Daily Market Commentary 9th September 2020

Equities continued to lose ground, with Tech shares leading the rout, as there is a perception that they are massively overbought. Markets plummeted again overnight, as tensions rise between Trump’s USA and China. The President is talking about ‘decoupling’ the economy from China, while there are considerations being given to a Chinese semi-conductor-chip ban in the USA. This is destabilising and impacting the existing supply chain.

Japanese GDP contracted 28.1%, amazingly better than expected, while European markets dipped lower. EU GDP contracted 14.7%, for Q2, but Europe is mired in a resurgent virus and failing Brexit talks. The Brexit talks look to be on the brink of collapse, reflecting in the GBP plunging to 1.3000, while the EUR fell below 1.1800. The resurgent virus is a worrying development, but so far authorities have appeared to have learned the lesson of the first wave and resisted further lockdowns.

The deterioration in US/China relations is impacting the supply chain and the trade exposed currencies. The AUD has fallen back to 0.7230, while the NZD looks to test 0.6600, on the downside. The re-emergence of the virus in NZ and Australia has not helped domestic economic conditions, with Victoria suffering the strictest lock-down in the world, while NZ suppresses into a national election campaign.

US China and the virus remain the macro issues, while a correction looks likely, in equity markets.