For your eyes only....Bond, Long Bonds!!!
Local market started positive and then faded into negative territory with AUDUSD as global investors traded the currency exposure. We had another strong turnover day but less than the last two extreme days. It was clear that the momentum turned around the middle of the day as the Asian markets came online. Banks as a currency proxy for global investors moved from solid positive to solid negative through the day. Once again big moves in the bond market suggests macro trade is in play. Bond market is back in favour as risks rise!!!
US remains the key region. Vaccine upside is in the price while election uncertainty and Covid lockdown restrictions are starting up again. The economic surprise peaked in August and has been sliding ever since. We expect the same trend will play out for corporate earnings cycle as well. Downgrades are coming for Q4 in Europe and US.
Overnight the US market was undecided with a bit of unwinding of recent moves. Russell was down 0.5% and DOW flat while NASDAQ bounced 2% after recent belting and pulled S&P up 0.8%. US$, Bond yields and Oil ticked higher while metals were lower. Aussie 10 year bond yield nearly 1% and moved to a premium to US. Tech and Retail lead while Energy and Industrials lagged. US election results may not be called by all the officials till January. Senate is in no rush to pass any substantial stimulus to help the new administration. Inflation is rising and dragging bond yields higher and creating credit squeeze. We are starting to see restrictions in the US with NY shutting restaurants, gyms and bars after 10pm. The next few weeks are key.
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy!!!
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