Mutual Daily Mutterings
Quote of the day…
“If you cannot prove a man wrong, don’t panic. You can always call him names…” – Oscar Wilde
The short story “surf’s up, dude…!”
- Overview – risk off session offshore in general, especially so in European markets as a surging COVID second-wave and talk of re-locking down large swaths of the continent is understandably reigniting macro concerns. In the US, seems the eternal market optimists just won’t let go of their pre-election fiscal stimulus hopes and dreams, again that’s what the narrative is spruiking. I guess while Pelosi and Mnuchin are still talking, there remains a faint glimmer of hope and that’s enough in these crazy times. Trump also stoking the furnace, stating he’d go over the Republican’s $1.8 trillion package – he has an election to win of course. More reporting season, this time Morgan Stanley surprised on the upside, which gave bank stocks in general a tickle, while an unexpected spike in US jobless claims added to the level of uncertainty and concern.
- Stocks – European stocks were smashed, down over ↓0% as a second wave of COVID infections spreads across the continent, and cities re-lockdown. US markets opened on the weak side, with futures down ↓1.0% when I hit the sack around 11pm our time. Physical’s went as low as down ↓1.4% in early trading, hit also by data signalling a stall in post-pandemic job’s creation. Despite these headwinds, stocks clawed their way back from the intra-day abyss, back to almost unchanged, fuelled by bank earnings and lingering optimism that a new fiscal support package might be squeezed out before the election in just under three weeks. The ASX 200 has remained relative resilient, keeping its nose above the high end of recent trading ranges, but will open with some downward pressure this morning.
- Offshore Credit – a sleepy day for US IG, just one deal announced. Again, EU IG a little more active, with €5bn priced. Deal metrics remain constructive, with books 3.5x oversubscribed and spreads compressing ↓11 bps from launch to final pricing. Spreads in secondary did little, very marginally tighter. In CDS, MAIN smacked around the chops, ↑2 bps, while CDX was half a basis point wider.
- Local Credit – from the traders “RBA Governor Lowe seemingly rubber stamped a micro cut in November whilst also raising expectations that we’ll see some form of QE enacted in the near term. Spread product sharply tighter with moves amplified by the paucity of inventory available on secondary trading books”. Major bank senior and tier 2 is unchanged to a basis point tighter. Expect a pause in senior here, while tier 2 might have some legs.
- Bonds – crunchy, crunchy, crunchy, go yields, ACGB’s fell yesterday with the good Guvna (Lowe) sending strong signals that they’ll be adding monetary fuel to the market’s fire at next month’s meeting. ACGB 10-year yields plunged as much as ↓8 bps intra-day, but ended down a touch under ↓7 bps at 0.766%, new six-month lows. Three-years did little on the day. Despite the risk-off tone in offshore markets, US treasuries did little on the day, yields a smidge higher if anything.
Please see attached for more detail commentary.
Have a good weekend all
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Scott Rundell, Chief Investment Officer
T: +61 3 8681 1907
Mutual Limited Daily Update