US stocks continued their relentless climb for the fifth consecutive session since last Wednesday, with fresh all-time highs in the semiconductors, housing and biotechnology sectors, as well as the Dow Jones transportation average.
Based on yesterday’s closing levels, the S&P 500 (3,534, +1.6%) and Nasdaq 100 (12,088, +3.1%) are now just 1.5% and 2.9% away from their respective current all-time high printed in early September 2020.
The current risk-on mood had been built on the narrative of a prompt passage of the second US fiscal stimulus package, but negotiations between the White House administration and the House remained deadlocked yesterday. In addition, members of the House had been informed not to expect any votes on the stimulus package this week, and a significant number of Senate Republicans had rejected the White House’s US$1.8 trillion package proposal for a deal. Hence, it will not be a surprise to see some potential profit-taking activities to submerge today. In today's Asian session, futures on the S&P 500 and Nasdaq 100 shed 0.4% so far.
Foreign relations between China and Australia continued to strain as Beijing had just announced a new suspension on purchases of Australian coal, where Chinese power stations and steels mills had been verbally told to immediately stop using Australian coal. The AUD/USD took a hit in today’s Asian session, where it plummeted by 43 pips from yesterday’s US session close of 0.7209 to print a current intraday low of 0.7165, making the AUD the worst performing currency (-0.6%) against the USD among the majors currencies. The next near-term support to watch on the AUD/USD will be at 0.7140.
The USD/CNH (offshore) had continued to inch higher today, up by 0.20% to print a current intraday high of 6.7652, after market participants took cue on the latest lax reserve requirements to be set aside by financial institutions in order to transact in yuan forward contracts, which implied policymakers were getting uncomfortable on current yuan strength.
Hence given its significant direct correlation with the movement of the yuan, China’s stock market had succumbed to some profit-taking activities in today where the CSI 200 had shed -0.4% after a strong rally recorded yesterday, partly due to the a positive news flow on President Xi’s upcoming visit to the Shenzhen on Wednesday, to make a significant speech regarding boasting economic growth in the Greater Bay Area. Overall, the medium-term downtrend on USD/CNH remains intact as long as the key resistance zone of 6.82/85 is not surpassed.
Events to watch
US Q3 earnings kick-starts with major financials firms Citigroup, JP Morgan Chase and BlackRock.
Apple’s 'Hi-Speed' event with potential for four new versions of the iPhone 12 that carry 5G technology.
China’s trade data for September; consensus is set for a 10% year-on-year increase in exports, with 0.3% year-on-year increase in imports. The trade balance figure is expected to decrease slightly to $58bn from $58.93bn in August.
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