Excess
Overnight, Tesla (TSLA) in a one-sided battle with perennial bears emerged once again out on top. Short interest covering clearly evident, the electric car-maker looked to be in cruise control as it soared past US$500 for the first time in its decade-long listing history.
Gains weren’t just isolated to Tesla though with Nasdaq 100, home to the world’s biggest tech companies, climbing again to all-time highs itself.
Apple (AAPL), often bandied around as the ringleader of excessive stock market valuations, was also leading the charge having edged higher in the session above US$314. A stark contrast from where it was at the end of 2018; effectively half that price.
Positive Wall Street looks to set Asia up for a strong run at the open with ASX 200 pointing higher +32pts, CSI 300 +45pts and Hang Seng +148pts.
Lack of bad news = good news
In my mind, a combination of the Fed’s liquidity experiment and current lull in bad news have expedited the retracement in equities from the minor downwards correction we saw last week after a soft US employment report.
US-China negotiations are on better footing with the pair expected to sign a Phase One deal on Wednesday, and China’s designation as a currency manipulator to be removed in the upcoming US Foreign Exchange report.
The timing of both these key developments, while largely already priced in, should help sustain risk sentiment at strong levels over the next few days.
USDJPY, a timely reflection of global risk sentiment, has now breached 109.7 – an area it failed to break throughout Q4 2019’s risk rally.
While the bellwether for US-China trade sentiment in USDCNH tracks six-month lows, cracking 6.9 levels. Multi-year trend support is being seriously tested having been intact since the beginning of trade tensions.
FX movers
For FX traders, a couple of announcements and ongoing thematics to be aware of that drew reaction overnight.
GBPUSD pushed down to 1.296 on increased dovish market pricing after MPC Vlieghe hinted that he could join the BoE rate-cut camp at the next Jan meeting. A weak batch of UK GDP and Industrial Production data did little to pacify those concerns. Sterling has since pulled higher back towards 1.3 as UK Retail Sales makes for a more interesting print later in the week.
GBPUSD also ticks under its 55d-MA. A meaningful close here, combined with more dovish catalysts over the next fortnight, and we could see the pair trading lower towards the 200d-MA.
USDCAD whipped around on a net positive BoC Business Outlook Survey after the headline number printed 0.7 vs 0.4, and consumer expectations set a positive tone. But was largely unfazed keeping within the session’s range.
