Broad-based carnage was seen overnight in the US stock markets; the S&P 500 dropped by -2.4% which recorded a cumulative loss of close to -10% from its current all-time high of 3,588 printed on 2 September 2020.

The higher beta Nasdaq 100 shed -3.2% where steep losses were seen in Apple (-4.2%), Amazon (-4.1%), Netflix (-4.2%), Google (-3.5%), Microsoft (-3.3%) and Facebook (-2.3%).  In addition, high growth-oriented Tesla plummeted by -10.3% post “Battery Day” and broke below a key medium-term support at 386; putting its medium-term uptrend in place since 18 March 2020 in jeopardy.

Overall, the benchmark US stock indices are poised for their first monthly slide since March 2020 coupled with a fourth consecutive session of gains seen the US Dollar Index as the USD continued to strengthen against the major currencies. A stronger USD is also putting pressure on gold where the COMEX gold futures fell -1.9% that broke below the 12 August 2020 low of 1874.2.

Also, current political gridlock in US Congress is hampering the passage of another round of much-needed fiscal stimulus and a resurgence of coronavirus infections around the world have added worries for market participants.

3 events to watch

Inclusion of China’s government bonds into FTSE World Government Bond Index (WGBI); index compiler FTSE Russell will make a decision today whether to include China sovereign bonds into its WGBI at the close of the US session, a year after rejecting the bonds. An inclusion is likely to increase capital inflows into China sovereign bonds where China’s benchmark 10-year bond yield is at around 3.1% versus yields of close to zero for most developed nations’ bonds. Market participants have indicated “high hopes” of an inclusion where Morgan Stanley had put the odds of inclusion at 90%. Hence, a further strengthening of the Chinese yuan may have already been priced in and such event may not lead to a significant drop of the USD/CNH (offshore yuan) exchange rate at this juncture. The USD/CNH has been strengthening (yuan weakness) in line with USD appreciation against the major currencies seen in the past four days. Immediate resistance to watch on the USD/CNH will be at 6.85 and above opens up scope for a further potential push up towards 6.90 with near-term support at 6.77.

Germany’s Ifo business climate survey for September; business sentiment had continued to improve steadily since May 2020. Market participants remain upbeat where consensus is set at 93.8, an increase from 92.6 seen in August 2020.

US initial jobless claims for the week ended 19 September; jobless claims had started to decline steadily in the past three weeks and expectation is set at an increase of 840 thousand claims, a drop from 860 thousand as seen in the previous week.


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