The combination of EU/UK Brexit talks coupled up with the Sino/American tensions has given investors little encouragement today. EU equities have had little reason to be up and as a result all sectors are trading in the red. Interestingly the FTSE is once again outperforming its peers (helped by today’s earnings plus weaker sterling) and although it is too early to call it a change to the underperformance trend, definitely one to watch.
With Labour Day in the US, today’s session has been unsurprisingly quiet. Volumes have been low since the open with EU indices trading -28% vs their 1d AVAT. Not the most exiting day but it is probably not the worst thing taking a breather after the hefty moves from last week. One that I will be watching this week will the VIX (key resistance at 40, see the graph below).
After yesterday’s sell off (Nasdaq 100 had worst day since March), it feels like investors are debating whether this is simple profit taking or the beginning of a genuine sell off. Our view is that no real damage has been made (yet?!). In the US, it is true that the Dow, S&P and NDX only fell to 7 day lows but the reality is that they are still trading above their 25 and 50 day moving averages (and perhaps it is too early to call yesterday’s move a rotation?). Here in Europe, we are still trading within the ranges of the past few months and the themes continue to be the same (FTSE 100 the loser in the region after it made a 3m closing low yesterday). Focus this afternoon moves to Nonfarm Payrolls data (1371k vs est. 1350k) but I will leave my US colleagues to comment on it.
QUOTE OF THE DAY “I am worried and disappointed.” Michel Barnier commenting on UK’s approach to Brexit talks – unsurprisingly not much improvement behind the scenes… KEY INDEX MOVES Stoxx50 FTSE DAX FTSEMIB ▲ +1.0% ▲ +0.4% ▲ +0.8% ▲ +0.6% Autos Travel & L. Technology Basic Resources ▲ +2.5% ▲ +3.7% ▼ -0.3% […]
More of a cheerful day as we are seeing more winners than losers. Volumes slightly mixed with most indices trading below their 1d AVAT although still nice to see them trading above their 20d AVATs. Germany a difficult one to beat with the DAX again outperforming its peers. Closing above 13190 would be new 6m closing high (13313 needed for 6m intraday high). Chemicals sector having a good day as well (SX4P +2.6%) – it made a new all-time price and relative highs earlier today (resistance at 1065). Also note the STOXX 600 Growth/Value ratio (STGP/STVP) – new all-time relative high for Growth earlier (intra-day) after outperforming Value for three days in a row.
We kick off September with a mixed tone. Most EU indices have been trading sideways for most of the session (except for the FTSE, which made a new all-time rel low vs the SXXE earlier) and vols have been better across the board (+40% vs 20d AVAT). Positive comments over Germany’s economic recovery are helping the DAX to outperform its peers and the trend is probably set to stay for another month. Spain actually not great (made a new all time low vs SXXE as well) and has been trading below 7000 for most of the session. In currencies, the Dollar one of the few in the spotlight today after the DXY made new 2 year low (currently below 92). We are watching the EUR (resistance at 1.20 although March low of 1.215 is more important) and Sterling (resistance at 1.35).
Working remotely from Madrid comes to an end today and I’m not really sure how I feel about it. I’m exited to see everyone in London but those two weeks of quarantine and 6:30am starts (vs 7:30 here) are going to hurt with no doubt. Coincidentally the news over Boris Johnson launching the “Go back to work or risk losing your job” major drive came in this morning so it will be interesting to see if the campaign has any success.
Today was always going to be an interesting day as investors have been waiting all week. Jerome Powell just started speaking at the Jackson Hole (at 14:10 BST) so it will be very interesting to see how today’s session evolves this afternoon. Into the speech, our pad is slightly skewed to the sell side and the selling has been split between defensives and cyclicals. Volumes pretty mixed (+25% vs 1d, -15% vs 20d AVAT) but I wouldn’t describe it as a busy morning flow wise (suggesting today’s vols “pick up” is probs mostly futures action and quant funds?). In terms of the Speech itself, expectations have been for Jerome to move towards average inflation targeting, which would fundamentally change the relationship between inflation and interest rates and open the door to sustained Fed intervention in markets even in the face of rising inflation. For now let’s listen to him…
After a pretty mixed session in Asia this morning (and with little newsflow to catch investors’ eye), European equities didn’t have any choice other than to follow the trend. UK is once again underperforming vs its peers and Germany continues to be the winner in the region (Angela Merkel’s decision to extend the job-preserving subsidies helping the cause today). The DAX was actually very near a 6m closing high yesterday so hopefully it doesn’t disappoint us again today. Other than that, Europe remain trading in the ranges. For your reference, EuroStoxx ranges at 3173/3451and Stoxx at 350/380. Vols have been pretty low since the open with EU indices back trading well below their AVAT levels (c.-30% vs 20d). Focus for the rest of the week will be Jerome Powell’s speech tomorrow at the virtual Jackson Hole summit.
Another session in the green after a positive call between US and China. Volumes slowly improving as we saw all EU indices trading above their 1d, 5d and 10d AVAT levels for the first time in a long time (though they have been slowing down throughout the session). We are seeing Spain outperforming (IBEX up +1.2%, vols up +27% vs yesterday) and the UK underperforming (FTSE -0.3%, made new intra-day all-time rel low vs the SXXE). Sector wise, Travel and Leisure currently on top (supported by recent optimism over a covid vaccine) with IAG leading the way (IAG LN +5%). Chemicals amongst the losers having made an all-time intra-day relative high vs the SXXP yesterday.