21st September 2020

Equity Markets

Asian Equity Market

In Asia, China was the outperformer as the SHCOMP rose +2.07% amidst a quiet day for other equities. The HSI saw muted gains of +0.47% while the Nikkei continues to be resilient as it gained +0.18% on Friday. The Kospi breached Thursday’s lows but recovered to close up +0.26%.

European Equity Market

In Europe, the major European stock indices trended lower, led by the Spain’s Ibex with a –

2.21% loss on the day. Other indices were mainly almost -1% lower, though the German DAX had some relative outperformance, down only -0.70%. For the week, Spain’s Ibex closed near unchanged despite today’s large decline, with the prospect of lockdowns due to increasing cases weighing on Europe.

US Equity Market

In the US, the Nasdaq led losses with a -1.30% decline vs the S&P 500’s – 1.12% drop. Friday saw quad witching with the initial bounce at the open giving way to some heavy selling. Of note, the S&P 500 closed below the 50- day ma for the first time since late April. Amongst the S&P sectors, all closed negative; real estate was the laggard at -2.0%, while health care lost -0.2%.

Fixed Income

U.S. Treasury yields stabilized within their recent trading ranges on Friday as investors took in the Fed’s new approach of keeping interest rates near zero till the inflation target of 2% has been hit. Long-term yields rose 0.5-1.44bps while US 2Y yields rose 0.41bps. This had the effect of steepening the US 2Y- 10Y curve to 55.46bps. Euro zone government bond yields edged up on but prices remained supported as attention remained on the ECB. Safe-haven 10Y bunds yield rose 0.6bps and likewise the other euro government bonds rose at the 1-2bps range with the Spanish 10Y yield rising the most at 2.1bps.

Commodities

Precious metals had differing fortunes on Friday amidst a weakened equity market and some dollar strength. Gold was up +0.33%, while silver was down -0.93%. Both metals are still decidedly trading in a tight range and a sustained breakout either way is still not forthcoming. In oil markets, Brent lost ground for the 1st time in 4 sessions, down -0.35% even as WTI gained +0.34%. Natural gas rebounded off its 200-day moving average with the Baker Hughes oil rig report showing a small tick up in gas rigs to 73. In base metals, copper rose +0.47% to record its highest close since Jun 2019. Nickel fell -1.19% with some reports that Indonesia’s Weda Bay Industrial Park expects 4 new nickel smelter construction to be completed next year.

Currencies

The U.S. dollar lost ground to the Japan’s yen for the fifth straight day and the yen was at a seven-week high against the greenback on Friday as investors sought safety amid concerns about a resurgence in coronavirus cases in Europe and a lack of progress in U.S. fiscal stimulus negotiations. The dollar index fell -0.05% to 92.926 and registered its first weekly decline since August. Sterling edged -0.43% lower on rising COVID-19 cases and the back of BOE’s message of potential negative interest rates. The aussie fell -0.33% driven by the weakness in US equity market. The dollar fell -0.16% at 104.57 against the yen and hit 104.27, the lowest since July 31.

22nd September 2020

Equity Markets

Asian Equity Market

There was some slight weakness across Asia, as the news that China was publishing an “Unreliable Entity List” weighed on markets. HSBC, rumoured to be on the list, dragged the HSI lower, with the HSI falling -2.06% vis-à-vis the SHCOMP at -0.63%. Japan was spared the selling as it embarked on a 2-day holiday. The Kospi was also down by -0.95%, potentially forming a double top.

European Equity Market

The equity carnage was the most widespread in Europe; the STOXX 50 was down -3.74%, while the German DAX fell -4.37%, the most since March. Other European indices were lower by over -3.5%, showing widespread selling. Despite the large moves down, European equities are still hovering near the lower bound of the summer trading.

US Equity Market

In the US, European selling spilled over into the NY open, pushing the Nasdaq down to -3% down at one point. A strong recovery mid-session pushed the Nasdaq to close +0.40% higher. The bounce was less evident in the S&P 500 (-1.16%) and the small-cap Russell 2000 (-3.35%). Amongst the S&P sectors, only technology closed positive at +0.6%. Energy was the laggard at -4.9%, as most other sectors dropped >-1%.

Fixed Income

U.S. Treasury yields moved lower but recovered from their worst levels of the day as a sell-off in equity markets continued from the prior week. Long-term yields fell -2.79-3.84bps while short-term yields fell -0.2-0.25bps. This had the effect of flattening the US 2Y-10Y curve to 52.87bps. Euro zone bond yields fell on dovish policy guidance. The 10Y bund yields fell -4.5bps and the other European govies yields fell in the range of -2-4bps.

Commodities

There were some big falls across the commodities space yesterday, as king dollar showed its strength and its potential to disrupt the many dollar bears. Precious metals had a bloodbath especially in silver, where the market was at one point more than lower than 10%. Silver eventually closed -7.72%, while gold breached the $1,900 level, before recovering to close lower by – 1.97%. Crude also bounced from lows of more than -5%; Brent fell -3.96% while WTI settled lower at -4.3%. In base metals, the complex followed the lead of yesterday’s risk-off sentiment. Copper made a 2-year intraday high, before falling -1.78% on the day, with the cash-3 months spread easing $10.83 to $27b. Zinc was the laggard, losing -3.13% on the day.

