CURRENCY MARKET WRAP
As of Tue Aug 13th, Singapore Time zone UTC+8
Dollar Index +0.01%, 97.50
USDJPY, -0.01%, $105.38
EURUSD, +0.08%, $1.1216
GBPUSD, +0.49%, $1.2078
USDCAD, +0.14%, $1.3237
AUDUSD, -0.33%, $0.6755
NZDUSD, -0.21%, $0.6447
Argentina’s bonds collapsed on Monday following a “shocking” landslide loss for President Mauricio Macri in a primary election. The Kirchner-allied Alberto Fernandez garnered nearly 48% of the vote to Macri’s 32%, a result that bodes ill for the president’s chances in October. If the same result plays out, there won’t even be a runoff. 45% of the vote (or 40% and a margin of 10 points), wins the presidency outright. The Argentina ETF is in full-on meltdown mode, falling nearly 30%.
U.S. corporate and economic print was sparse on Monday, which helped turn attention to the government protests in Hong Kong, the political instability in Italy and Argentina, and the lack of improvement in U.S.-China trade relations. Economists from Goldman Sachs added to the sour mood, stating that they are not expecting a U.S.-China trade deal before the 2020 presidential election.
The spread between the 2-yr and 10-yr yields narrowed to six basis points, as demand for longer-dated tenors continued to climb amid growth concerns. The 2-yr yield fell five basis points to 1.58%, and the 10-yr yield fell ten basis points to 1.64%. Analysts are rushing to adjust their forecasts. UBS cut their year-end target for 10-year yields to just 1.25%, and Morgan Stanley trimmed their outlook as well. Yields are down some 40bps this month alone. The U.S. Dollar Index unchanged at 97.50.
STOCK MARKET WRAP
S&P500, -1.22%, 2,883.09
Nasdaq, -1.20%, 7,863.41
Nikkei Futures, -0.12%, 20,373.0
Stock market fell more than 1% on Monday, as uncertainties about the global economy continued to push investors away from risk assets and into safe-haven assets like U.S. Treasuries and gold. The S&P 500 fell 1.22%, which was comparable to the declines in the Nasdaq Composite (-1.2%) and Russell 2000 (-1.2%). The Dow Jones Industrial Average lost 1.5%.
This compression in yields not only hit investor sentiment but was also affected the S&P 500 financials sector (-1.9%), which led all 11 S&P 500 sectors in losses. Banks typically rely on healthy net interest margins to boost profit and facilitate lending activity. The other rate-sensitive sectors — real estate (-0.3%) and utilities (-0.3%) — outperformed but still finished lower.