Morning Market Wrap:
Overnight Markets:
Overnight, markets experienced a solid bounce, primarily driven by a notable miss in consumer confidence, which came in at 106.1 compared to the expected 116. This added weight to the speculation of a pause in Federal Reserve actions. Yields were significantly impacted, dropping to 4.11%, and the odds of a rate change in the September 20 decision decreased to 89%. The rate-sensitive Nasdaq saw the most significant rally:
- SPX: +1.45%
- Dow: +0.85%
- Nasdaq: +2.14%
Macro and Metals:
As mentioned earlier, yields experienced a sharp decline, prompting risk-on sentiment in the market. The USD sold off, leading to continued gains in both Gold and Silver. Silver saw a push of +2%, while gold increased by 1%, now at $1,937.
Base Metals:
Base metals showed mixed performance: Nickel continued to struggle with a -0.53% change, Copper rose by +1.19%, Aluminum increased by +0.81%, and Tin dropped by -0.62%. The metals landscape exhibited diverse trends, not receiving the same positive response against the USD as Precious metals or equities. This variation is an interesting development.
Energy and Battery:
Natural Gas experienced choppy movement, closing -0.78%. NEWC closed around recent range highs at 158.5 for the September contract and 160 (-0.58%) for the November contract. Oil rebounded to the upper range, closing the WTI Oct contract at $81.32. Iron ore held steady within the mid to high range, closing the night session at 818CNY. Notably, Iron names saw a strong push overnight, particularly VALE, which surged over 3%. There is speculation that FMG's recent news could lead to a catch-up rally and positive index flows if they follow the US lead. The price of Lithium dropped early in the session, briefly pushing futures to new lows of around 190CNY/kg, but it managed to close above 200, resulting in minimal change. Lithium-related stocks experienced substantial demand yesterday, and this continued in the US market with ALB and SQM up by over 4% and +2% respectively. The reason behind this surge is unclear; it could be related to China's potential RRR cut, though no definitive news has been identified. Keep an eye out for any new developments. Uranium price continues to rise, yet it's intriguing that Uranium stocks were among the few red sectors in the US market. This deviation from the usual trend of Uranium stocks serving as a market proxy is puzzling, given the positive movements in Lithium names and the Uranium price increase. It will be interesting to observe how Uranium stocks perform today.
Local:
Australian futures suggest a solid opening with a +47pts gain. As mentioned earlier, there were robust flows in the NEV sector yesterday, contrasting with negative flows in the uranium space. It's worth noting that these two sectors have exhibited an inverse trading pattern for the past couple of weeks, where bid Uranium names correspond with sell-offs in Lithium names. This inversion continuing last night and yesterday aligns with this flow-based perspective.
Data (Sydney Time):
At 11:30 am today, Australia's building approvals data will be released. Additionally, the US will unveil the second estimate of GDP and core PCE at 10:30 pm. Other than that, the economic calendar appears relatively quiet.
Have a great day.