19th October 2020

Equity Markets

Asian Equity Market

In Asia, the Nikkei fell -0.41% on Friday, following the slightly more risk-averse sentiment on Wall Street. The HSI rebounded +0.95%, with Ant Group’s increase of IPO valuation providing some strength for Alibaba. The SHCOMP gained +0.13% as it looks to be consolidating for a move higher. Elsewhere, the Kospi lost -0.83%, marking so far 3 series of lower highs and corresponding lower peaks in its MACD.

European Equity Market

In Europe, the major indices rebounded strongly from a poor Thursday. France’s CAC index was higher by +2.03%, closing the gap down opened on Thursday. The laggard was in Spain’s Ibex 35, which only managed a +0.48% day, below most of its peers’ ~+1.5% advances.

US Equity Market

In the US, the S&P 500 closed near flat, outpacing both the small-cap Russell 2000 (-0.31%), and the Nasdaq (-0.39%). For the week, all the major indices were higher, though the S&P 500’s +0.19% week, resulting in a doji, could be a concern for longs. As of Tuesday, SentimenTrader is showing a 3-week $72b swing from a net short to a net long $25b position, marking one of the biggest 3-week swings. Amongst the S&P sectors, utilities were the best performer at +1.1%, while energy lagged at -2.3%.

Fixed Income

U.S. Treasury yields edged higher on Friday after data showed U.S. retail sales increased more than expected in September and consumer confidence improved in early October. Longer-term yields rose 1.34-1.53bps, and US 2Y yields rose 0.41bps while US 3M yields fell -0.25bps. This had the effect of steepening the US 2Y – 10Y curve to 60.25bps. 10Y bunds yields were down -1.2bps to -0.622 and were set for their biggest weekly drop since the week ending June 12. Thursday’s sell-off in Southern European bond yield came to a halt on Friday, with Italian and Spanish 10Y yields dropping -2.5-4.6bps.

Commodities

Both major precious metals lost ground on Friday despite some dollar weakness. Gold lost -0.49% with the 1,900 figure being the battleground de jour for the past few weeks. With prices not diverging too far away from 1900, it appears that the election and the approval of the US stimulus will likely dictate the near-term moves of the metal. In base metals, nickel was the outperformer for the 2nd day in a row at +1.49%, with the metal closing at the highest levels since 02-Sep. In oil markets, Brent was lower by -0.53%. The US Baker Hughes weekly oil rig showed a bigger uptick, hitting 205 vs 193 prior.

Currencies

The dollar edged lower against a basket of currencies on Friday, paring some of the week’s gains built on increased caution over a global surge in coronavirus cases and fading prospects for a U.S. stimulus package before the Nov. 3 election. The dollar index fell -0.19% to 93.682, the index is up 0.67% for the week, its best weekly gain in 3 weeks. The offshore yuan was the biggest winner of dollar weakness as it rose 0.29% to 6.6939. Yen was up 0.05% again the dollar and had a weekly gain of 0.21. Sterling rose 0.05% to 1.2915, despite dropping sharply after PM Boris Johnson’s statement that the UK should get ready for a no-deal Brexit. Aussie fell -0.18% to 0.7081 on the back of employment figures and a potential cut in interest rates.

20th October 2020

Equity Markets

Asian Equity Market

The Globax open saw US equity futures rise from the get-go, supporting stocks at the open in Asia. The Nikkei rose +1.11%, maintaining at the top-end of its trading range from the past few months. The Chinese data release affected the SHCOMP, which rejected a bullish breakout, and closed -0.71% lower on the day. The HSI also gradually gave up its gains throughout the day, closing up +0.64%.

European Equity Market

In Europe, the major indices had relatively mixed results on Monday. The UKX (-0.59%) and German DAX (-0.42%) had the bigger losses while Italy and France closed slightly off unchanged. Spain’s Ibex was the only index to close in the positive at +0.15%.