Currencies

The U.S. dollar index soared to an almost six-week high on Monday and riskier currencies fell as investors sought safety and global stock markets tumbled on fears about rising COVID-19 cases and uncertainty surrounding November’s U.S. elections. The dollar index rose 0.79% to 93.656 and hit a mid-August high of 93.777. The commodity currency took a hit on the dollar strength as the aussie traded -0.89% down at 0.7224, the kiwi drops -1.35% at 0.6668, and the loonie drop -0.79% against the dollar. The sterling fell -0.77% due to rising COVID-19 cases which prompted Britain to consider a second national lockdown. The euro traded -0.58% lower against the dollar on dollar strength.

23rd September 2020

Equity Markets

Asian Equity Market

In Asia, most of the equity indices were down on the day as they took stock of Wall Street’s performance overnight. The SHCOMP fell -1.29%, while the HIS closed at the lowest since the start of Jun, down -0.98%. The high-flying Kospi also dropped -2.38% tracking the tech sector in the US. Singapore’s banks continued to weigh on the STI, with the index falling -0.90%.

European Equity Market

In Europe, the major equity indices closed somewhat mixed, despite seeking to bounce off yesterday’s sell-off. Spain’s Ibex was the laggard as it fell -0.65% and closed at levels last seen in May.

US Equity Market

In the US, the Nasdaq led the recovery, rising +1.88%, outpacing both the S&P 500 (+1.05%) and the small-cap Russell 2000 (+0.79%). Volatilities inched lower across the board, with the VIX still pricing in a 1.6% daily moves. Of note, JPM prime brokerage is seeing data that hedge fund net exposure are at 2-year 100 percentile levels, backing up various other prime brokerages. If more incremental buyers have already bought, overall upside momentum may be more limited. Amongst the S&P sectors, consumer discretionary was the best performer at +2.1%, while energy was the laggard at -1.0%

Fixed Income

U.S. Treasury yields moved off earlier lows on Tuesday, as equities found their footing after a four-session drop and after comments from U.S. Federal Reserve Chair Jerome Powell before the House Financial Services Committee. Long-term yields rose 0.5-0.85bps while US 2Y yields fell -0.2bps. This had the effect of steepening the US 2Y-10Y curve to 53.57bps. Italy’s borrowing costs tumbled to multi-month lows, Italian 10Y yield fell -5.2bps at 0.866 its lowest level since February. German 10Y bunds yields rose 2.5bps to -0.505 but only slightly higher than the previous day’s 6-week low of -0.54%.

Commodities

A rebound was on the cards for most of the commodities after yesterday’s red ink. Base metals had a decent showing before dollar strength in the NY session took away some of the shine. Copper was the outperformer, up +1.32% on the day, even as both aluminium (-0.17%) and lead (-0.24%) lost ground. In oil markets, both Brent (+0.68%) and WTI (+0.65%) stemmed some of the losses from the previous day off oversold regions. Precious metals suffered another day of losses, as gold lost -0.64% and flirted with the 1,900 handle while silver fell -1.28%. Gold is trading bear the bottom of the 1+ month consolidation range, and may threaten the 12-Aug lows.

Currencies

The dollar rose to an eight-week high on Tuesday, after a top Federal Reserve official struck a hawkish tone by mentioning the prospect of raising interest rates, further entrenching investors who were already in a risk-off mood. The dollar index rose 0.35% to 93.988 and earlier hit a late-July high of 94.086. The aussie was the biggest loser on the resurgent dollar as it fell -0.73% to 0.7171, while the kiwi was also badly hit as it fell -0.54%. The pound fell –

0.66% at 1.2733 and hit a late-July low of 1.2711 after new Covid-19 restrictions were unveiled. The euro was down -0.54% against the dollar at $1.1708 after falling below the key $1.17 level, its lowest since late July. The dollar also gained 0.27% against the yen, rising for a second day in a row.

24th September 2020

Equity Markets

Asian Equity Market

In Asia, the Nikkei returned from a 2-day holiday with nary a scratch as it closed near unchanged. Other indices staged some recovery; the SHCOMP was up +0.17%, while the HSI was higher by +0.11%. The STI bounced +0.73% with the banks approaching short-term oversold levels on Tuesday. The Kospi clawed back losses to close essentially flat.

European Equity Market

In Europe, most of the major indices closed near their lows after being up almost 2% on the day. The UK’s FTSE 100 outperformed, up +1.20%, down from intraday highs of +2.49%. Italy’s FTSEMIB lagged the others, gaining +0.18%, after trading as high as +1.7%.

US Equity Market

In the US, pre-session gains could not be sustained as the market sold off from the open. The Nasdaq fell -3.16%, outpacing both the S&P 500 (-2.37%) and the small-cap Russell 2000 (-3.04%). Volatilities were higher across the board, with the VIX pricing in 1.8% daily moves. The VIX curves were slightly higher across the term structure, but nothing looks extreme yet. Amongst the S&P sectors, all closed negative, with health care the relative outperformer at -1.0%. Energy was the laggard at -4.5%.

