Equity Markets

Asian Equity Market

In Asia, it was a relatively benign day for equities. Besides the Nikkei, which suffered a small wobble of -0.44%, most other indices recorded modest gains. SHCOMP put in another day of recovery since the 11-Sep short-term bottom, up +0.51%, while the HSI was up +0.38% despite another bout of HK stimulus. The Kospi also rose +0.65%, hitting the highest close since Jun 2018.

European Equity Market

In Europe, most of the major indices were higher on the day, led by the UK’s FTSE 100, which rose +1.32%. Spain’s Ibex also advanced by +1.22%, with the rest of the majors seeing smaller gains.

US Equity Market

In the US, the Nasdaq led its peers at +1.43%, with the small-cap Russell 2000 closing near flat. Volatilities for the major US indices continued to come in, though they are above mid-Aug levels. Amongst the S&P sectors, communications was the outperformer at +1.8%, while financials lagged the rest at -1.4%.

Fixed Income

Longer-term U.S. Treasury yields rose higher on Tuesday, steepening the yield curve, as equity markets rose while the Federal Reserve began a two-day meeting. Long-term yields rose 0.66-1.94bps and the US 2Y yields rose 0.2bps. This had the effect of steepening the US 2Y-10Y curve to 53.99bps. Euro zone bond yields were steady to a touch lower, shrugging off positive economic sentiment data from Germany. 10Y bunds yields rose 0.1bps while other euro bonds 10Y yields dropped -1.10-2.30bps. 10Y Japanese bond yields remained unchanged ahead of the U.S and Japanese central bank meetings.

Commodities

There was almost a break higher for precious metals earlier in the day, before a rebound in the dollar put paid to earlier gains. Gold dropped -0.14%, after being up almost $20, while silver closed relatively flat. In oil markets, Brent rose by +2.32%, breaking out of 2 days of middling activity, and towards the topside of a week-long range. Oil volatility fell back -8% to pricing in ~2.8% daily moves. In base metals, only zinc (+0.64%) closed higher despite the better China data release, as the dollar’s recovery weighed on the complex. Lead was the laggard, losing -0.99%, while the rest of the metals were modestly lower at ~0.5%.

Currencies

The dollar dropped to a two-week low against the yen on Tuesday on expectations the Federal Reserve will maintain its downbeat stance on the U.S. economy as it grapples with the COVID-19 pandemic and keep U.S. interest rates near zero for some time. The dollar index was little changed at 93.05, as the greenback recovered somewhat after the euro reversed earlier gains. The sterling was the biggest winner as it rose 0.34% to 1.2889 after better-than-expected jobs data but worries still lie ahead on a potential no-deal Brexit. The dollar fell -0.27% against the yen to 105.4a, after earlier sliding to a two-week low of 105.30 yen. The euro was down -0.16% at 1.1847 and earlier gained after the ZEW economic sentiment survey showed investor sentiment in Germany rose in September.

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