The great rotation continues as the fall in NASDAQ continues to mirror the move out of Tech and into Growth. Government yields rise (US 10-Year will hit 1% this week) as money goes back into equities. Compression continues as investors seek higher beta debt investments in anticipation that the latest vaccine news is a game-changing panacea for the outlook for just about everything. HK and Shanghai continue lagging the global rally while Tokyo and Sydney are both up more than 1.7%
With vaccine booster shots getting delivered to the market, investors care little that Trump is unwilling to admit defeat, funding costs are shooting higher, COVID death tolls are rising, Brexit, trade disputes (EU agreed to put new tariffs on $4bn worth of US imports) and macro challenges seem forgotten for now. Stocks tickers are getting painted green as money on the sidelines if feasting on a smorgasbord of global indices. The heavily cyclical weighted European bourses the apple of the market's eye.
However, I think some caution is warranted especially on equities for all of the reasons above. For now, I think investors should obviously go with the momentum as it makes little sense to try and stand in the way of moves in either equities or fixed income. In particular, it will be interesting to see whether the equity rotation out of tech and into other sectors actually sticks or if it is largely a factor of the market being caught underweight.
RBNZ's Change In Tone Shakes Up NZ Rates Market
The message from the RBNZ today was the economy is doing better and that the Funding for Lending Programme is more effective than cutting the cash rate 25bp. All the negative talk rates disappeared, sending the New Zealand rates market into a tailspin and the Kiwi took flight.
Asia EM FX Following Idiosyncratic Themes
USD/Asia EM moves this morning have been idiosyncratic. THB continues to outperform with massive equity inflows making funding flush; tom/next is down to -3, and spot looking to test the year-low at 30.00. USD/IDR still sees by interest on n dips with record inflows in the bond market-creating significant levels to hedge the currency. USD/PHP is trading in a tight range, but the market is looking to pay dips into the month-end. USD/CNH is back down towards 6.5800, probably the clearest signpost of all while holding the 6.5700-6.6100 range. USD/KRW continues to see risk trading well