Fixed Income

Shorter-term U.S. Treasury yields edged higher on Wednesday as comments from a flurry of Federal Reserve officials reinforced the central bank’s recently announced policy stance. US 30Y yields fell -0.65bps while the US 10Y yields rose 0.16bps and shorter-term yields rose 0.25-0.36bps. This had the effect of steepening the US 2Y-10Y curve to 53.37bps. Italy’s 30-year government bond yield hit a record low of 1.755% and the benchmark 10-year yield drop – 1.5bps to 0.851 and hit 0.83 the lowest since early October 2019.

Commodities

Precious metals lost further ground on Wednesday, with the 12-Aug lows acting as a magnet for gold. Gold lost -1.94% on the day, though that loss was dwarfed by silver’s -6.64% tumble. Silver has now surpassed the Aug lows, and further dollar strength could see it test the 19.70 region. Base metals also took the dollar strength on the chin; as the complex sold off. Copper led to the downside at -2.59%, followed closely behind by zinc’s -2.45%. Copper has so far been resistant to drops, recovering quickly a day later, so it will be interesting to see if yesterday was a breakthrough. Oil markets closed generally flat on the day as Brent closed up +0.12%.

Currencies

The dollar gained for the fourth day in a row and traded at a more than eight week

high on Wednesday, as U.S. equities fell and investors questioned the pace of the global economic recovery on rising coronavirus cases and weak economic data in Europe while investors grappled with U.S. policy uncertainty. The dollar index rose 0.43% to 94.389 after earlier hitting 94.435, its highest level since July 24. The aussie was the biggest loser on the resurgent dollar as it fell -1.38% to 0.7072 its lowest level since July 24. The kiwi dropped 1.39% to 0.6521. The dollar rose 0.44% against the yen at 105.39. The dollar rose 0.61% against the off-shore yuan. The euro was down 0.41% at $1.166, after falling to $1.16515, its lowest since July 27. The pound was relatively flat at 1.2724 with investors seeing some room for cautious optimism over the impending Brexit deadline.

25th September 2020

Equity Markets

Asian Equity Market

Asia followed through on the previous overnight selling in the US. China sold off with the SHCOMP recording a -1.72% decline, while the HSI dropped – 1.82%. The Kospi was also among the worst losers, falling -2.59% on the day, with the Kosdaq also recording an -11% drop since 16-Sep. The Nikkei closed lower by -1.11%, by still maintaining near the top end of the trading range from June.

European Equity Market

In Europe, most of the major indices closed lower, though it was off their opening lows. Italy’s FTSEMIB was the best relative performer at -0.12%, in volatile trading, as its lows stretched to -1.6% while its highs reaching +0.9%. The Stoxx 50 has largely traded near the closing levels of the big sell-down from 21-Sep for the past 3 days.

US Equity Market

In the US, the Nasdaq traded as high as +1.7% before settling lower at +0.58%, outpacing both the S&P 500 (+0.30%) and the small-cap Russell 2000 (+0.03%). There were little drastic moves in volatilities across the board, though the VVIX has fallen past recent lows. Amongst the S&P sectors, utilities were the outperformer at +1.1%. Health care was the laggard at -4.5%.

Fixed Income

U.S. Treasury yields fell on Thursday as labor market data signaled the economic recovery may be running out of gas but moved off lows after a stronger-than-expected report on the housing sector. Longer-term yields fell -0.65-0.91bps and US 2Y yields fell -0.59bps. This had the effect of flattening the US 2Y-10Y curve to 53.31bps. Euro govies yields rose across the board despite concerns over the economic impact of a second wave of Covid-19 infections, 10Y Italian bond yield rose 4.2bps while the other European nation’s 10Y yield average a 1-2bps increase.

Commodities

Precious metals staged a comeback on Thursday after being pummeled for the best part of the preceding 3 days. Silver bounced strongly intra-session after being down more than -4%, eventually closing up +1.62%. Gold also rebounded just below $1,850, closing higher by +0.25%. In base metals, the complex sold off from the Asian start, led by copper. A later recovery saw copper close lower by -1.23%, while zinc led to the downside at -1.41%. Across the complex, metals were largely lower by -1% on the day. In oil markets, Brent trading was much more muted as it traded up +0.41%.

Currencies

The U.S. dollar lost ground as equities gained in volatile trading on Thursday with investors betting on the prospects for a new U.S. stimulus package to boost the coronavirus-battered economy after data showed rising unemployment claims. The dollar index fell -0.04% to 94.354 after earlier rising to 94.60, its highest level since July 24. The pound was up 0.18% at $1.2747 and recouped earlier losses after the country’s finance minister, announced a new job support program, but said the government would not save every job. The euro was up slightly against the dollar at 1.1672. The aussie pared some losses but was last down -0.35% in its fifth straight day of losses against the dollar.

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