September 4: Overnight Market Wrap

September 4: Overnight Market Wrap

Key Points:

Nasdaq leads US indices rout down almost 5% on the day

Gold closes down $12 at 1931 as risk assets are pushed lower

Jobless claims beats expectations at 881K from 950K expected

The long overdue and highly anticipated equity dump was delivered in style with the Dow down over 1100 points at the lows before closing down 2.78% and that was the best performer! The S&P500 down 3.5%, the Russell down 3% but the day’s winner to be expected is the overbought and bloated Nasdaq at 4.96% on the day. The FANGS, Nvidia and Tesla the biggest losers with Tesla now down over 25% since Tuesday. Analysts are scratching their heads as to what was the catalyst for the sell off with one possibility being that China plans to change policy around its semiconductor industry which is likely to impact the tech sector. The knock on effect saw continued strength for the USD in general particularly against the usual risk currencies AUD, NZD and CAD but weaker vs JPY and CHF. The big surprise was EUR’s strength. Markets having digested verbal intervention around 1.20 altered their thinking to explore the likelihood that the Fed is now on HOLD but the ECB may have to go MORE after this week’s poor EU data. These anomalies allowed the DXY to remain around 92.80/85 into the close after popping above 93.00. Before the collapse we saw the US weekly jobless claims number improve to 881K from 950K expected but adjustment to the calculations mean comparisons to previous weeks would be distorted. Either way it was largely ignored. For once in a long time metals looked calm in comparison. USD gains impacted on Silver and Gold but we also saw other commodity prices falling with copper down 1.4% and lumber plunging 8.1% on the day. Oil by comparison was sanguine closing slightly lower at $41.37. Bitcoin is now looking like a test of 10,000 is coming as the correlation to precious metals remains more aligned than ever. Today’s Asian session could be busier than usual with AUD and NZD under pressure as stock markets are likely to remain fragile affecting their strength. A close below 0.7275 for the AUD tonight could see further correction to 0.7150 area, however before then we will get to see the NFP print. Better ISM and revisions to jobless claims could indicate a better number tonight however consumer confidence remains low adding to a cloudier picture, market consensus is 1.35m. Either way I’m not sure we’re likely to see much to change momentum. Recent price action feels like there is further correction ahead so the USD could remain supported for now. Plenty of investors will be looking to ‘buy the dip’ in equities, but as with the stretch to join the recent hyperbolic rallies, in reverse we could be trying to catch a falling piano.

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