Sunset Strip - 12th October 2020
Local market was aimless most of the day despite the optimism in Chinese markets before getting jammed up in the last hour by global investors chasing a stronger AUDUSD. Aussie fund managers were still in holiday mode as turnover was weak. Chinese markets are up near 2.5% due to reform policies expected to drive a post pandemic economy. China remains the main country/region showing stable recovery path and the Yuan is flying on the back of that. The Yuan peg to USD keeps rising and the Chinese are allowing that to play out. They are preparing for the next USD decline cycle. USD global currency standard is gradually being weakened by Yuan in different parts of the world. It may not happen tomorrow, but the cracks have started to appear and the lack of reform will keep the move away from USD. US 30 year bond yield has broken above 200 day MA for the first time in years as cost inflation starts to pick up. Economic recovery fading with markets as White House remains the underdog in the election cycle. Elevated risk of geopolitics taking centre stage in the next month as Chinese economy holds recovery cycle and US doesn’t!!!
The positive drive in the last hour for local markets were in Tech and Banks while Energy and Utilities were the big negative sectors. Fintechs were in M&A play with Bravura acquiring and Link getting a bid.
Globally pandemic first, second or third wave is hitting all parts…even China. Emerging Markets are a hotbed of the pandemic and that is unlikely to change in 2021. Even a vaccine in the next 3 months will not reach them for a year.
US market moved higher on Friday with weak economic data, clarity on election result and stimulus hope to deliver the best week in 2 months. DOW ran up 300 by lunch and faded to close up 160. UK growth was weaker than expected and that set the weak economic outlook for EU region in second wave. US job data also confirmed recovery fading. Trump pushed up stimulus deal worth $1.8T and then wanted one above Democrat deal of $2.2T... not sure what is real anymore. The election odds are moving towards Democrats and markets are pricing in low risk of uncertainty. Democrats holding most swing states, debates seem to be off and Ted Cruz warns of election bloodbath like post watergate. Bonds and US$ were lower and commodities higher ... except oil struggling with demand worries. Gold ripping higher again and market realizing money printing is inevitable. Gold was the best sector by a margin while tech and retail were next best...energy and property were the worst. Expect some left field move by Whitehouse as the election moves away from them. Chinese are ramping Yuan higher against US$ as they expect devaluation move...they are usually right!!!
Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy…new month/quarter has started!!!
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Over 25 years’ experience in the finance/tech industry. Mathan has worked extensively in all parts of the finance sector (i.e. County NatWest, Citi, LIM, Southern Cross, Bell Potter, Baillieu Holst and Blue Ocean Equities). Currently Founder and...