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.
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.
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.
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.