Stalling Stock Market Rally And Rising COVID Caseloads Make For Bad Bedfellows


Thanks to a holiday in the US, France, and some other European countries, we have seen global markets consolidating on the recent rally across equities and debt. Yields found a base, decreasing a couple of basis points after its gap higher, US tech stocks caught a bid and outperformed broader markets while cash credit remained firm, 

Asia focus was  on the stalling stock rally, monitoring  global COVID numbers and China’s Tech bounce following the wipeout in past days due to tougher regulation

Over the past 24 hours, price action has started to show signs of a little vaccine exuberance exhaustion. Perhaps we shift to consolidation in the near term awaiting the efficacy results of the next vaccine candidate. 

But until we have clarity over the rates and inflation outlook, key mobility impacted sectors such as Leisure, Construction and Energy could continue to recover. Still, the case for the entire Value universe is much less clear. 

In a similar vein

GBPUSD Price Action Showing Signs Of Exhaustion

price action over the past 24 hours has started to show signs of a little exhaustion, and perhaps the pair is due for a bit of consolidation in the near term.

demand seemed to reemerge into the latter stages yesterday, and momentum in the latest risk rally has also slowed.

AUD also in consolidation mode 

continues to consolidate following recent gains, as some of the exuberance following the positive covid vaccine news earlier in the week abates. Equities drifted off a bit during the Asia session, and USD demand on dips has emerged. Continued -related supply following the RBNZ yesterday has perhaps also added some weight. AUD/USD gains have been relatively short-lived today. The pair failed to probe above 0.7300, and there has been a slightly more offered tone as the day has progressed. 

NZD trickling lower

After shifting gears from overpricing the probability of a 25bp rate cut to now worrying about the New Zealand debt load, the trickled lower. Keeping in mind the average attention span for FX traders is around 48-72 hard to stick to one narrative.

Lots of questions on the INR today

The RBI has been accumulating US dollars to weaken the , partly because it aims to orient the economy toward the export sector. The rupee is, however, historically weak on a NEER basis now. Inflation concerns should dominate, with consensus expecting September at 7.3% y/y later today. With demand returning in the real economy, CPI inflation should remain elevated, as supply may be slower to catch-up. It’s a matter of time before  USD/INR downside to help cap inflation.

Oil 

OPEC backstops are a reason to cut shorts not chase the market higher with both COVID in the air and production hedgers selling into rallies 

The DOE number might help support but my feeling is that the vaccine binge is losing steam given the prompt deliverable nature of contacts. Prices are vulnerable to setbacks as we have seen today after the Tokyo COVID surge headline 





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