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Global Equity Markets Higher Overnight


Global equity markets overnight were all higher with the gains ranging from mere fractions percent to as high as 1.83% in the TOPIX Index. Despite the ongoing surge of Delta variant infections, recent disappointment with US scheduled data and persistent talk of tapering by the US Fed, the equity markets have extended last week’s late recovery bounce, and might be capable of regaining “all-time highs”. Tempering today’s optimism is the news that the infrastructure program will be delayed until the social engineering package is passed! The most recent CDC daily US infection count came in above 157,000 and therefore cases have returned to the highest levels since January 27th. At least for today the equity markets look to be capable of discounting the threat of Federal Reserve tapering talk at the end of the week and delta infection counts.


A reversal of risk on slowing sentiment from last week into a risk on environment has caught the dollar index overbought technically and overbought fundamentally. With a major interest rate market Guru this morning indicating the relative return on quantitative easing has dissipated and the dollar index holding the largest open interest reading since June 10th (which was the highest in several years) liquidation in the Dollar could be significant. On the other hand, some traders see the Fed symposium at the end of the week to be dollar supportive. Normal corrective action in the dollar from the late July early August rally projects a correction to 92.99. 


With a risk-on environment thrown off by positive global equity market action, it is not surprising to see treasury prices start out in a weaker track. In fact, the risk on environment has discounted a wave of disappointing services, manufacturing, and composite The treasury market is likely to fret over the prospects of tapering dialogue later in the week when the virtual Jackson Hole symposium kicks off. On the other hand, dialogue from conference from sidelines interviews could be limited given the online status of the meeting. The North American session will start out with the Chicago Fed’s July national activity index which is forecast to have a minimal uptick from June’s 0.09 reading. The August Markit US “flash” manufacturing PMI is expected to have a modest downtick from the previous 63.4 reading. July existing home sales are forecast to have a minimal downtick from July’s 5.86 million annualized rate.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

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