It has been an uneventful start to the new week, with only small changes in asset prices across equities, bonds and currencies. The NZD trades slightly weaker, just below the 0.66 mark while the AUD is flat at 0.7150.
There’s not much to report today, with a lack of newsflow and price action to begin the week. The S&P500 has spent most of the session in positive territory and currently shows a small gain. However, underneath the surface the market has a much more positive tone, with some evident sector rotation out of big tech and growth stocks and into value and smaller cap stocks. The Russell 2000 index of smaller cap stocks is up 1.3%, following its 1.6% gain on Friday. Over the past two days the S&P500 has barely increased.
There has been no fresh news on the fiscal stimulus bill up for negotiation between the Republicans and Democrats. The weekend announcement by President Trump to sign an executive order that would fill a gap in the meantime is seen as an over-reach and questionable from a legal perspective. The market is still taking the view that a deal will soon be reached. Treasury Secretary Mnuchin told CNBC that a compromise could be reached with Democratic leaders this week.
The rolling 7-day average for new cases of COVID19 in the US continues to trend lower, with that metric down to around 54k compared to 67k three weeks ago.
Last night China said that it will sanction 11 US officials in retaliation for the US sanctioning 11 Chinese officials, including Hong Kong Chief Executive Carrie Lam. The list includes four Senators and a Congressman but doesn’t include any members of the Trump Administration, so is really just a symbolic gesture. The market took this news in its stride, with more focus on the meeting at the end of the week between key US and Chinese trade officials on a progress report on the phase 1 trade deal.
Oil prices are up around 2% after a positive update from Saudi Aramco’s CEO, who said over the weekend that crude demand in Asia is almost back to pre-COVID levels and demand for energy will probably improve over the rest of the year, as countries ease lockdown restrictions to reboot their economies. The Energy and Industrial sectors are the best performing within the S&P500 on the day.
Currency movements have all been plus or minus 0.3% against the USD for the day. The NZD slipped to as low as 0.6578 overnight and currently sits around 0.6590. There was no market reaction to the ANZ business outlook survey yesterday, which showed some slippage in confidence and activity indicators. Rather than suggest a faltering economic recovery, lower confidence probably reflects businesses’ caution ahead of the upcoming general election and the likely prospect of another three years of a Labour-led government.
There was little movement in the NZ rates market and US Treasuries have also been well contained overnight. Focus is directed towards the RBNZ’s MPS tomorrow and the market will be sensitive to any discussion around negative interest rates.
AUD has been hovering around the 0.7160 mark through the day and currently sits flat at 0.7150. NZD/AUD slipped below 0.92 for the first time since early June, where it met support and is now back above that level. EUR has slightly underperformed, down to 1.1750, taking NZD/EUR back just above 0.56.
There are a few bits and pieces on the economic calendar but nothing much that is likely to be market moving.