HIGHLIGHTS
US equities stayed at all-time high, mainly driven by the strong earnings, rally in semiconductor sector and China recovery. Gold also hit record high this week due to the concerns of the Middle East conflicts and uncertainty around US election.
China: CSI300 and CSI tech went up 3.6% and 7% respectively as the People’s Bank of China (PBOC) introduced additional stimulus. President Xi mentioned that tech and science should lead the modernization of China. The policy update from PBOC officials also offset the skepticism over the recent stimulus effort.
USD: US dollar increased this week due to the supportive economic data, increasing odds of Trump win, and dovish European Central Bank (ECB) commentary. Officials from Bank of Japan mentioned that they are watching the impact of currency on the prices and the economy closely. USDJPY is back to 150.
ECB: ECB cut its rate by 25bps to 3.25% this week, which is the second consecutive cut. The purpose of the cut is to stimulate economic growth and control inflation. Economists expect continued consecutive 25bps cuts until 2% target rate.
MARKETS
18,489.55 | +0.80% | |
S&P 500 | 5,864.67 | +0.85% |
Dow | 43,275.91 | +0.96% |
10-Year | 4.07% | +0bps |
Brent | 73.16 | -7.31% |
DXY | 103.46 | +0.52% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Goldman Sachs: Nuclear stocks rallied this week as mega-tech firms are betting on nuclear power. After Microsoft, Google and Oracle, Amazon also announced its investments in nuclear companies as tech firms are looking for new energy supplies to power their enormous data centers to run the AI systems.
Morgan Stanley: Although Chinese policy makers announced the surprise stimulus programs, we doubt they were enough for their equities to get out of the bear market. It would take much larger stimulus hitting the balance sheet deleveraging and promoting structural shift.
Fixed Income
Morgan Stanley: The backup in US treasury yield could be a surprise for those who think the 50bps easing in September would lead to a collapse in yield. This gives investors a chance to buy high quality bonds with 5% yields.
Bank of America: Given the rate markets already priced in the expectation of a forceful Fed rate cuts, the volatility in treasury market has remained elevated.
Economy
Goldman Sachs: The current US budget deficit is $1.9 trillion. The market is forecasting that it would become $5.25 trillion over the next 4 years under Trump presidency, while it would become $2 trillion under Harris presidency. It demonstrated the differences in fiscal impacts each administration could have on revenue balance and federal spending.
Morgan Stanley: Corporate cash flows are secure and underlying rates keep higher for longer under the current backdrop. The soft-landing scenario is expected, and markets are aware of the reflation risks after the core CPI print showed sign of reacceleration.
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DISCLOSURE
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