US DOLLAR, STOCKS, GAMESTOP, FED, US GDP – TALKING POINTS:US Greenback on the upswing as Wall Road leads world inventory market r
US DOLLAR, STOCKS, GAMESTOP, FED, US GDP – TALKING POINTS:
- US Greenback on the upswing as Wall Road leads world inventory market rout
- The retail-inspired “Gamestop” narrative misses a bigger, macro story
- Disappointing 4Q US GDP knowledge might compound general risk-off flows
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US Greenback marched increased in Asia-Pacific commerce, buoyed by haven-seeking capital flows as regional inventory exchanges adopted Wall Road decrease. Not surprisingly, the sentiment-linked Australian and New Zealand {Dollars} suffered outsized losses, sinking alongside Japan’s Nikkei 225, China’s Shanghai Composite and Hong Kong’s Hold Seng Index fairness benchmarks.
The bellwether S&P 500 inventory index suffered the biggest every day drop since October, shedding 2.6 %. A median of Asia-Pacific shares isn’t removed from pacing this dismal efficiency: regional names are on tempo to offer again 2 %. Futures monitoring prime European equities are pointing aggressively decrease forward of the opening bell in London and on the Continent, hinting at extra of the identical within the coming hours.
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LOOKING BEYOND GAMESTOP AND RETAIL FLOWS, LARGER ISSUES EMERGE
The story is an thrilling one to ponder, however finally appears too fanciful to be a reputable catalyst by itself. Take into account that the typical market capitalization of S&P 500 member firms is about US$65.7 billion, whereas Gamestop is near US$24 billion after the newest near-vertical ascent. What number of such firms’ shares would wish to pop to pressure liquidation on the size seen yesterday? Maybe greater than is life like.
Quite, excessive worth strikes in pockets of the markets most likely converse to a bigger macro-level problem: the rally from March 2020 lows within the wake of the preliminary Covid-inspired collapse and Fed-driven rebound could also be out of steam as buyers run out of issues to stay up for. The US election and surrounding narratives are spent, a Brexit deal is in, and a number of other Covid vaccines have emerged.
On the coverage aspect of the equation, a much-debated top-up of US fiscal stimulus has been handed and the follow-on US$1.9 billion plan championed by newly-installed President Joe Biden is primed for disappointment because the Democrats’ slender Senate majority forces negotiation downward. In the meantime, the Fed is in no hurry to increase help, and the current quantity of lodging might be priced in.
US DOLLAR RALLY SET TO CONTINUE AS LIQUIDATION CONTINUES
Wanting forward, the flight to security appears to be like more likely to proceed, attracting capital flows towards the unequalled liquidity of the Buck. Fourth-quarter US GDP knowledge headlines the financial calendar, with economists flagging an annualized development charge of 4.2 %. US news-flow has weakened relative to baseline forecasts in current weeks, opening the door for disappointment that encourages market turmoil.
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— Written by Ilya Spivak, Head Strategist, APAC at DailyFX.com
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