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Daily Outlook – 1 Oct 2020
By: Andria Pichidi
A variety of factors helped support equities.
- Improvement in risk appetite and sentiment mainly focusing on headlines suggesting progress in U.S. stimulus talks.
- The vote on the Democratic proposal was delayed to give negotiators more time to come up with a compromise deal as Fed officials warn against delaying a new aid deal until next year.
- Mnuchin later indicated he had boosted his offer toward 1.6tln
- Stocks boosted while the USD underperformed
- Regeneron reported the first data from its antibody regimen in COVID-19 patients, which argued for the efficacy of the current vaccination strategies (Bloomberg).
- Moderna says its coronavirus vaccine will not be ready until 2021.
- Upbeat US economic data provided a timely reminder that the recovery has maintained a solid momentum amid a variety of crosscurrents, with a notable bias toward housing.
- The USA30 has firmed 1.2%, the USA100 is up 0.7% and the USA500 has improved 0.8%. GER30 and UK100 futures are up.
- Japan manufacturing PMI and Tankan surveys, which both suggested an improvement in sentiment
- Japanese media reported the government there is considering further economic stimulus.
- Trading across Asia was very thin with holidays in China, Hong Kong, Taiwan, and South Korea.
- Trading at the Tokyo Stock Exchange halted after a technical glitch.
- Markets await hints toward Friday’s Non-Farm Payrolls and are worried about layoffs.
The seasonal analysis points to a very “clear-headed” October.
- Since 1982, the total advance for the first 5 trading days of October is up 45bps. This is 4x larger than the median weekly return of 12bps.
- Since 1985, October has the 2nd highest monthly return with a median return of ~200bps. The first 2 weeks are stronger than the second 2 weeks.
- If S&P is between 0 and 5% heading into Q4, which it is, this produces the highest q4 median gain of 9%
In FX markets interest in the dollar and yen waned as risk appetite improved.
EUR – extended to 1.1750 but holds below 20- and 50-DMA
GBP – stronger – closed above 20-DMA and currently at 1.2943
JPY -steady around 20-DMA but stalled below PP of the day.
CAD – reversed 7-day gains from 1.3417 to 1.3282
AUD 4 days rally. Key Resistance at the confluence of 20- and 50-DMA at 0.7210
Oil – lifted to $ 40.27 per barrel, with gains coming after the solid round of U.S. data, including the better ADP jobs report, stronger Chicago PMI, the slightly improved Q2 GDP revision, and the better than forecast pending home sales print.
Biggest gainer – USDZAR -1.05% – Drifted for 4th day in a row posting an incomplete rounding top
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