QUOTE OF THE DAY “The large, and in some countries, accelerating number of Covid-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside” The IEA captures the mood of markets in its monthly report KEY INDEX MOVES Stoxx50 […]
QUOTE OF THE DAY “You don’t need to work in Europe, or the US or Latin America if you can come here and work for a couple months at a time; go back and come back.” Barbados Prime Minister (Mia Mottley) as she is considering to allow foreigners to live in the island for up […]
Ahhhh Rishi Sunak. He’s great isn’t he? We all need a Rishi right now. He settles nerves. He tells us it’s all going to be okay. He buys me dinner Monday to Wednesday (sort of). Today has been all about the Summer statement where as expected, a 9 month stamp duty holiday is the big news for the UK housebuilders. We were actually expecting it to run for 6 months so an extra 3 months always welcomed. He also announced a furlough bonus and most importantly a 50% discount for eating out from Mon- Wed. Yup, 50% off! It is only up to £10 per person but it will do. Not quite sure how it tallies with Boris’s plans to tackle the obesity crisis but there we go.
A good day for the deep-dive report you’ve been meaning to read today. Investors taking a pause for breath ahead of Q2 results, which is probably not the worst idea. Perfect time to see were we currently stand market wise and revisit some ideas. Volumes are lower across the board but, interestingly, the theme continues – higher volumes on up days, lower volumes on down days. EU equities have been ticking lower since the open but, overall, we are still watching June’s highs as the key resistance levels (12913 on DAX, 20399 on FTSE MIB and 3394 on SX5E).
After a great weekend (involving the first restaurant visit in months for many of us), markets started with a heavy risk-on tone. It all began with China having a bouyant session after a clear effort by the Govt there to encourage moves higher. The CSI 300 made a 5 year high, HSI traded above its 200dma and the Shanghai Composite made a 2 year high after it broke the resistance level of 3288 (April 2019 high). Here in Europe, equities followed (SXXP +1.3%) and encouragingly, once again on healthy volumes. Cyclicals are back outperforming defensives and Spanish names seem to be on trend (Ibex currently up +2.2% vs peers all below +1.8% and the only index trading above its 10d AVAT).
What’s that saying? A watched pot never boils? With investors eagerly awaiting the prospect of a long weekend (and pubs reopening!) today’s morning session felt like it dragged on for ever. Interestingly, while it may seem like things were slow from the comfort of the WFH desk, volumes are actually telling us a different story. Through the morning we saw a decent amount of futures positioning ahead of the US data. For reference, EU indices are currently trading up +33% vs yesterday’s volumes (albeit down -13% vs the last 20 days). As per yesterday the volume seems to be coming on upticks. Liquidity overall remains underwhelming though as thoughts turn to BBQ’s.
Wow, that was a good quarter wasn’t it! The S&P closed +1.54% (+19.9% for the quarter), which makes Q2 the best quarter since 1998. I was 4! Granted, this is a truly unique situation we find ourselves in which makes it hard to call Q3. So let’s perhaps look for clues in history. All 8 quarters +15% or more since 1945 have been followed by another robust one (with an average +9.5% gain). It doesn’t feel from today’s action that that is anything like possible but we’ll see (puts note in diary for end Sept).
Well let’s focus on how Q2 has done rather than how H1 has done. A much stronger second quarter after the horrors of Q1 leaves us hopeful for more of the same going forward. The S&P on track for its best Q2 since the 1930’s. You’d not have suggested that as likely as we started April. Volumes are understandably mostly higher across the board and macro data is helping those looking for some window dressing (Chinese PMIs beating expectations) but they’re leaving it late at the moment with most indices down just shy of 1%. Maybe yesterday’s late move was enough for most.
Quiet start to the week for most markets with all EU indices trading well below their 20-day AVATs. Feels like investors have taken the day to organise their weekend plans for the 4th of July (celebrating freedom not just in America this year). Americans will celebrate Independence Day while Brits will celebrate that pubs are finally open – hurray! US closed on Friday and it does feel as though we’re going to be calm.
Looking at the photos of Bournemouth beach late last night, it was hard not to draw the comparison between the beachgoers and the overcrowded positioning of ‘Robinhood’ traders at the minute. Despite countless warnings, thousands flocked to the shoreline in the sweltering sun to claim a patch, a little piece for themselves. High risk, high return I guess but just like with those consensual robinhood names, it feels like it is only a matter of time before the risk manifest themselves into something ugly.