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.