US stocks had managed to stage a recovery yesterday after last week’s dismal performance; the worst decline since March 2000. The S&P 500 and Russell 2000 advanced by +1.2% and 2.0% respectively while the Nasdaq 100 underperformed, with a modest gain of +0.3%.
Overall, the cyclical, value and US domestically oriented stocks saw more inflows versus mega cap technology stocks as indicated by the S&P sectors performance; Energy (+3.7%), Materials (+3.4%), Industrials (+2.7%) while Information Technology (+0.3%), Consumer Discretionary (+0.3%) and Communication Services (+0.1%) underperformed.
Two main catalysts can be attributed to the rally seen in the US stock market; short-term technical oversold conditions after last week’s steep decline. Secondly, the polling averages, the last day before US presidential election had indicated Biden leading over Trump in six key battleground states; Florida, North Carolina, Pennsylvania, Michigan, Wisconsin and Arizona. Over in Europe where rising coronavirus infection cases that led to stringent lock down measures trigged a sell-off last week had managed to recover some loss ground as well; Germany’s DAX (+2.0%), France’s CAC (+2.1%) and UK’s FTSE 100 (+1.45%).
In the foreign exchange market, the US dollar had managed to hold steady its gains recorded last week against the majors as indicated by the US Dollar Index; it rose by + 0.2% to end yesterday’s US session at 94.06, a positive following through after a bullish breakout above its major descending resistance of 93.48 that had capped previous rallies since March 2020. In addition, the US Treasury 10-year yield was almost unchanged at 0.85% and held on to last week’s gain as well. Hence, the bears may not be out of the woods yet for stocks.
Over to Asia, upcoming mega Ant Group’s initial public offering, the world largest had started to trade at a 50% premium in the grey market ahead of its dual listing in Hong Kong and Shanghai on November 05. Some trades were executed at HKS$120 in the grey market yesterday versus its Hong Kong listing price of HK$80. Meanwhile, Alibaba’s key founder Jack Ma and Ant Group’s top executives were summoned by four Chinese regulators including the central bank and banking watchdog to a supervisory interview yesterday, a rare meeting that implied rising government “scrutiny” ahead of Ant Group ahead of its IPO listing.
Key Asian benchmark stock indices had continued to hold on their respective gains since the start of this week; at this time of the writing, South Korea’s KOSPI 200 (+1.8%), Hong Kong’s Hang Seng Index (+1.7%) & Hang Seng Technology Index (+1.5%), China’s CSI 300 (+0.5%) while Japan is closed for a holiday today. Singapore’ Strait Times Index and Australia’s ASX 200 both advanced by 1.0% and 2.0% respectively.
Events To Watch
Australia’s central bank (RBA) monetary policy decision; the consensus is for a rate cut on its policy rate to 0.10% to 0.25%, the lowest on record.
US Presidential Election; polls are expected to close between 8.00 am to 11 am (Singapore time tomorrow) for these key battleground states, Florida, North Carolina, Pennsylvania, Texas, Michigan, Arizona, Wisconsin and Nevada.
Chart of the day – AUD/USD medium-term downtrend intact below 0.7165 resistanceSource: CMC Markets platform