Equity Markets

Asian Equity Market

Asia continues to be resilient in the face of the US tech sector’s wobbles. The Nikkei rose +0.65%, as it awaited Yoshihide Suga to be confirmed later in the day. SoftBank, the company now more involved in asset management, was up +8.96% on the day. Both the SHCOMP and HSI put in modest gains, up +0.57% and +0.56% respectively.

European Equity Market

In Europe, most major indices gave up early gains to close relatively flat. France’s CAC was the relative outperformer at +0.35%, while the German DAX closed relatively flat. Looking at the STOXX 50, the market has barely trended since late May and is still looking for a resolution either way.

US Equity Market

In the US, the small-cap Russell 2000 led its peers with a +2.65% move, outpacing the Nasdaq’ +1.72% gain. Volatilities for the major US indices have also continued to come in, though they are above mid-Aug levels. Both the put/call ratio and skews have dropped, reflecting a more benign environment after the (small) volatility shock of the previous 2 weeks created by the SoftBank whale. Amongst the S&P sectors, all closed positive. Real estate was the outperformer at +2.4%, while communications lagged the rest at +0.4%.

Fixed Income

Investors kept U.S. Treasury yields stable on Monday as they tried to gauge how the U.S. Federal Reserve will put its new approach to monetary policy into practice. US 10Y yields rose 0.65bps while the US 30Y remained unchanged. US 2Y yields rose 1bps and the US 3M yield dropped -0.51bps. This had the effect of flattening the US 2Y-10Y curve to 53.53bps. Euro zone bond yields was mixed, with the benchmark German 10Y yield increasing 0.1bps while Spanish 10Y dropped -2.6bps as traders digested last week’s dovish tone from ECB policymakers

Commodities

In the face of a weaker dollar, precious metals put in strong gains on Monday. Gold was up +0.84% as the consolidation continued within the mid-1900s. Silver also bounced +1.47%, with its consolidation in a slightly wider band than gold. Brent fell -0.55% with the OPEC monthly report out on Monday forecasting a cut in global demand for its crude by 700kpd in 2020 and 1.1 mmbpd in 2021. In base metals, the whole complex rose with the positive risk sentiment and the decline in the dollar. Lead was the outperformer on the day, up +1.98%, while nickel maintained its bounce for the second day, up +1.19% after hitting strong support around USD14,700/mt.

Currencies

The dollar slipped on Monday against its major peers, dropping to a two-week low versus the yen, as positive news about a COVID-19 vaccine and a wave of merger and acquisition deals lifted the mood in global equity markets. The dollar index fell -0.30% to 93.052, after posting 2 straight weeks of gains. The yen was the biggest beneficiary of the dollar weakness as the dollar fell -0.41% against the yen, and earlier hit a 2-week low of 105.55. The pound rose 0.39% while investors waited for UK lawmakers to vote on a bill which the European Union has told London to scrap. The euro was up 0.17% versus the dollar at $1.1866. The commodity currencies were up against the dollar with the aussie up 0.06%, kiwi at 0.51%, and the loonie up 0.02%

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