Asian Equity Market
In Asia, stocks were generally positive with the US equities closed on Monday. The Nikkei rose +0.80%, clawing back earlier losses, as Softbank bounced off the session lows. In China, both the SHCOMP (+0.72%) and the HSI (+0.14%) also put in mildly positive days. HSTech continues to trend down, dropping – 1.63% on the day.
European Equity Market
In Europe, opening early gains were quickly eroded as the US Nasdaq futures started to weigh on the indices. The major European indices closed lower, but off the lows. The UK was the relative performer, the FTSE 100’s -0.12% drop cushioned by the 1% fall in the pound. Italy’s FTSEMIB fell -1.81%, to be the day’s laggard.
US Equity Market
In the US, the Nasdaq attempted to recover several times throughout the day, but eventually closed lower by -4.77%, dipping into correction territory. Both the S&P 500 (-2.78%) and Russell 2000 (-2.0%) fared just a tad better. Both the VIX (+2.3%) and VXN (-1.7%) closings were largely muted, with volatility possibly lower as the open interest for calls decreased, and the gamma panic also being more subdued. Amongst the S&P sectors, all closed negative, with utilities being the best relative performer at -0.6%, while technology lagged at -4.5%
U.S. Treasury yields fell on Tuesday as tumbling stocks boosted demand for the safe haven U.S. debt, and before the United States government will sell $35 billion in 10-year notes on Wednesday. Long-term yields tumbled -3.92- 5.01bps and the US 2Y yields dropped -0.2bps. This had the effect of flattening the US 2Y -10Y curve to 53.8bps. Euro zone bond yields fell on expectations from ECB meeting. The 10Y Bund yield was down -3.2bps at – 0.495%, after hitting a new low since Aug. 24.
Oil markets took another tumble on Tuesday, with Brent front-month dropping – 5.31%. This was Brent’s lowest close since mid-June and continues the weakness seen after Saudi Aramco cut its prices to Asian refiners on Monday, suggesting a possible weakening of demand. The Brent 2-8-month contango is so far still trading at levels last seen in late May. In base metals, the strong dollar pressed heavily on the complex, with zinc the underperformer and falling -3.7%. Nickel also fell -1.96%, as stops were triggered past the USD15k mark. Gold was surprisingly resilient in the face of the strong dollar, bouncing off USD1,900/ounce to close near unchanged.
The safe-haven dollar climbed to a four-week peak on Tuesday, led by gains versus sterling on renewed worries about Brexit and as risk appetite waned with a sell-off on Wall Street. The dollar index climbed 0.783%to 93.445, after hitting a 4-week high of 93.483. The sterling was the biggest loser and extended its losing streak to 5 days as it hit a 4-week low against the dollar. The pound fell -1.40% to 1.2982 on fears of a no-deal Brexit. The aussie fell -0.87% to 0.7214 amid the US tech led sell-off. The euro fell to a two-week low versus the dollar and was down -0.33% at $1.1778. The CNH dipped -0.31% after the U.S. President warned about “decoupling” the 2 economies. The dollar struggled against the Japanese yen falling -0.23% to 106.03.