9th November 2020

Equity Markets

Asian Equity Market

In Asia, there was no stopping the train that is the Nikkei; it was up +0.91%, recording the highest close since Nov 1991, though the high is lower than Feb 2018. The HSI also had its best close since July, as it closed near unchanged, though the SHCOMP fell -0.24% to test the breakout of the consolidation triangle. The Nifty was up +1.18% for its best close since Jan 2020.

European Equity Market

In Europe, the major indices close slightly lower to snap a 4-day win streak. Spain’s Ibex was the laggard on Friday as it dropped -0.78%, bringing the week’s gains to +6.5%. For the week, Italy’s FTSE MIB led the pack as it gained +9.7%, though most indices were looking at closes of above +6% for the week.

US Equity Market

In the US, opening weakness in the indices were brushed aside by the Nasdaq, which was up +0.11%, outpacing the S&P 500 (-0.03%), and the small-cap Russell 2000 (-0.96%). Volatilities continued to be crushed across the board and are back near the levels in Aug. VIX has dropped near 40% and has trended lower in tandem with the MOVE index. Amongst the S&P sectors, consumer staples was the strongest at +0.5%, while energy lagged at -2.2%.

Fixed Income

U.S. Treasury yields rose on Friday while the market kept a close eye on the latest election developments that showed Democrat Joe Biden on the verge of winning the presidency. Longer-term yields rose 5.56-7.64bps and the US 2Y yields rose 0.8bps.This had the effect of steepening the US 2Y-10Y curve to 66.58bps. There will be a huge supply of treasuries being offered this week, with $54B of 3Y, $41B of 10Y, and $27B of 30Y. Yields on Italian 10Y govies fell to a record low of 0.603 but gradually ticked higher to 0.623 along with core euro zone government bonds after stronger than expected jobs data in the U.S.

Commodities

TAfter breaking out on Thursday, gold spent Friday consolidating its move and closed essentially unchanged. Silver was higher by almost 0.94%, as it tested the downward trendline from its Aug highs. In base metals, the complex was relatively mixed, with copper the outperformer on the day at +1.37%, the highest close since 21-Oct. Nickel was the laggard at -1.28%. Elsewhere, oil markets did not participate in the positivity, as Brent fell -3.62% on the day.

Currencies

After breaking out on Thursday, gold spent Friday consolidating its move and closed essentially unchanged. Silver was higher by almost 0.94%, as it tested the downward trendline from its Aug highs. In base metals, the complex was relatively mixed, with copper the outperformer on the day at +1.37%, the highest close since 21-Oct. Nickel was the laggard at -1.28%. Elsewhere, oil markets did not participate in the positivity, as Brent fell -3.62% on the day. The dollar sank to its lowest level in over two months against a basket of peer currencies on Friday, as vote counting for the contentious U.S. elections slowly moved toward a divided government and investors predicted more losses for the currency. The dollar index fell -0.32% to 92.229, hitting its lowest level since 2nd of Sept. For the week, the dollar index was down as much as 1.9%, on course for its biggest drop since March. On the back of a weak dollar, EURUSD and GBPUSD strengthened 0.42% and 0.06%, printing at 1.1890 and 1.3174. While the aussie was down -0.34% to 0.7258, and the yen was up 0.14% to 103.35. The offshore yuan gained 0.27% to 6.5915 and hit a 2 year high of 6.5868

10th November 2020

Equity Markets

Asian Equity Market

Early in the Asian session, markets were buoyed by the seeming conclusion to the US presidency The Nikkei gained another 2.12% as it closed higher than the Feb 2018 highs The positivity extended to the Chinese markets, where the SHCOMP rose +1.86% and the HSI was also up +1.18%.

European Equity Market

The Kospi was also higher as it closed near its mid Sep and mid Aug highs The European session was when equities went straight up with promising vaccine news from Pfizer The major indices closed up 5 out of previous 6 days, led by Spain’s Ibex which was up +8.57% One day gains were downright heady as 5 gains in the indices were the norm.

US Equity Market

In the US, the strong opening was led by the small cap Russell 2000 which closed higher by +3.70% outpacing the S&P 500 (+1.17%) and the Nasdaq (-2.16%) Flows reversed mightily from tech momentum into unloved sectors such as energy (up +14.3% in the S&P sector) and financials (+8.2%) The dark pool index however, trended down on the day Volatilities was initially crushed across the board but staged a late comeback Nasdaq vol now pricing in just under 2% daily moves.

Fixed Income

US Treasury yields jumped on Monday, as news of a successful late stage vaccine from Pfizer Inc spurred optimism that the world’s largest economy would emerge from a pandemic induced recession Longer term yields rose 10.5-10.89 bps and the shorter term yields rose 0.25 – 1.79 bps This had the effect of steepening the US 2Y – 10Y curve to 75.29 bps. US 10Y rose to its highest since March, and had its biggest one day jump since March Euro govies yields also surged yesterday with the 10Y bunds and Italian 10Y yields rising 11.2 bps – 11.7 bps.