US Equity Market

In the US, the Nasdaq (-1.84%) led losses amongst its peers, though both the S&P 500 (-1.63%), and the small-cap Russell 2000 (-1.24%) also closed below -1%. Volatilities were higher across the board, with both VIX and RVX recording above +6%. Nasdaq vol is currently pricing in ~2.3%, though yesterday’s swing was almost 3%. Amongst the S&P sectors, all closed lower, with utilities being the best relative performer at -0.8%%, while energy lagged at -2.1%.

Fixed Income

U.S. Treasury yields came off their highs on Monday as optimism ebbed that U.S. lawmakers will reach a deal to launch new stimulus in the near term, though the yields held higher on the day. Longer-term yields rose 2.34- 3.10bps, and US 2Y yields rose 0.20bps while US 3M yields fell -0.26bps. This had the effect of steepening the US 2Y – 10Y curve to 62.39bps. Core euro zone government bond yields held near seven-month lows. 10Y bund yields were at -0.62 on Monday, more than 10 bps below the current ECB deposit rate, suggesting investors are expecting further easing. Issuance of social bonds, a type of debt that channels proceeds to specific socially beneficial projects, has surged to $85 billion this year so far, compared with $10.6 billion in the same period of 2019.

Commodities

There wasn’t much reaction in the metals market after Chinese data showed a miss in reported Chinese GDP. Copper trended down after the report but eventually closed higher by +0.59%. The spread for copper cash-3months widened to 20.75c, the widest since June. Nickel retested its previous high from 03-Sep, before retracing and closing up +0.20%. Gold continued trading in its consolidation triangle, up +0.25% on the day. Silver also followed in

gold’s lead, retracing from its day highs to close up +0.96%. In oil markets, Brent was slightly changed at -0.72% while WTI settled down -0.12%.

Currencies

The dollar edged lower as investors were cautiously optimistic that an agreement on a fiscal stimulus package could be reached before the election, and that a vaccine will be ready by year-end. The dollar index fell -0.27% to 93.427, giving back some of its 0.7% gain from last week. The euro was the biggest winner of the dollar weakness as it rose 0.44% to 1.1769. The pound extended gains and climbed 0.26% to 1.2948 and even hit above 1.30 in European session. The offshore yuan rose 0.22% to 6.679 and touched a 1- 1/2 year high of 6.6737 on the back of data that showed China’s economic rebound from the pandemic accelerated in the third quarter.

21st October 2020

Equity Markets

Asian Equity Market

In Asia, the Nikkei dropped -0.44%, as it continued to grind within its narrowing upward range from August. In China, the SHCOMP rebounded +0.47%, after failing the previous day at the bullish breakout, while the HIS inched slightly above unchanged. The Kospi was up +0.5%, building on its 2nd consecutive gain, despite opening lower

European Equity Market

In Europe, it was another mixed day for the major indices. The German DAX led losses, falling -0.92% on the day, even as gains were seen in Italy (+0.56%) and Spain (+0.98%). Both France and the UK rounded the session, closing near unchanged.

US Equity Market

In the US, the Nasdaq broke its 5-day losing streak, while the S&P 500 broke its 4-day decline. However, the indices closed off their session highs, with the S&P 500 leading the way at +0.47%. Volatilities inched higher in both the Russell and the S&P 500 Vix, though the Nasdaq was -2% lower. According to JPM positioning, hedge fund net exposure is now at least at a 30-month high. Amongst the S&P sectors, all closed higher, with the exception of consumer staples at -0.1%. Energy was the best performer at +1.2%.

Fixed Income

Benchmark U.S. Treasury yields hit four-month highs on Tuesday and the yield curve steepened as hopes grew that U.S. lawmakers will agree on a deal for new stimulus. Longer-term yields rose 1.67-3.18bps while shorter-term yields fell -0.20-0.25bps. This had the effect of steepening the US 2Y – 10Y curve to 64.26bps. Euro zone bond yields held ground as the first of the European Union’s debt sales backing its recovery programmes finally kicked off. 10Y bunds rose 2.2bps and other core European government 10Y bond yields rose between 0.8-2.4bps.

