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Tag Archives: $SPX

Are We on the Cusp of New Leg up in Risk Assets?

The consolidative/corrective phase in the capital markets appears to be drawing to a close.  The June PMI readings confirm a significant improvement is underway and that many high-income economies are on track to return to positive growth in Q3.  At the same time, the extent of government and central bank support is unprecedented.  The dollar fell against all the major currencies last week, save the Japanese yen.  All five of the best performers (NOK 2.1%, NZD 1.6%, AUD 1.0%, GBP...

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Caution as Last Part of Corrective Phase could be the most Impulsive

We anticipated and have been tracking the corrective or consolidative phase in the foreign exchange market since shortly after the unexpected surge in US non-farm payrolls reported on June 5.  That phase may not be over yet, and the quarter-end adjustments are a wildcard. Many expect large equity sales after strong rallies that were all the more incredible given the deep contractions most economies are expected to report for Q2.  The MSCI indices for developed economies and emerging...

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Corrective Forces Still Dominate

After a run-up in risk assets from the middle of May, broad consolidation was the main feature of the capital markets last week.  Markets were calmer.  The three-month implied volatility of all the major currencies fell, led by the usually high-beta dollar bloc. The VIX, which measures the volatility of the S&P 500 snapped a five-day decline ahead of the weekend. The volatility of the Treasury market (MOVE) also eased.  The risk is of higher volatility into the end of what has been...

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New Optimism Lifts Sentiment Ahead of the Weekend

Overview: China's new pledge to meet its trade commitments under the Phase 1 agreement with the US coupled with signs that the virus flare-up in Beijing may have been brought under control is helping underpin risk appetites today.   Led by Chinese shares, equities in the region rose, giving the MSCI Asia Pacific Index a four-day advance to carry into next week. European stocks higher, leaving the Dow Jones Stoxx 600 in its recent ranges. US shares are also firm.  Bond markets are...

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Dollar’s Upside Correction to Continue

A phase in the markets that began in mid-May ended last week with a dramatic sell-off in stocks and risk-assets in general.  The Federal Reserve confirmed what investors already knew.  After all, the implied interest rates for the December 2021 fed funds futures implied a negative yield at the start of the month, and a rate hike was not reflected in the derivatives markets until 2023.   It may not have been what the Fed said or did, but simply the old "buy the rumor sell the fact"...

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Breakouts Confirmed, Time for Consolidation?

A 10 million-beat on the May non-farm payrolls failed to trigger much dollar demand.  Indeed, the dollar fell to new session lows against a few currencies after the report, including sterling and the Mexican peso, which are discussed at greater length a bit lower.  There does appear to have been a shift in market psychology in the middle of May.  We have been monitoring the heavier dollar, and the confirmation we sought last week of a breakout was delivered by the price action in recent...

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Breakouts Need Confirmation

The dollar had a difficult week, falling against all the major currencies but the Japanese yen and appeared to break out of its recent trading ranges against the euro, Canadian and Australian dollars. Only a handful of emerging market currencies fell against the dollar.  Among these were the Chinese yuan, which, when everything was said and done, lost 0.1% against the US dollar.  The Argentine peso was the weakest currency.  It lost about half of one percent as its debt restructuring...

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Breakouts Mostly Averted, so Far

The dollar, the Treasury market, and the S&P 500 were threatening to break out of the trading ranges. But the escalation of tensions between the US and the PRC gave reason for investors to pause ahead of the long holiday weekend in the US and UK, especially in the context of the National People's Congress session in China and unpredictable, but seemingly increasingly hostile rhetoric from President Trump. The tensions are likely to rise further in the period ahead, and these may be...

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What do the Charts say about Risk Appetites?

The US dollar was generally stronger last week. The dollar-bloc currencies and sterling bore the most weight. Decreased appetites for risk, illustrated by losses in the major equity benchmarks, seemed to have played a role. Sterling fell every day last week to reach its lowest level since late March ahead of the weekend. While there was discussion of the possibility of negative rates in the US, the UK two-year yield has remained below zero for the past three sessions. New Zealand, which...

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Risk Appetites aren’t Satiated as the NASDAQ turns higher on the Year

The threat of the US not servicing its debt to China, the loss of 20.5 mln jobs last month,  nor the prospect of negative interest rates have undermined the US dollar.  It sat at the fulcrum between the currencies seen as beneficiaries of risk appetites, namely the dollar bloc and Scandis and the underperforming European currencies. The euro was the heaviest of the majors, losing about 1.3% and recorded a new a two-week low below $1.08. A controversial German Constitutional Court...

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