Another day of carnage seen in global stocks where key US benchmark stock indices tumbled the steepest since June; S&P 500 (-3.5%), Nasdaq 100 (-3.9%) and Russell 2000 (-3.0%).
It was a day of indiscriminate selling across the board as the data from market breadth on NYSE had indicated a ratio of 10 declining stocks to every advancing stock and the Nasdaq Composite saw a ratio of around 6. Also there was nowhere to hide or seek refuge from a sector performance perspective, a sea of red across the key S&P sectors; even the defensive Utilities declined by -2.9% with the worst seen in the high beta Information Technology sector where it tumbled by -4.3%.
Several major European countries that including Germany and France had started to impose more renewed stringent lockdown measures to contain the current trend of rising coronavirus infection cases. The German DAX had recorded an accumulated decline of -14% from its 03 September high of 13460 to yesterday’s close of 11560. Sentiment had been dampened by such “ripple effects” where traders and investors were spooked by the increase in possibility of more countries in the west to impose lockdown measures over the liquidity backstop that central banks are still committed to provide to the markets and economy. Secondly, it can also be due to a potential thinning of liquidity condition from order flows as the incentive to take up the opposite side of trade in larger quantities is being reduced ahead of the major risk event, November 03 presidential election.
The US dollar and the Japanese JPY had benefited from the current rout of risk-off. The US Dollar Index rose by +0.37% and it is now testing a key descending trendline in place since March 2020 now acting as a resistance at 93.48. The USD/JPY had inched lower by -0.10% to print a low of 104.11, a whisker away from the 104.00 lower limit of the key medium-term range support in place 31 July 2020. Gold and oil tumbled as well; gold futures (COMEX) declined by -1.7% to close yesterday’s US session at 1879, just 1.4% away from the recent 24 September 2020 swing low of 1851. WTI crude oil futures plunged by -5.5% to close yesterday’s US session at US$37.39 per barrel, 3.2% away from 08 September 2020 swing low of US$ 36.13 per barrel.
Over to Asia, performances of key benchmark stock indices were all in the red in today’s morning session but fared much better than their US and Europe counterparts so far at this time of the writing. Japan’s Nikkei 225 (-0.8%), South Korea’s KOSPI 200 (-1.7%), Hong Kong’ Hang Seng Index (-1.1%) & Hang Seng Technology Index (-1.5%), China’s CSI 300 (-0.2%). In addition, Singapore’s Straits Times Index declined by-0.6% and Australia’s ASX 200 downed by -1.5%.
Events To Watch
End of China’s 4-day key economic summit; the release of two policy blueprints that will chart the medium-term and longer-term economic plans for China in the next 5 and 15 years. The focus will be on details of a “dual circulation” strategy and its indirect impact on the rest of the China’s economy. “Dual circulation” in a broader context for China implies a lesser dependence on overseas markets and technology to counter the on-going US-China Tech War.
Bank of Japan & ECB monetary policy meetings; the focus will be on the message and tonality of the respective central bankers during the press conference. For BOJ, watch out for any mention of the current JPY strength. As for ECB, any new or a more “improvised” accommodating monetary easing policies.
US “Big Tech” earnings results after the close of today’s US session; consensus estimates from FactSet; Apple (US$63.70 billion revenue & US$0.71 earnings per share), Amazon (US$92.78 billion revenue & US$7.41 earnings per share), Google/Alphabet (US$42.80 billion revenue & US$11.28 earnings per share).