Commodities

There were big moves in the base metals market on Tuesday, as both nickel and copper scaled to new near-term highs. Nickel was the outperformer at +2.16% as it closed at levels last seen in Nov 2019, while copper gained +1.76% to breeze though its recent 21-Sep high. In precious metals, silver continued trading on its uptrend from the Mar lows, advancing by +1.04%. Gold was up +0.15%, up on the dollar weakness. In oil markets, Brent closed higher by +1.27%, though its still within its September range.

Currencies

The U.S. dollar dipped on Tuesday, hitting a one-month low against a basket of major currencies, as investors awaited the outcome of fiscal stimulus talks ahead of the upcoming U.S. presidential election and coronavirus cases spiked in Europe. The dollar index fell -0.385% to 93.067 declining for a second day and hit a Sept.21 low of 92.991. The euro the biggest winner was up 0.45% to 1.1822, hit a one-month high of $1.184 versus the greenback, after having weakened 0.1% to $1.17600 in early London trading. The aussie downtrend continued as it fell -0.37% to 0.7048 on the back of Dovish RBA commentary. Offshore yuan continued its upward trend against the greenback rising 0.37% to 6.663.

22nd October 2020

Equity Markets

Asian Equity Market

In Asia, the Nikkei rose +0.31%, still continuing to grind within its narrowing upward range from August. In China, the SHCOMP closed relatively unchanged, even as the HSI gained +0.75%. The Kospi was also higher by +0.53% on the day. The Nifty inched higher by +0.34% as it stalled at the same levels for the past 1.5 weeks.

European Equity Market

In Europe, it was a red day as most of the major indices closed more than -1.5% lower. Italy’s FTSEMIB led losses at – 2.03%, while the German DAX was the best relative performer at -1.41%. On the daily chart, the DAX looks to be setting up a H&S pattern, which could spell more losses in the near-term.

US Equity Market

In the US, the major indices closed lower on the day and near the lows of the day. Trading was based mainly on stimulus hopes, with the Russell 2000 leading to the downside at -0.86%, visà- vis the S&P 500 (-0.22%), and the Nasdaq (-0.11%). Implied volatilities were slightly down across the 3 indices. Amongst the S&P sectors, communications was the best performer at +1.7%, with most of the remaining sectors in the red. Energy was the laggard at -1.9%.

Fixed Income

Benchmark U.S. Treasury yields rose to four-month highs on Wednesday onhopes that U.S. lawmakers will reach a deal to pass new fiscal stimulus in the near term. Longer-term yields rose 3.69-4.39bps and shorter-term yields rose 0.25-0.41bps. This had the effect of steepening the US 2Y – 10Y curve to 67.54bps. 10Y bund yields rose 1.8bps to -0.588 after touching their highest of -0.568 in a week in early trade on U.S. stimulus hopes. Other core European government yields rose from the range of 1.7-5.5bps with the Italian and British 10Y outperforming.

Commodities

The weakest dollar close since mid-Sep benefitted precious metals, with gold gaining +0.91%, while silver had another +1% day at +1.65%. Both gold and silver volatility are pricing in higher daily moves than the current realised, likely reflecting the premium that traders are paying for positioning into the election. In base metals, the complex with the exception of nickel (-0.86%) closed in the positive. Copper was above the psychologically important level of $7000 at one point, before correcting lower. Cash-3 months spread also tightened by 5.80 to 13.75c. In oil markets, Brent lost -3.31% while WTI lost -3.57%, with the EIA data showing a less than expected drawdown.

