and tit-for-tat consulate closures, China further escalates by proposing to stop recognizing UK oversea passports held by Hong Kong residents. Hong Kong implements additional quarantine and social distancing measures whilst Australian state NSW considers locking down once again as bordering Victoria experiences its deadliest day. With 300 infections and 6 deaths. Wall street not unaffected, led by poor earnings from technology and consumer goods, a deteriorating labor market and a Senate in disarray, struggling to find a balance on a top-up stimulus package.
Wall Street brushes off geopolitical conflicts on better than expects earnings whilst China and Hong Kong indices decline as tensions escalate. The US has slowly intensified rhetoric recently banning TikTok, a popular Chinese owned social media app. And just yesterday demanding the closure of the Chinese consulate in Houston. China thus far has condemned the move. Threatening closures of US embassies in China.
US dollar continues its decline whilst precious metals surge towards historic highs. News of stimulus packages deals in Europe whilst US in disagreement spurred investor sentiment to more safe haven assets against the dollar. Markets fear political frays will leave the size of the stimulus package short of expectations.
Tech stocks pull ahead with Nasdaq closing at record highs. Tech giants Amazon and Zoom announced robust growth, benefiting greatly from economic dislocation resulting from COVID19. Usage in e-commerce and video conferencing soared as people are less reluctant to go outside and working-from-home becomes the norm. Wall Street and global markets followed suit on the back of a series of positive developments. Oxford University led research showed promising results of a potential vaccine, US senate moving forward with an additional rescue package as previous benefits are set to expire and EU’s recovery fund now closer to an agreement. The deadlock broken on conditions rebates being provided to so called frugal members.
A pandemic out of control as nations respond with stricter mandatory measures while others in internal deadlock. Both Hong Kong and the Victorian state of Australia now require mask to be worn when outside. Fines will apply if disregarded. Across the Pacific, Trump reassures supporters the virus will disappear whilst withholding new federal funding for coronavirus testing.
Markets mixed as Asia indices retrace gains from Wall Street yesterday. News of an early phase vaccine for COVID-19 helped lift markets amid worrying concerns containment has been futile with Tokyo recently put on the highest alert level. Whilst ever-increasing geo-political turmoil threatens with greater uncertainty. Right after signing the Hong Kong Autonomy Act, the Trump administration back-tracked against sanctioning Chinese officials and withdrawing additional visa requirements for Chinese students.
Wall Street trades higher on a potential COVID-19 vaccine whilst US banks set aside $28bn in preparation for current and future loan losses. The vaccine still in early testing phases and loan loss forecasts optimistic in outlook. Bank executives from three of the largest US banks JP Morgan, Wells Fargo, and Citigroup stress the biggest forthcoming risk is uncertainty. With respect to containing the second wave, whether additional fiscal and monetary stimulus will be implemented.
Risk-off as US investors prepare for earning seasons. Wall Street for the most of it, has remained remarkably upbeat amid economic damage wrought by the pandemic. Not unsubstantiated as recent economic data revealed stark contrast to March and April gloomy figures. Yesterday’s volatile rejection from fresh highs however suggest sentiment waffling. Unlike before, this earnings season will offer an insight as to whether companies are resilient to and how they have coped with a once in a lifetime crisis.
Faced with the rising rate of global infections, markets diverge from grim realities and continue to rally. On the surface, much of the rally seemingly supported by talks of additional fiscal relief in the works and prolong low rates to remain. Others suggest markets have come to realize an alternate theory. The global economy is transforming upon accepting working-from-home does not affect productivity, the exponential rise of e-commerce and in turn a re-invention of logistics
There is seemingly no end in sight as Coronavirus cases surge. A combination of re-emerging hotspots and government reluctance to act swiftly has cascaded into state-wide infections and in-turn, lock down proceedings. Joining Australia NSW, Queenlands will block border entry from Victorians. Coming Saturday, Hong Kong will re-implement stricter social distancing measures. Curfews to be applied in Serbia. New Jersey to sign an order requiring masks to be worn when outside.
On the other side of the spectrum, whether in favor or against the strict policies implemented by China during their pandemic. Of global nations, China is emerging as the front-runner in successfully flattening the curve and subsequent waves. Investor confidence high with the Shanghai Composite Index breaking out of a year and half consolidation to 3,400. and Yuan appreciating beyond the 7.000 psychological level. Whilst the momentum may slow, with funding cost remaining low in the foreseeable future.
Last week’s losses retrace on back of news that Beijing only had 9 new (reported) cases. US and Asian indices trade higher from Friday’s close. AUD then NZD & GBP outperform to start the week. EURUSD trades up. Gold hit monthly highs as investors seek the safe-haven metal over concerns there will be a delay in global economic recovery