Lifting the risk barbell

CMC Markets

Both safe haven and risk assets rose in overnight trading, apparently responding to different signals. Rising Covid-19 infection rates kept bonds and gold firmly bid. However reports of EU agreement on an economic response to the pandemic combined with calls from the US Treasury Secretary for further fiscal support helped boost share and industrial commodity prices.

The US dollar slid in a sign that the overall market tilt is growth positive. The potential for a 750 billion Euro package lifted the single currency, and commodity currencies rose with crude oil and iron ore. The focus on the traditional asset spectrum came at the expense of cryptocurrencies. CMC’s All Crypto Index shed a further 1.1%.

Shares traded modestly higher around the globe, with the exception of US tech stocks. Investor support for “stay at home” stocks like Zoom and Amazon pushed the Nasdaq 100 index to a record closing high. IBM’s aftermarket quarterly report beat analysts’ forecasts by around 3%, although profits were down more than 31% year on year. IBM rose in late trading, and regional trading could see a focus on technology sectors.

BHP reported quarterly and full year production at close to guidance this morning. Gains in iron ore, copper and petroleum were offset by falls in coal output. The company outlined risks for the future, with a particular focus on China, and expects $100 to $150 million in direct costs associated with the viral outbreaks.

The Reserve Bank of Australia release minutes from the July meeting later this morning. The Australian dollar broke through 70 US cents overnight, but any contemplation of unconventional monetary policy by the board could undermine the gains. Futures markets indicate opening gains for Asia Pacific share indices today

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