Markets:
- USD leads, NZD lags
- WTI crude oil down $2.53 to $80.29
- US 10-year yields up 5.3 bps to 4.24%
- Gold down $46 to $2399
- S&P 500 down 0.7%
There was no place to hide today as stocks, bonds, commodities and precious metals all fell. The lone exception was bitcoin, which notched an impressive 5% gain, perhaps as the Crowdstrike fiasco highlighted the fragility of the tech ecosystem.
For the rest of the market, it was a deleveraging event with political and economic uncertainty high. That meant selling in everything as the market looks to the Fed blackout and a quieter summer market. Given the turmoil recently, that might be a fanciful hope but the temptation to cash out after a 16% YTD stock market rally is real.
Unlike some other pockets of the market, the FX moves were modest. The dollar weakness early in the week continued to erode with the euro backing away from 1.10 and the pound retreating after briefly breaking 1.30. The later looks something like a break after an extended post-election move.
USD/JPY survived the rout in Wednesday and has steadied itself though was reluctant to push anywhere near 158 today. Yields were a tailwind and the talk about the BOJ refraining from further hikes helped. There is unease about intervention though or whatever the MoF playbook might be.
Commodity currencies present the most-compelling narrative as they slide on deteriorating growth prospects both at home and globally. China hasn’t offered up any change of course hints at the Third Plenum, though there are some hopes for post-even announcements in the coming week or two. Domestically, a poor Canadian retail sales report cemented a rate cut next week and has kicked off talk of a deeper, faster rate-cutting cycle.
Have a wonderful weekend. I’ll be off next week so see you in a couple weeks.