Commodities

There was a big breakdown in both gold and silver, as both suffered from the rise in yields, and fell -4.53% and -5.88% respectively For gold, this was the largest daily loss since 11 Aug, and marked a reversal of the breakout seen on 05 Nov Oil markets cheered the potential return of demand as Brent rose +7.48% on the day, though down from highs of over 10 With open interest in oil having laboured in the past few months, it would be crucial to see if the long OI increases significantly In base metals, nickel was the best performer at +2.55% Copper’s trading action was peculiar, with it hitting a new 18 month intraday high but closed -0.44% down on the day.  

Currencies

PowerPoint Presentation Traders unloaded Japanese yen and bought riskier currencies and the US dollar on Mondays   market confidence in the economy and world trade increased with progress on a COVID 19 vaccine and the prospect of Joe Biden being U S president The dollar index gained 0.54% to 92.725 The yen tumbled the most and held broad losses against its peers falling 1964 against the dollar to 105.38. The euro fell 0.51% to 1.1813 against a strengthen dollar The pound had a volatile session testing the 1.32 level before printing at 1.3166 up 0.08% The aussie was up 0.36% to 0.7284 while the offshore yuan has finally given up its streak falling 0.38% against the dollar

11 November 2020

Equity Markets

Asian Equity Market

Asia was somewhat mixed in its first reaction to the Pfizer news. The Nikkei was up +0.27%, closing near the lows of the session. The SHCOMP was down -0.40%, while HSI rose +1.10%. Asian tech was roiled on the session, mirroring the trading seen in the US, as HSTECH was down -5.5%, and erstwhile Asian tech names Tencent, Alibaba, and Softbank were down > -4%. The STI had an outsized day, led by both bank and REIT stocks, as it gained +3.67%.

European Equity Market

In Europe, major indices closed the day higher, bringing it to 6 out of last 7 days of gains. Spain’s Ibex was up +3.38%, handily leading the indices, while the German Dax lagged at +0.51%.

US Equity Market

In the US, there was a 2nd day of outperformance by the small-cap Russell 2000 at +1.88%, which outpaced the S&P 500 (-0.14%), and the Nasdaq (-1.74%). Flows continue to reverse out of the tech names as reflation is priced in and replacing tech longs with tech calls could be something to look at, especially with the VXN still at Aug levels. Amongst the S&P sectors, energy was the best performer at +3.2% while technology lagged at -1.9%.

Fixed Income

U.S. Treasury yields rose modestly on Tuesday, as the market consolidated the previous session’s strong gains fueled by news of a potential coronavirus vaccine. Longer-term yields rose 3.26-3.60bps and the US 2Y yields rose 1.01bps. This had the effect of steepening the US 2Y-10Y curve to 77.88bps, and even hit 78.5bps the widest since Feb 2018. The European Union saw over 10-fold demand for the second bond issuance backing its SURE unemployment scheme, while 10Y bunds yields rose 2.4bps to -0.485 and touched a one-month high of -0.473.

Commodities

After Monday’s breakdown in gold and silver, both staged a rebound of sorts despite US yields moving higher. Gold was up +0.77% while silver was higher by +0.53%, failing at the trendline break higher. Oil markets rose for the 2nd straight day, as front-month Brent closed at the top end of its daily trading range from Sep. The past few days have seen the Brent 2-8 month spread tighten though its current 1.27c is still wider than the lowest in June at 0.72c. In base metals, the complex was positive, though all were within +1%. Nickel was the outperformer for the 2nd day in a row at +0.95%, and is back above the 61.8% Fib (USD15,800/mt) of the Sep 2019 highs and Mar 2020 lows.

Currencies

The dollar was steady on Tuesday and the yen stayed near three-weeks lows, as the currency markets digested Monday’s big moves. The dollar index gained 0.03% to 92.749 and lost around 1.4% this month until Democrat Joe Biden’s victory became apparent over the weekend. The euro fell below 1.18 amid discouraging German data but clawed back to 1.1815 up 0.02%. The pound surged 0.81% to 1.3272 amid upbeat UK employment data and with Brexit in focus. The aussie was flat at 0.7284, while the yen rose 0.08% against the dollar. Offshore Chinese yuan strengthened 0.26% to 6.599, paring Monday’s drop and outperforming most peers in Asia

12th November 2020

Equity Markets

Asian Equity Market

In Asia, the Nikkei gained +1.78%, maintaining at its highest levels since 1991. Over a 7-day span, the Nikkei has gained >10%, as investors chased the under-owned stocks. In China, the SHCOMP reversed -0.53% while the HSI also stalled at its July highs, down -0.28%. HSTECH has fallen -12% from its highs of 3 days ago, and will be something to watch for US tech.

European Equity Market

In Europe, the major indices closed higher for the 3rd consecutive day and 7 out of the last 8 trading days. After breaking through the downside of its summer trading range, the STOXX 50 has now tested the top-end of that range, even as the vol has dropped to recent lows. After an almost 19% move from the lows, we could see some profit taking at these levels.

