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Daily Markets Update, 29 June

 

 

  • Wall St. lower : tech selloff outweighs bank gains
  • Daily swings in the tech megacaps widest vs. S&P since 2014
  • European Stocks in the red: slide in rate-sensitive sectors.

“Speeches by the Bank of Canada, the European Central Bank and the Bank of England over the last three weeks look to be a deliberate expectations management exercise, preparing the market for the removal of some of the emergency monetary measures put in place from 2015,” said analysts at ING.

“Everyone talks about the VIX but there are undercurrents of significant volatility in the market,” Joe Sowin, head of global equity trading at Highland Capital Management LP, said by phone. “There’s a lot more volatility in tech this month and that’s in part due to stretched P/Es, positioning and breadth that isn’t good.”

Volatility higher than measured and  money stimulus withdrawal are the main themes quoted by analysts that try to explain the downturn  in risky assets.

Nasdaq down more than 1.5%, and the Dow on track for its biggest one-day drop in more than a month as the technology sector resumed its selloff, overshadowing a gain in the financial sector.

The losses in tech were so severe on Thursday that every component in the sector was in negative territory. On the upside, financial shares XLF, +0.29%  jumped 0.5% after the 34 biggest U.S. banks passed the Federal Reserve’s stress test and received a green light for plans to return capital to shareholders.

Bonds shadow central banks: Financial shares have also been tracking a rise in long-term Treasury yields. A selloff in U.S. and European bonds on Thursday sent yields higher as investors maneuvered around potential moves by the Federal Reserve, the European Central Bank and the Bank of England. Bond prices and yields move inversely.

Excess volatility in technology megacaps may be a function of how fast they have run up.

 

 Crude oil, which is gradually recovering from the recent selloff. The calls for $30 oil were indeed a contrarian signal. The sentiment has been so negative that a bounce (which could be temporary) makes sense at this juncture. Hedge funds have been short oil and some have been covering lately.

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Main moves in markets from Bloomberg

Stocks

  • The S&P 500 Index fell 0.9 percent as of 12:28 p.m. in New York. It’s on pace for a seventh straight quarterly advance.
  • Goldman Sachs Group Inc. and JPMorgan Chase & Co. rose more than 2 percent.
  • The Nasdaq Composite Index lost 1.8 percent, pushing its loss in June toward 2 percent. The measure rose as much as 21 percent this year, before a selloff that started three weeks ago took 3 percent back.
  • The Stoxx Europe 600 Index fell 1 percent. Banks bucked the trend, gaining 1.7 percent. Utilities and construction companies fell 1.6 percent and 1.5 percent, respectively.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1 percent, though the currency fell against most of its G-10 peers.
  • The euro increased 0.2 percent to $1.1397, heading for the highest level since last year’s Brexit vote.
  • The pound climbed 0.3 percent to $1.2964, heading for a seventh straight day of gains, the longest winning streak since April 2015.
  • The Canadian dollar rose 0.1 percent after jumping 1.2 percent on Wednesday as Bank of Canada Governor Stephen Poloz reiterated he’s considering tighter policy.

Commodities

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 The dollar continues to drift lower, helping stabilize commodity prices.
  • WTI futures advanced 0.2 percent to $44.81 a barrel. Prices gained as government data showed a drop in U.S. gasoline supplies that have remained stubbornly high at the start of the summer driving season.
  • Gold fell 0.6 percent to $1,242.11 an ounce.
  • Copper futures jumped 0.9 percent, advancing for a seventh day.

Bonds

  • The yield on 10-year Treasuries rose three basis points to 2.26 percent, after gaining two basis points on Wednesday and jumping seven basis points in the previous session.
  • The yield on U.K. gilts increased seven basis points to 1.22 percent. French 10-year yields added seven basis points, as did those of 10-year German bunds.

Asia

  • China’s yuan strengthened for a third day, with the offshore currency advancing 0.3 percent as President Xi Jinping kicks off a landmark visit to Hong Kong. The Hang Seng Index climbed 1.1 percent and the Shanghai Composite added 0.5 percent.
  • Singapore’s Straits Times Index rallied 1.4 percent, the most since November. Australia’s S&P/ASX 200 Index rose 1.1 percent, with banks and basic materials shares having the biggest impact. South Korea’s Kospi index advanced 0.6 percent to a record.
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