STATE OF THE MARKETS
Stocks pared earlier losses amid surging yields. US stocks recovered Monday’s losses as technology and communication sector was scooped after, in the wake of rising yields that saw the 10Y benchmark surged to 155 basis points while the 2Y at 29 basis points. US index from Dow (+0.92%) and S&P (+1.05%) to Nasdaq (+1.25%) and Russell (+0.49%) climbed higher after US services activities surprised to the upside while trade deficit widened more than expected. Dollar (DXY) almost regained the 94 handle after three black soldiers appeared on the horizon as yields rose.
In the commodities market, crude continues its upward trajectory, closing around $79/bl, as OPEC+ would not waver in its plan to control supplies. Gold pulled back to $1748.70 before settling around $1,759.40/oz as Dollar strength weighed on the precious metal. Elsewhere, iron ore for December was settled lower, around $116.30/tn as markets await the fate of US infrastructure bills.
In the FX space, short and medium term accounts seemed optimistic as demand for Swiss and Yen was pulled back to offers, while Sterling and Loonie led the demand territories with Dollar, Aussie and Kiwi. Long term investors were little changed as they awaited better ADP numbers (405k vs 374k) on Wednesday, ahead of the NFP Friday that is already priced in. Crude traders will be watching EIA reports for the latest update on the US oil inventories.
OUR PICK – No New Pick
We stay on the sideline ahead of NFP. Today we saw the bullish Dollar gained traction as demand was up on rising yields. But on yields alone, depending on maturities, Loonie, Kiwi and Aussie are not that bad contenders either. On another note, derivatives markets were most bullish on Aussie, Sterling, silver and gold while pricing the highest volatility in Silver (25.80%), Gold (14.74%) and Aussie (9.29%). Sterling was implied at 7.67% volatility and the lowest was Euro at 5.20%
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