Equity Markets

Asian Equity Market

Asia played catch-up to some of the losses in the previous overnight in the US. The Nikkei fell -1.04%, though it recovered from session lows. Trading in the Nikkei has been largely range-bound, with the current levels around those last seen in early June. In China, the SHCOMP lost -1.86%, though the Chinext, a barometer of retail risky trading, broke towards the downside as it registered a -4.80% day.

European Equity Market

In Europe, relative caution at the open eventually gave way to a more optimistic mode as markets looked past the AstraZeneca setback. The DAX was the strongest performer at +2.07%, helping the Stoxx 50 to record a +1.76% day. Despite the volatility in the US, European equities have largely not budged from its summer trading pattern.

US Equity Market

In the US, it was a recovery day for the Nasdaq, which rose +2.96%, leading the S&P’s +2.02% and the Russell 2000’s +1.46%. Volatilities were lower across the board, with Goldman prime brokerage noting that some funds had started to buy the dip. Amongst the S&P sectors, all closed positive, with technology having the biggest bounce at +3.3%. Energy lagged at +0.7%, with the XLE ETF back to levels last seen at the start of April due to oil’s recent swoon.

Fixed Income

U.S. Treasury yields rose on Wednesday after the government sold $35 billion in 10-year notes to slightly soft demand, and ahead of a 30-year bond auction on Thursday. Long-term yields rose 2.13-3.57bps and the US 2Y yields rose 0.6bps. This had the effect of steepening the US 2Y -10Y curve to 55.33bps. 10Y bunds yields rose 3.3bps to -0.462 after hitting a two-week low of -0.508% in early trade. Italian bond yields, expected to be a beneficiary of any additional ECB stimulus, edged down, with the 10-year down -0.7bps at 1.021.

Commodities

It was a recovery day of sorts for commodities as they took advantage of the lower USD. Gold was higher by +0.77% on the day as we await the resolution to its consolidation triangle. Silver was also up +1.16%. In oil markets, there was finally a bounce after 5 straight days of selling; Brent was up +2.54% while WTI was up +3.51%. Oil volatility dropped sharply on Wednesday but is still currently pricing in ~3% daily moves. It was more mixed in base metals, both ali and lead fell -0.45% and -0.47% respectively, while copper led the pack at +0.99%. According to SMM, China boosted production of refined copper ali, zinc, and nickel-pig iron last month.

Currencies

The U.S. dollar slid from a four-week high on Wednesday, affected by losses against the euro after a news report said European Central Bank officials have become more confident in their outlook for the region’s recovery. The dollar index dropped -0.20% to 93.255, after hitting a 4-week peak of 93.664. The commodity currencies were the biggest winner with the aussie up 0.96% to 0.7283, and the kiwi up 0.98% to 0.6684. The loonie recovered 0.68% against the dollar after the Bank of Canada held interest rates steady at 0.25%. The euro rose 0.21% against the dollar. The Sterling hit a six-week low below $1.29 before bouncing back 0.15% to 1.30 as Britain unveiled draft legislation for post-Brexit life.

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