Market Quick Take - July 20, 2021
Yesterday was a day of capitulation and saw equity market gloom spreading, with many European bourses posting their worst performance of the year, while safe haven bonds spiked higher and the bottom fell out of the crude oil market. In China, a troubled large property developer in deepening trouble is causing jitters, although futures markets did manage to piece together a solid bounce from the lows yesterday that has held to some degree overnight in Asia.
Macro Dragon WK # 31: The Fed, China Tech [DIDI -42%, Tencent -12% but Weibo +44%!], Earnings from TSLA, AMZN, FB, MSFT plus Robinhood IPO [HOOD]
Macro Dragon = Cross-Asset Quasi-Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
FX Update: Risk off swoon sees twin USD and JPY wrecking balls swinging.
The weak close in equity markets last week is turning into an outright rout to start this week as Asia and especially Europe hit the skids ahead of the US session. The purported driver of the weakness in risk sentiment is the resurgence of Covid, but an increasingly complacent market was always going to be poorly prepared for a spike in volatility, one that in FX is sending the usual twin wrecking balls of the USD and JPY swinging, with the risk of the fallout worsening further before the move exhausts itself.
Macro Dragon Reflections: Is it enough of the Hammer & Dance Strategy & time to just step through the imperfect Covid-Gateway?
Latest Macro Dragon Reflections, airs the eventual pathway that all countries need to take on, in the perpetual campaign against Covid-19. Perhaps it is time for a final end of the Hammer & Dance Strategy, & just step through the imperfect Covid-Gateway. We need to start to take the 2nd, 3rd & 4th order consequences into account, instead of just focusing on the 1st order effects. You can ride from Covid, but you cannot hide. Sooner or later, we all have to go through that tunnel of turbulence.
Market Quick Take - July 15, 2021
Yesterday saw an uninspiring session in US equities, with the major averages closing lower on the day while small cap and value stocks were quite weak, perhaps in part on falling yields at the long end of the US yield curve. Those lower yields inspired fresh yen strength and a weak session in Japan, while China is looking at finishing its session in green after slightly stronger than expected June economic data.
FX Update: Trading the central bank normalization theme.
The RBNZ is the latest central bank to remove policy accommodation among G10 currencies, with the Bank of Canada having led the charge in April and likely set to taper purchases again at its meeting later today. Today we look at some hopefully uncorrelated trades for the coming months as the normalization theme potentially deepens, and even in one case if it fails to do so.