Yesterday’s price movement seen across major cross asset classes had indicated a risk-off behaviour driven by mostly technical factors, where four consecutive higher closes in the major benchmark US stock indices had led to extreme overbought conditions on the shorter-term horizon.
Fundamental factors such as better-than-expected loan-loss provisions from Citigroup and JP Morgan Chase announced in their respective Q3 earnings reports, and Apple’s “Hi-Speed” event, had taken a back seat yesterday. In addition, market participants seem to have come to a realisation that chances were receding for the passage of a much-needed second US fiscal stimulus package, as squabbles remained among the White House administration, Democrats and even Senate Republicans.
The S&P 500 and Nasdaq 100 had shed -0.6% and -0.04% respectively; Apple was the worst performer among the mega tech stocks, plummeting -2.7% versus a -0.6% loss recorded in the S&P Information Technology sector. In addition, value-oriented sectors also underperformed; financials (-1.9%), real estate (-1.7%), energy (-1.6%) and industrials (-1.1%).
The weakness seen in stocks had also translated to a revival in US dollar strength against the major currencies, as the US Dollar Index recouped its two days of losses since last Friday, to close yesterday’s US session at 93.53. Also, Gold futures (COMEX) tumbled -1.8% to end yesterday’s US session at 1,894.
Singapore’s flash Q3 GDP estimate came in at -7% year-on-year, slightly below consensus of -6.8% but better than the previous Q2 GDP reading of -13.2% year-on-year, due to the negative shock caused by the pandemic. MAS, Singapore's central bank, made no changes to its monetary policy, maintaining a depreciation stance on the Singapore dollar against a basket of undisclosed currencies, to counter the negative repercussion from a weak global economic condition. Full-year 2020 forecasted GDP growth for Singapore was maintained at -5% to -7%.
Three events to watch
Keynote speech from China's President Xi in Shenzhen on its 40th anniversary as a special economic zone; market participants are expecting President Xi to announce new measures and steps to drive economic growth in the Greater Bay Area to compete against Silicon Valley.
Eurozone industrial production for August; a slight improvement is expected, with a consensus estimate of -7.2% year-on-year versus -7.7% year-on-year recorded in July. If the consensus reading comes in as expected, it will be four months of consecutive improvement since April 2020.
US Q3 earnings: Goldman Sachs, Wells Fargo and Bank of America: Earnings per share estimates are as follow; Goldman Sachs (5.54), Wells Fargo (0.44) and Bank of America (0.49).