Chart of the Day
It was a poor start to the week for global markets as the stocks fell across the world – although the key Asia markets were closed yesterday. The weakness is linked to concerns about the crisis with Evergrande in China, which could cause some investors to sell other assets to meet their liabilities. This concern about forced selling helps explain why yesterday’s sell-off hit global markets across the board, with commodities looking especially weak.
Macro
In the US, NAHB homebuilder confidence rose to 76.0 in September. At that level, it suggests housing starts will fall a bit in the coming months.
Markets
The sell-off hit cyclical equity sectors the hardest, amid concerns about global growth.
Defensives have also sold off though.
The sell-off has been accompanied by a rise in the cost of hedges, with implied volatility from the options market rising sharply for both US equities and bonds.
There’s also been a dramatic spike in trading volume, though it died down on Monday.
Commodities have been hit hard – will copper weaken more than it during the summer? Iron sure has…
Palladium and platinum have been falling sharply, while gold rose yesterday, linked to safe-haven demand.
Even crypto appears to have got caught up in the sell-off.
Conversely, bonds have been rising in price as yields drop back again, also doing their bit as a safe haven trade.
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