US equities fell back to earth on Thursday, the S&P down 0.3% and registering its first drop in a week. Treasury yields pushed higher still, US 10Y treasury yields up another 8bps to 0.82%. However, European bonds rallied after the ECB announced a larger than expected expansion of its PEPP program.
And if investors were looking for another stimulus bounce (although arguably it feels like we’re on the brink of policy fatigue), the White House is expected to spend up to $1tn in yet another round of economic stimulus, which is likely to be unveiled next month.
But the upward momentum in risk appetite has faltered slightly; there’s no single explanation for the tempered enthusiasm in markets other than exhaustion, perhaps. US economic data remains weak, but markets have been willing to look through it by focusing on the recovery phase.
A gnarly US NFP is likely to herald the highest unemployment rate since the Great Depression. So, given the magnitude of scintillating equity market moves of late, arguably overextended bullish positioning has likely forced a few hands, even more so as the prophets of doom have been out in full force this week.
US-China relations simmer in the background with new reports of China delaying agricultural imports from the US (WSJ). But news that China will allow international airlines to re-start flights from overseas starting next week nipped the US-China airline snaggle in the bud. However, these aren’t stories that move the needle to any significant degree.
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In this edition of “Charts of the Week”, we will have a look at precious metals where the short-term outlook has turned brighter, as well as Bitcoin which is going through a major sell-off right now, followed by Oil – which is finally on the move after days of consolidation – and two major currency pairs.