US Markets Hit Again – Dow Down 1.3%
US Stock markets took another tumble off historic highs in trading yesterday as investors continued to reevaluate their portfolios. The blue-chip Dow took a heavy hit after breaking to new highs in recent days, losing 1.29% on the day followed by the S&P and Nasdaq which dropped 0.77% and 0.70% respectively. The Euro ultimately fell on the day after the ECB held rates steady as was widely expected, however the move came more on US dollar strength after stronger US data as the single currency gained on most of the crosses. US Treasury yields gained after the data, the 2-year adding 3.4 basis points up to 4.463% and the 10-year pushing 4.4 basis points higher to close at 4.190%. Oil prices were steady and closed close to flat, whilst Gold dropped lower again in line with the stronger greenback, losing 0.54% on the day to finish at $2,224 an ounce.
Impact of Joe Biden Dropping from the US Election
Calls for Joe Biden to step down from the race for the next president of the United States have been increasing over recent days and traders are now setting themselves to react if this eventuality does occur. Most investors expect that we will see some immediate defensive positioning in the market if Joe Bide does pull back, this will probably see flows into traditional haven products like Gold, the Yen, the Swiss franc and the dollar. However, many suspect that the impact will be relatively short lived as there has been plenty of news column inches devoted to this happening and then the “Trump Trade” will take precedence as the likelihood of Trump becoming the next president is likely to increase further. This is also seen as dollar positive and could explain last nights strengthening of the greenback, so for the next few sessions the old adage of ‘Buy dollars, wear diamonds’ may be true once again.
Volatile Trading Day to Close out the Week
The macroeconomic calendar is actually relatively light today but given the moves on Wall Street overnight and the potential for more geopolitical influences on the market today, traders are expecting volatility to remain high as we head into the weekend. Asian markets are set to open on the back foot after Wall Street saw losses across the major indices and there is little on the event calendar to change sentiment. We do have key Retail Sales numbers due out later in the day from both the UK and Canada and these prints should increase volatility in the pound and Loony. There are no significant US data releases today but we do hear from FOMC members Williams and Bostic later in the day which could influence Fed rate expectations.
