Market News

• The surge in Treasury rates was a major catalyst behind the steep drop on Wall Street, though the looming debt limit and potential potential government shutdown on October 1, and more importantly the threat of default, weighed heavily on US assets.
• China’s power crunch worsens. 
• Yields stabilised (30-year closed to 2.10% and the 10-year hitting 1.565% before dipping late in the session as some dip buyers stepped forward).
• MSCI’s gauge of Asian stocks saw the biggest drop in almost six weeks and is set for the first quarterly slide in six. –  Evergrande concerns resurfaced as China stepped in to buy a stake in a regional bank from the developer.  Hong Kong’s central bank has reportedly asked lenders to report their exposure to the Group and Fitch Ratings downgraded the developer’s rating to C from CC.
• Testimony from Fed Chair Powell and Treasury Secretary Yellen did not do the markets any favors either but added to the overall uncertainties emanating from Capitol Hill.
• Equities extended losses in Japan, JPN225 down -2.6%. USA500 was off -2.0% at 4355, USA100  paced the plunge in the indexes, tumbling -2.8%, below 15,000. USA30  was -1.6% lower.
• USOil dropped back below the $74 mark, after reaching a high of 74.87.
• FX markets – GBP selling off sharply yesterday but steadied so far today– USD corrected – USDJPY – 110.33, Cable 1.3527, EURUSD 1.1677.

European Open – Some stabilisation then for the beleaguered bond market and stocks are also showing signs of life, with GER30 and UK100 futures posting gains of 0.4% and 0.2% respectively, while US futures are up around 0.6%.

After the sharp sell off in equity markets in recent days, dip buyers would emerge eventually – Will calm in bond markets last for long?  even if central bank officials will do their best to calm nerves this week.

Unless China risk escalates and spills over monetary policy support is set to be phased out gradually over the next years and stocks will have to adjust to the changed outlook.

Today – Data releases today include UK lending data and Eurozone ESI economic confidence and there are also a number of speakers at the ECB’s conference on central bankers. Pending Home Sales from US also on tap.

Asset of Interest Cotton (+6.53%) Broke 101 barrier, posting fresh record high, extending rally  for 8 day’s in a row breaking the upper daily BB line. Daily RSI at 73 while MACD line extended above 0 suggesting the increase of positive bias.

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Andria Pichidi

Market Analyst

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