US Equity Market

In the US, the Nasdaq rebounded after 2 days of losses, gaining +2.31% to lead the S&P 500 (+0.77%) and the small-cap Russell 2000 (unchanged). Volatilities dropped across the board, though the VVIX closed the day positive. Amongst the S&P sectors, technology was the best performer at +2.4%, while materials lagged at -1.5%.

Fixed Income

US Treasury rates were mostly unchanged on Wednesday The US debt market was closed to observe Veterans Day, ensuring that trade was relatively subdued. Germany’s 10Y yields fell -2.2bps to -0.507 off a two-month high touched in early trade at -0.456%, on the back of hopes for a COVID-19 vaccine gave way to the view that monetary stimulus to shore up a fragile economy would continue to underpin bond markets. Yields in Italy, a big beneficiary of the ECB’s bond-buying stimulus, led the move down in euro area bond yields. Italian 10Y yields fell -2 bps off its highest levels in over a week it had touched in earlier trade.

Commodities

Brent broke the top end of its trading range since Sep, as it closed higher by +0.44%. Gains were tapered towards the end of the session though as traders took some profit off a 10% rally. Markets will be on watch for draws from US EIA data. In base metals, the complex was mixed as aluminium, lead, and nickel closed higher, while copper and zinc finished in the red. Copper reversed just under the psychological USD7000/mt figure, closing down -0.68%. In precious metals, gold consolidated around its Sep lows, though another break lower could see USD1,800/mt in short order.

Currencies

The U.S. dollar rose and the safe-haven yen weakened again on Wednesday as markets continued to adjust to higher interest rates and prospects for economic growth following news on Monday of encouraging results for a coronavirus vaccine. The dollar index gained 0.32% to 93.043. The pound fell -0.38% to 1.3222 against a stronger dollar, as optimism that a vaccine would bolster the UK economy was tempered by a lack of progress in Brexit negotiations. Likewise, the euro fell -0.32% to 1.1777 against a strengthening dollar. The dollar gained against both the yen and the aussie, up 0.12% and 0.04% respectively. The kiwi however continued its streak against the dollar, soaring to a 1 ½ year high as traders scaled back bets that the central bank there would move to negative interest rates.

13 November 2020

Equity Markets

Asian Equity Market

In Asia, the Nikkei finished +0.68% marking its 8th consecutive close higher Chinese stocks were slightly less exuberant the SHCOMP was down -0.11%
while the HSI declined -0.22% despite HSTECH marking a relief rebound
Elsewhere, the Kospi fell -0.41% but still t its highest levels since May 2018
The Nifty also corrected -0.46% off all time highs

European Equity Market

In Europe, the major indices broke a 3 day winning streak France’s CAC led to the downside at -1.52% with most of the other indices averaging slightly under 1 losses The STOXX 50 also paused below the breakout level of its summer trading range

US Equity Market

In the US, the small cap Russell 2000 fell 1.64% to lead losses vs the S&P 500 (-1.00%) and the Nasdaq (-0.55%) Volatilities bounced back across the board, the highest day change coming from Russell VIX, while the VVIX was higher for the 2nd day in a row Amongst the S&P sectors, all closed negative, with energy the worst at -3.2% Consumer staples was the best relative performer at -0.3%.

Fixed Income

US Treasury yields sank, weighed down by the persistent rise in coronavirus cases around the world and data showing inflation remained benign in the world’s largest economy Long term yields fell -9.38-10 30 bps, and short term yields fell -0.25-0.39 bps This had the effect of flattening the US 2Y-10Y curve to 70.47 bps BoE Governor mentioned that yield curve control has been discussed to keep interest rates low but there is little need for it Euro zone bond yields fell as caution replaced enthusiasm over COVID 19 vaccines, while focus also remained on the European Central Bank Italian 10Y yields led the fall at -5.4 bps while other core govies fell around -2 bps.

Commodities

Gold recovered some of its poise on Thursday, due to lower long term yields
even as the USD fell slightly Gold closed up +0.60% while silver was relatively unchanged In oil markets, Brent failed to close at the above its Sep trading range as it fell -0.62% While this may be a small pullback following the gains in the past few sessions, Brent remains stuck in its summer trading range In base metals, the complex closed positive, save for nickel, which was down -0.22% Copper was up +0.71% as it gathered pace for another run at the 7000/mt handle

Currencies

The dollar traded mixed against its G 10 peers, as investors were cautious over expectations about a COVID 19 vaccine that is unlikely to avert a grim winter in the United States and Europe as the pandemic’s latest wave intensifies The dollar index fell -0.09 to 92.963 The euro edged higher by 0.25% to 1.1806. The pound was the biggest laggard, as it fell -0.79% to 1.3118 as markets remained focused on developments in Brexit negotiations The aussie likewise performed poorly as vaccine optimism fades, it fell -0.67% to 0.7232 The loonie and kiwi were both down -0.6% against the dollar The yen outperformed its major peers as investors fled to safe haven assets on worries about resurging coronavirus cases, with USDJPY printing at 105.13

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