Currencies

The dollar hit a seven-week low after U.S. President Donald Trump and House Speaker Nancy Pelosi boosted hopes for a large fiscal stimulus package, prompting some traders to ramp up bets on riskier currencies. The U.S. dollar was 0.49% lower at 92.611, and hit a Sept. 2 low of 92.605. Sterling was the biggest winner on the dollar weakness as it soared 1.55% to a 6-week high of 1.3149 as Brexit negotiations wee due to start again. The riskier commodity currencies were up with the aussie up 0.98% reversing losses suffered in the wake of Tuesday’s dovish RBA minutes, and the kiwi up 1.09% to 0.6653. The dollar plunged -0.86% against the yen, a fresh October low, and hurting the yen carry trade. China’s yuan surged and continued its upward trend, in both offshore and onshore trading, led by firmer central bank guidance.

23rd October 2020

Equity Markets

Asian Equity Market

It was a relatively mild session in Asia, with little big moves present. In North Asia, the Nikkei lost -0.70%, while the Kospi dropped -0.67%. Korean tech, the Kosdaq, may be forming a large head and shoulder pattern, and because its potential to lead US tech, should be watched closely. The SHCOMP was down -0.38%, rallying off session lows, as the HSI closed just in the positive.

European Equity Market

In Europe, the opening of the European open was met with selling before a sharp rebound had most of the major indices just slightly under for the day. The German DAX was lower for the 4th straight day at -0.12%, though Spain’s Ibex led losses at -0.22%. The other indices closed within +/-0.16% of yesterday’s close.

US Equity Market

In the US, the small-cap Russell 2000 led its peers with a +1.65%, driven by the financial sector and the KRE’s +4.75% gain. Implied volatilities were slightly down across the 3 indices, though moves still seem elevated compared with the daily realized. Amongst the S&P sectors, energy was the best performer at +4.1%, while real estate was the laggard at -0.7%.

Fixed Income

Benchmark U.S. Treasury yields rose to four-month highs on Thursday and the yield curve steepened on hopes that U.S. lawmakers are close to striking a deal on new fiscal stimulus. Longer-term yields rose 3.36-4.02bps, US 2Y yields rose 0.61bps while US 3M remained unchanged. This had the effect of steepening the US 2Y – 10Y curve to 70.29bps, the widest spread since June 8. US 10Y rose as high as 0.853%, the highest since June 9. Core European government bond yields ticked higher in a range of 1.9-4.2bps. Italian yields rose to a two-week high on Thursday after Italy launched an 8 billion-euro ($9.5 billion) government bond due to mature in 30 years for which investors offered an overwhelming 90 billion euros.

Commodities

The rebound in the dollar had some effect precious metals; correlation in the past 15 days for gold is near -0.67. Gold lost -1.05%, wiping out the totality of the previous day’s gains. Silver also corrected -1.35% but still stayed above the uptrend from Mar 2020. In base metals, the majority of the session was spent in the red before potential US stimulus news pushed zinc, aluminium, and lead in the positive. Both copper (-0.99%) and nickel (-0.43%) looked to have retraced most of its breakout gains, and it should be watched closely lest it forms a false breakout. In oil markets, Brent rose +1.75%, still maintaining tightly in its range, as focus shifts towards the Dec OPEC meeting.

Currencies

The dollar index ticked higher on Thursday, easing off a seven-week low as hopes for a coronavirus aid package ahead of the U.S. elections faded and COVID-19 cases surged around the world, giving a slight bid to safe-haven assets like the greenback. The dollar index rose 0.22% to 92.951 above Wednesday’s bottom of 92.469, which marked the lowest level since Sept. 2. The pound was the biggest loser as it fell -0.5% to 1.3083 amid the dollar’s recovery. The euro and yen were both down -0.36% and 0.26% respectively amid renewed dollar’s demand and better performance of equities. The offshore yuan was down -0.39% to 6.6701 on signs that the authorities have become increasingly wary over the currency’s recent rapid gains.

Newsletter

subscribe