Morning Brew September 4 2023

Good Morning.

Let us hope that Friday is NOT the most “interesting” day of the week!

We saw a massive selloff in equities yesterday continuing into Asia today. The reasoning seems rather unclear, it looks like a combination of a weaker than expected PMI out of the US, worries on global growth and fears that September is traditionally one of the weakest months of the year for equities.

In my view the extent of the selloff seems exaggerated, Nvidia lost 279 billion in value in the biggest market value in a single day ever.

The S&P 500 lost 2.1%; the Nasdaq shed 3.3% and the Dow lost 1.5%, the Philadelphia SE Semiconductor index fell 7.8%, the GER40 is down 3% from yesterdays high, the Japan 225 is currently down 4.5%. the Vix rose more then 30% to above 20 and Volumes are massive – in the US we had more than 12 billion shares traded again.

VW is facing a tough general assembly as management and workers meet. It is expected that there will be factory closures and the termination of the 30 year old guarantee for jobs.

While Bitcoin and Ethereum are more than 3% lower, FX is curiously quiet. Gold and Silver are at 2495 and 28.00, EURUSD is 1.1057, GBPUSD 1.3115 and USDJPY 145.15.

Oil lost 4% on worries of Chinese demand lower.

Charu took a look at the current turmoil from  an FX Perspective:

Key points:

• September Panic: Markets entered a risk-off mode yesterday amid risks of a September sell-off and ahead of the US jobs report that roiled markets last month.
• JPY as a Safe-Haven: The Japanese yen was the outperformer in FX markets with its safe-haven appeal adding to the case for more rate hike from bank of Japan reaffirmed by Governor Ueda yesterday.
• NFP Risk Ahead: Markets are bracing for August jobs report due for release on September 6. Consensus is looking for higher headline jobs growth and lower unemployment print, but markets could be highly sensitive to any downside surprise.
• Carry Unwind: In addition to its safe-haven appeal amid concerns over weakening global growth, yen gains could be further boosted if the potential unwinding of carry trades materializes, especially if a 50bps Fed rate cut for September becomes the base-case scenario.

Yesterday Charu wrote a longer piece on the USD Outlook:

A More Nuanced Approach to the USD Outlook

While the US dollar is currently facing challenges, a full-blown crisis remains a low-probability event unless these warning signs start to materialize. Investors should stay vigilant and be prepared to adjust their strategies if the landscape begins to shift dramatically.

The expectation of a 50 basis points rate cut has risen to 45%, let us see if that is sufficient to turn sentiment into recovery mode. In August we say a one day selloff, will September be the same?

Wednesday
- Data AU GDP, US International Trade, Bank of Canada, US Factory Orders
- Earnings: Hewlett Packard , Dick’s Sporting, Dollar Tree DocuSign

Speakers: Fed`s Beige book

Thursday
- Data AU Trade, DE Industrial Orders, US Initial Jobless Claims, ISM Manufacutring PMI
- Earnings CVC BNP Paribas Broadcom,
Speakers:
Friday
- Data EU GDP US Nonfarm Payrolls

- Earnings:  Williams