Daily Market Commentary 4th September 2020

US Equity markets experienced a ‘blowout correction’ overnight, lead by a crash in ‘stay-at-home’ tech shares. The Nasdaq and S&P have blown through historical highs, while the Dow has been surging towards pre-pandemic highs. The turmoil in share markets did not translate directly into other markets. Bond yields drifted slightly and the US Dollar continued to build on the recent upward momentum. Commodity prices also drifted in the face of a rising Dollar. This may a bit of a flash in the pan or, if extended, may become a significant market correction. Everything is political leading into the US Presidential elections.

EU Retail Sales contracted, while European Services/Composite PMI data was mixed, allowing the EUR to continue the downward correction. The UK recovery is slow and reticent, as the return to work is a mix of reluctance and inertia, which will undermine the economic recovery. The GBP fell back to 1.3270, reflecting weak Services/Composite PMI, while the EUR dropped back to 1.1850.

Commodity prices drifted and the currencies were also damaged by the rising reserve. The AUD fell back to 0.7270, while the NZD looks to test 0.6700, on the downside. Australian trade data revealed a sharp increase in imports, accentuating an imbalance, as exports fall.

Markets now keenly await the all important Non Farm Payrolls and US employment data, due out tonight. A big number is expected and any failure to add more than a million jobs may threaten market performance, while the Unemployment rate is expected to fall below 10%.