State of The Markets | Equities Slumped Amid Safe Haven Flows


Equities slumped amid safe haven flows. Global equities closed lower on Monday, with S&P (-1.30%) and FTSE (-0.23%) to ASX (-0.35%) and Nikkei (-1.87%) all in the red, after concerns over recent Evergrande’s failure to meet interest payment might escalate as the company face interest due on another Dollar denominated bond. Flows to Swiss and gold were noted amid rising yields, as bond prices fell, with the 10Y yields shooting back up to 151 basis points before settling around 148. Dollar fell for three straight days, settling below 93.85, as New York closed.

In the commodities market, crude shot past $78/bl before settling around $77.60/bl as OPEC+ was firmed with its gradual output plan. Risk off sentiments saw gold climb back above $1,767/oz as investors concerned over the US debt ceiling on top of weaker Dollar. Elsewhere, iron ore was little changed as the infrastructure bills came to an impasse.

In the FX space, Loonie was seen synching across all horizons while Euro and Kiwi in the medium to long term accounts, that seemed more risk averse as Yen, Dollar and Swiss led the demand. Swiss seized the helm of demand in the short term accounts, as traders positioned themselves ahead of RBA, RBNZ rate decision and NFP Friday.

OUR PICK – No New Pick

We stay on the sideline ahead of NFP. At this point, we saw a disconnect in funds flows and technical, which point to indecisive markets due to multiple pending issues like the US debt ceiling, infrastructure bills, and global concerns on Evergrande, among others. With NFP numbers signaled better expectation that we believed already priced in, given current circumstances, we see Dollar stands a risk to the downside.

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